Diligent Corp - FORM 10-Q

Attached files

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EX-31.1 - Diligent Corp	v221653_ex31-1.htm
EX-31.2 - Diligent Corp	v221653_ex31-2.htm
EX-32.2 - Diligent Corp	v221653_ex32-2.htm
EX-32.1 - Diligent Corp	v221653_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 000-53205

Diligent Board Member Services, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		26-1189601
(State or Other Jurisdiction		(I.R.S. Employer
of Incorporation or Organization)		Identification No.)

39 West 37 St. 8th Floor, New York, NY, 10018

(Address of Principal Executive Offices)(Zip Code)

(212) 741-8181

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ¨ Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer, “large accelerated filer” and smaller company: in Rule 12b-2 of the Exchange Act. (Check One):

¨ Large accelerated filer	¨ Accelerated filer

¨ Non-accelerated filer	x Smaller Reporting Company

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

THE NUMBER OF SHARES OF THE REGISTRANT’S COMMON STOCK OUTSTANDING AS OF

MAY 2, 2011 WAS 81,996,334.

(THIS PAGE INTENTIONALLY LEFT BLANK)

CONTENTS

		PAGE

Forward Looking Statements		ii
Available Information		ii

PART I – Financial Information

Item 1.	Consolidated Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18

PART II – Other Information

Item 1.	Legal Proceedings	18
Item 1A.	Risk Factors	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults Upon Senior Securities	19
Item 4.	[Reserved]	19
Item 5.	Other Information	19
Item 6.	Exhibits	19

SIGNATURES		20

FORWARD LOOKING STATEMENTS

Except for statements of historical fact, certain information described in this document contains "forward-looking statements" that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," "would" or similar words. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other "forward-looking" information. Diligent Board Member Services, Inc. believes that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this Form 10-Q because they involve risks, uncertainties and other factors affecting our operations, market growth, service, products and licenses. Events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. The occurrence of future events could have a material adverse effect on our business, results of operations and financial position.

AVAILABLE INFORMATION

We file reports, proxy statements, information statements and other information with the Securities and Exchange Commission. You may read and copy this information, for a copying fee, at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information on its public reference rooms. Our Securities and Exchange Commission filings are also available to the public from commercial document retrieval services, and at the web site maintained by the Securities and Exchange Commission at http://www.sec.gov. Our internet address is http://www.boardbooks.com. We will make available through a link to the SEC’s web site, electronic copies of the materials we file with the SEC (including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, the Section 16 reports filed by our executive officers, directors and 10% stockholders and amendments to those reports). To receive paper copies of our SEC materials, please contact us by mail addressed to Robert E. Norton, Corporate Secretary, Diligent Board Member Services, Inc., 39 West 37 St. 8th Floor, New York, NY 10018, (212) 741-8181.

PART 1 – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Diligent Board Member Services, Inc.

Consolidated Balance Sheets

	March 31,			December 31,
	2011			2010
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,481,511		$	3,212,449
Term deposit		95,425			97,300
Accounts receivable, net		537,439			494,048
Prepaid expenses and other current assets		308,679			323,911
Total current assets		4,423,054			4,127,708

Property and equipment, net		1,140,204			1,082,104
Note receivable from affiliate, net of valuation allowance		1,871,563			1,875,685
Restricted cash - security deposits		228,753			226,617

Total assets	$	7,663,574		$	7,312,114

LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	190,420		$	84,388
Accrued expenses		379,378			915,431
Deferred revenue		3,588,612			2,849,225
Current portion of obligations under capital leases		83,934			86,230
Total current liabilities		4,242,344			3,935,274

Non-current liabilities:
Obligations under capital leases, less current portion		42,392			60,861
Other noncurrent liabilities		51,041			50,255
Total non-current liabilities		93,433			111,116

Total liabilities		4,335,777			4,046,390

Commitments and contingencies

Redeemable preferred stock:
Series A convertible redeemable preferred stock, $.001 par value, 50,000,000 shares authorized, 32,667,123 shares issued and outstanding (liquidation value $4,989,902 and $5,259,406)		3,184,097			3,177,291

Stockholders' equity:
Common Stock, $.001 par value, 250,000,000 shares authorized, 81,978,001 and 81,968,001 shares issued and outstanding		81,978			81,968
Additional paid-in capital		23,356,713			23,107,919
Accumulated deficit		(23,287,355	)		(23,099,704	)
Accumulated other comprehensive loss		(7,636	)		(1,750	)
Total stockholders' equity		143,700			88,433
Total liabilities, redeemable preferred stock and stockholders' equity	$	7,663,574		$	7,312,114

See accompanying notes to consolidated financial statements

Diligent Board Member Services, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended March 31,
	2011			2010
Revenues	$	2,976,229		$	1,747,476
Cost of revenues		819,849			622,664
Gross profit		2,156,380			1,124,812

Operating expenses:
Selling and marketing expenses		873,036			566,885
General and administrative expenses		1,052,356			1,001,619
Research and development expenses		319,554			177,146
Depreciation and amortization		117,969			115,196
Total operating expenses		2,362,915			1,860,846

Operating loss		(206,535	)		(736,034	)

Other income (expenses):
Impairment recovery on note receivable from affiliate		-			3,200,000
Interest income, net		44,820			75,847
Foreign exchange transaction loss		(12,189	)		(39,629	)
Total other income, net		32,631			3,236,218

(Loss) income before provision for income taxes		(173,904	)		2,500,184

Provision for income taxes		13,747			13,638

Net (loss) income	$	(187,651	)	$	2,486,546

Net (loss) income per share:
Basic	$	(0.003	)	$	0.027
Diluted	$	(0.003	)	$	0.020
Weighted average shares outstanding:
Basic		81,974,668			90,440,000
Diluted		81,974,668			124,827,532

See accompanying notes to consolidated financial statements

Diligent Board Member Services, Inc.

Consolidated Statement of Changes in Stockholders’ Equity

and Comprehensive Loss

Three Months Ended March 31, 2011

											Accumulated
			Common		Additional						Other			Total
	Common		Stock		Paid-in-			Accumulated			Comprehensive			Stockholders'
	Shares		$.001 Par Value		Capital			Deficit			Loss			Equity
Balance at January 1, 2011		81,968,001	$	81,968	$	23,107,919		$	(23,099,704	)	$	(1,750	)	$	88,433
Net loss		-		-		-			(187,651	)		-			(187,651	)
Foreign exchange
translation adjustment		-		-		-			-			(5,886	)		(5,886	)
Total comprehensive loss															(193,537	)
Capital contribution		-		-		200,000			-			-			200,000
Share-based compensation		-		-		143,844			-			-			143,844
Exercise of stock options		10,000		10		1,590			-			-			1,600
Amortization of preferred
stock offering costs		-		-		(6,806	)		-			-			(6,806	)
Accrued preferred stock dividend		-		-		(89,834	)		-			-			(89,834	)
Balance at
March 31, 2011 (Unaudited)		81,978,001	$	81,978	$	23,356,713		$	(23,287,355	)	$	(7,636	)	$	143,700

See accompanying notes to consolidated financial statements

Diligent Board Member Services, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended March 31,
	2011			2010
Cash flows from operating activities:
Net (loss) income	$	(187,651	)	$	2,486,546
Adjustments to reconcile net (loss) income to net
cash provided by (used in) operating activities:
Impairment recovery on note receivable from affiliate		-			(3,200,000	)
Depreciation and amortization		117,969			115,196
Share-based compensation		143,844			117,346
Straight-line rent adjustment		786			2,718
Changes in operating assets and liabilities:
Accounts receivable		(43,391	)		6,960
Prepaid expenses and other current assets		15,232			(113,660	)
Restricted cash - security deposits		(2,136	)		(639	)
Accounts payable and accrued expenses, net		(160,517	)		100,578
Deferred revenue		739,387			64,034
Payable to affiliates		-			(490	)
Net cash provided by (used in) operating activities		623,523			(421,411	)
Cash flows from investing activities:
Purchase of property and equipment		(175,837	)		(50,084	)
Net cash used in investing activities		(175,837	)		(50,084	)
Cash flows from financing activities:
Payment of preferred stock dividend, net of capital contribution in lieu of dividend		(159,338	)		-
Proceeds from exercise of stock options		1,600			-
Proceeds from repayment of principal on Note receivable from affiliate		4,122			-
Payments of obligations under capital leases		(20,766	)		(31,865	)
Net cash used in financing activities		(174,382	)		(31,865	)
Effect of exchange rates on cash and cash equivalents		(4,242	)		(4,096	)
Net increase (decrease) in cash and cash equivalents		269,062			(507,456	)
Cash and cash equivalents at beginning of period		3,212,449			1,129,591
Cash and cash equivalents at end of period	$	3,481,511		$	622,135

Supplemental disclosure of cash flow information:
Cash paid during the period for :
Interest	$	7,754		$	16,760
Income taxes	$	17,910		$	4,686
Supplemental disclosure of noncash investing and financing activities:
Capital contribution in lieu of preferred stock dividend	$	200,000		$	-
Accrual of preferred stock dividend	$	89,834		$	82,500

See accompanying notes to consolidated financial statements

Diligent Board Member Services, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1) Organization and nature of the business

Diligent Board Member Services, Inc. (“Diligent” or the “Company”) is a global leader in web-based portals for Boards of Directors. The Company develops and sells an online software application called Diligent Boardbooks®, a web based portal that board members, management and administrative staff use to compile, update, review and archive board materials during and after board meetings. Diligent provides clients with subscription-based access to the software and also provides associated services including securely hosting the clients’ data and customer service and support for the application.

The Company was incorporated in the State of Delaware on September 27, 2007 and is listed on the New Zealand Stock Exchange (“NZSX”). On December 12, 2007, the Company completed its initial public offering on the NZSX. In April 2008, the Company filed a registration statement with the United States Securities and Exchange Commission (“SEC”), which became effective on June 30, 2008. The Company’s corporate headquarters are located in New York, United States and Christchurch, New Zealand.

The Company has a wholly-owned subsidiary located in New Zealand, Diligent Board Member Services NZ Limited (“DBMS NZ”), which provides research and development services to the Company. The Company also has a wholly-owned subsidiary, Diligent Boardbooks Limited (“DBL”), an England and Wales limited liability company, which provides sales and marketing services in Europe. On December 23, 2010, the Company formed a Singapore-based wholly-owned subsidiary, Diligent APAC Board Services PTE. Ltd. (“DAP”), to provide sales and marketing services in the Asia-Pacific region. Diligent, together with its subsidiaries, are hereinafter referred to as “the Company”.

The Company’s consolidated financial statements are presented in US dollars, rounded to the nearest dollar, which is the Company’s functional and presentational currency.

The Company has evaluated all subsequent events through the filing date of this Form 10-Q with the SEC, to ensure that this Form 10-Q includes subsequent events that should be recognized in the financial statements as of March 31, 2011, and appropriate disclosure of subsequent events which were not recognized in the financial statements.

2) Significant accounting policies

Basis of presentation – The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions for Form 10-Q pursuant to the rules and regulations of the SEC. Accordingly, they do not include all information and notes required by GAAP and provided in the annual consolidated financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in Form 10-K of the Company for the year ended December 31, 2010, as filed with the SEC on March 22, 2011.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements. The results of operations for the three months ended March 31, 2011 are not necessarily indicative of the results to be expected for the full year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair value of financial instruments –The fair value of our cash and cash equivalents, term deposits, accounts receivable, accounts payable and accrued expenses approximates book value due to their short term settlements. The note receivable from affiliate is recorded at estimated net realizable value, adjusted for any valuation allowance for amounts considered uncollectable. The valuation allowance is reviewed for impairment each reporting period.

Diligent Board Member Services, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Share-based compensation – The Company measures the cost of employee services received in exchange for an equity-based award using the fair value of the award on the date of the grant, and recognizes the cost over the period that the award recipient is required to provide services to the Company in exchange for the award.

The Company measures compensation cost for awards granted to non-employees based on the fair value of the award at the measurement date, which is the date performance is satisfied or services are rendered by the non-employee.

Net income (loss) per share – Basic net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders, after deducting accrued preferred stock dividends, by the weighted average number of common shares outstanding for the period.

Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock, unless the effect is anti-dilutive. Stock options and convertible preferred stock are included as potential dilutive securities for the periods applicable. All potentially dilutive securities have been excluded from the calculation for the three months ended March 31, 2011 as they were anti-dilutive. There were 38,597,458 potentially dilutive securities at March 31, 2011.

The components of the calculation of basic and diluted net income (loss) per common share are as follows:

	Three months ended March 31,
	2011			2010
Numerator:
Net (loss) income	$	(187,651	)	$	2,486,546
Preferred stock dividends		(89,834	)		(82,500	)
Basic net (loss) income available to common shareholders	$	(277,485	)	$	2,404,046
Diluted net (loss) income available to common shareholders	$	(187,651	)	$	2,486,546
Denominator:
Basic weighted average shares outstanding		81,974,668			90,440,000
Dilutive effect of stock options		-			1,720,409
Dilutive effect of convertible preferred stock		-			32,667,123
Diluted weighted average shares outstanding		81,974,668			124,827,532
Basic (loss) income per share	$	(0.003	)	$	0.027
Diluted (loss) income per share	$	(0.003	)	$	0.020

Recent accounting pronouncements – In January 2010, the FASB issued new guidance which improves disclosures about fair value measurements. The new standard was effective for interim and annual periods beginning after December 15, 2009, except for certain disclosures regarding Level 3 measurements which are effective for fiscal years beginning after December 15, 2010. This new guidance did not have a material effect on the consolidated financial statements.

From time to time, new accounting pronouncements are issued by the FASB and are adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of other recently issued accounting pronouncements will not have a material impact on the consolidated financial position, results of operations, and cash flows, or do not apply to the Company’s operations.

Diligent Board Member Services, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

3) Term deposit

At March 31, 2011, the Company has a term deposit with a New Zealand bank with an original term of 365 days. The term deposit in the amount of NZD 125,000 (US$95,425) bears interest at 4.00% and matures in March 2012.

4) Note receivable from affiliate

In January 2011, SSH LLC overpaid the interest due by $4,122, which was applied to the principal balance, in accordance with the Note agreement, reducing the contractual loan balance to $3,071,563.

5) Fair value measurements

The Note is the only financial instrument held by the Company for which a fair value measurement is made using significant unobservable inputs (Level 3). A reconciliation of the beginning and ending balances of the Note is as follows:

	Three months			Three months
	ended			ended
	March 31,			March 31,
	2011			2010
Balance at beginning of period	$	1,875,685		$	1,661,791
Total gains or losses (unrealized/realized)
Included in earnings (or changes in net assets)		-			3,200,000
Included in other comprehensive income		-			-
Purchases, issuances and settlements		(4,122	)		-
Transfers in and/or out of Level 3		-			-
Ending balance	$	1,871,563		$	4,861,791

The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to assets still held at the reporting date	$	-		$	3,200,000

6) Line of Credit Facility

As of March 31, 2011, the Company has not borrowed any amounts under its line of credit facility.

7) Redeemable Preferred Stock

On March 11, 2009, the Company issued 30,000,000 shares of newly-created Series A Preferred Stock for $0.10 per share in a private offering, for aggregate proceeds of $3,000,000 in additional capital. Expenses relating to the share issuance were $138,850.

For the year 2009, the Board of Directors of the Company approved the issuance of paid-in-kind (“PIK”) shares in lieu of cash, which dividend was effective January 4, 2010. Accordingly, the holders of the Series A Preferred Stock received an aggregate of 2,667,123 PIK shares in January 2010.

Diligent Board Member Services, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

The carrying value of the Preferred Shares at March 31, 2011 and December 31, 2010 is as follows:

	March 31,			December 31,
	2011			2010
Gross proceeds	$	3,000,000		$	3,000,000
Less: Issuance costs		(138,850	)		(138,850	)
		2,861,150			2,861,150
Issuance of PIK shares		266,712			266,712
Cumulative amortization of issuance costs		56,235			49,429
Balance	$	3,184,097		$	3,177,291

In 2011, the Company anticipates that cash dividends will be paid on the Series A Preferred Stock. Accordingly, preferred stock dividends of $89,834 for the three months ended March 31, 2011 are included in accrued expenses.

8)	Stockholders’ equity

In January 2011, Spring Street Partners, L.P., one of the holders of the Series A Preferred Stock, waived its right to $200,000 of the dividend due on January 1, 2011, and directed the Company to retain those funds to support future growth. This was recorded as a capital contribution in the first quarter of 2011. The founder and managing partner of Spring Street Partners, L.P. is also the chairman of the Board of Directors of the Company and the holder of 5.5 million shares of common stock of the Company.

9) Stock option and incentive plan

In November 2007, the Company adopted the 2007 Stock Option and Incentive Plan (“the 2007 Plan”) authorizing the issuance of up to 10,000,000 shares of the Company’s common stock as awards to selected employees, directors and consultants of the Company and its affiliates, in the form of incentive stock options, non-qualified stock options, and stock awards. The 2007 Plan is administrated by the Company's Board of Directors. Pursuant to delegation by the Company's Board of Directors, the Remunerations and Nominations Committee determines the number of shares, the term, the frequency and date, the type, the exercise periods, any performance criteria pursuant to which stock option awards may be granted and the restrictions and other terms and conditions of each grant of restricted shares in accordance with the terms of the 2007 Plan.

In June 2010, the Company adopted the 2010 Stock Option and Incentive Plan (“the 2010 Plan”) authorizing the issuance of up to 5,000,000 shares of the Company’s common stock to employees, directors and consultants of the Company and its affiliates, as Incentive Stock Options and Non-Qualified Stock Options. The 2010 Plan is to be administered by the Remunerations and Nominations Committee pursuant to delegation by the Company's Board of Directors, which will determine the number of shares, the term, the frequency and date, the type, the exercise periods, and any performance criteria pursuant to which stock option awards may be granted.

Stock Option Awards – In January 2011 the Company granted 750,000 stock options to a managing director. The exercise price of each option is the market price of the Company’s stock for the last sale prior to the grant date, converted to U.S. dollars using the exchange rate in effect on the grant date. The options generally expire after a period not to exceed ten years, except in the event of termination, whereupon vested options must be exercised generally within three months, or upon death or disability, in which cases the vested options may be exercised within twelve months, but in all cases the exercise date may not exceed the expiration date.

Diligent Board Member Services, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model and the resulting fair value is recorded as share-based compensation expense on a straight line basis over the option vesting period for employee stock options, ranging from one to three years.

The fair values of the options granted were estimated based on the following assumptions:

Expected volatility (1)		167.79	%
Expected term (2)	6.0 years
Risk-free interest rate (3)		1.93	%
Dividend yield		-
Weighted average grant-date fair value of granted options		.4427

(1)

The expected volatility was determined using historical volatility data for comparable companies.

(2)

The expected term of the options has been estimated using the simplified method allowed by the SEC, which calculates the average of the vesting period and the contractual term of the options.

(3)

The risk free interest rate is based on the U.S. Treasury constant maturity nominal yield with a term approximately equal to the expected terms of the options.

A summary of stock option activity for the three months ended March 31, 2011 is as follows:

	Options			Weighted average exercise price		Weighted average remaining contractual term
Outstanding at January 1, 2011		5,190,335		$	0.19	8.78 years
Granted		750,000		$	0.46
Exercised		(10,000	)	$	0.16
Forfeited		-			-
Outstanding at March 31, 2011		5,930,335		$	0.22	9.16 years
Exercisable at March 31, 2011		2,680,335		$	0.19	9.05 years

During the three months ended March 31, 2011, the Company recognized share-based compensation costs related to stock options of $143,844. At March 31, 2011 there was $429,055 of unrecognized share-based compensation expense related to options granted that will be recognized over the next 3.0 years.

10) Income taxes

The Company records an income tax provision for foreign tax obligations in New Zealand. No US, UK or Singapore current income taxes have been provided due to tax losses incurred. The Company has recorded a full valuation allowance against all US deferred tax assets, because management is unable to conclude that it is more likely than not that the deferred tax assets will be realized.

The Company and its subsidiaries are subject to regular audits by federal, state and foreign tax authorities. These audits may result in additional tax liabilities. The Company’s federal, state and foreign income tax returns for the 2007 through 2010 tax years are open for examination by the respective taxing jurisdictions.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes that appear elsewhere in this Form 10-Q. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

Overview

The Company develops and makes available an online software application called Diligent Boardbooks, a web based portal that board members, management and administrative staff use to compile, update, review and archive board materials before, during and after board meetings. The Company provides clients with subscription-based access to its software and also provides associated services including securely hosting the client’s data and customer service and support for the application.

Software-as-a-Service (“SaaS”) Model

The Company uses the Software-as-a-Service (“SaaS”) model to distribute its Diligent Boardbooks application to the market and maintain the security and integrity of its clients’ data. Under this model, the Company offers annual renewable subscriptions for customer access to its Boardbook product which is hosted on the Company’s secure servers, and offers a complete suite of related services including training, support, data migration and data security/backup.

The SaaS model allows the Company to differentiate itself through technological innovation and customer service while the subscription billing approach results in a predictable and recurring revenue stream. This SaaS model also allows clients to retain control over access to the application while outsourcing to the Company the support activities, such as managing the IT infrastructure and maintaining the software.

SaaS Benefits

The Company’s SaaS model addresses several difficulties found in the traditional software model and offers the following critical advantages for our company:

•

Highly scalable operations. Because our client’s boards do not ordinarily meet on a daily or monthly basis, our system has the capability to support many more Boards without absorbing increased costs associated with customer growth.

•

Better revenue visibility. By offering renewable annual subscriptions instead of one time perpetual licenses, the Company has much better revenue foresight. This high revenue visibility allows the Company to undertake much better planning and budgeting, with significant advantages for corporate strategy and profitability.

•

Lower cost of development. The Company has developed one application that is cost effectively shared across thousands of end users. This is considerably less expensive than developing all the permutations (data bases, operating systems, etc) needed by customers who want to run the software on their own premises. These economies allow the Company to spend resources on developing increased functionalities for its Boardbooks application instead of on creating multiple versions of the same code.

•

Longer corporate life. The SaaS model has a long tail of recurring revenue that reduces investment risk, simplifies corporate planning and leads to extended corporate life.

•

Better expense visibility. Because revenue is more predictable, the Company is able to better plan expenses.

Diligent’s History

We began developing components of the Diligent Boardbooks system starting in 1998. In 2001, SunAmerica Funds requested a solution to automate the management of its board meeting papers. With this request, the founders of the Company launched the Diligent Boardbooks concept and produced and tested a working concept that was delivered to SunAmerica Funds. By 2002, the founders of the Company believed the end product could become an extremely valuable licensing opportunity. With SunAmerica Funds as one of our anchor clients, the Company spent a year selling Boardbooks licenses to other major accounts in a market that had yet to deal with the implications of the Sarbanes-Oxley Act. Starting in 2006, after fully developing the capabilities of our product with our anchor clients, we began establishing our own credentials. Our marketing group produced promotional marketing materials featuring our anchor clients which described the Boardbooks product and explained its benefits for boards of directors. For the next two years, before undertaking an international rollout of a large licensing sales force, we tested several key growth assumptions relating to scaling the Diligent Boardbooks product.

On December 12, 2007 we completed a public share offering of 24,000,000 shares of our common stock in conjunction with a listing of our stock on the New Zealand Stock Exchange under the symbol “DIL.” As a result, the Company is subject to the regulation and reporting requirements imposed by the New Zealand Stock Exchange. There is no United States established public trading market for our common stock. However, because the Company is a U.S. company incorporated in Delaware with over 500 shareholders, it is also subject to the U.S. reporting and regulatory requirements of the Securities and Exchange Commission (“SEC”) and the Securities Exchange Act of 1934. Because of this dual regulation in New Zealand and the U.S., the Company is required to meet both standards, which means the Company sometimes is faced with conflicting requirements and always must comply with the more stringent rule.

Recent Developments

We are currently experiencing significant financial growth. The Company produced its strongest ever first quarter results with the addition of 64 new agreements for Boardbooks licenses and $1.88 million in annual recurring revenue. This is the highest quarterly sales figure recorded by the Company since it began offering Boardbooks licenses eight years ago. This growth is unprecedented for us, considering that the first quarter is historically one of the Company’s slowest quarters, and that the first quarter performance has never before exceeded the previous fourth quarter’s performance. The Company’s income consists of subscription-based revenue that recurs each year and increases with each new license agreement or upgrade. The growth trajectory of the Company is demonstrated by the increase in net sales revenues which, at $2.98 million for the first quarter 2011, is up 70% compared to the same quarter a year ago. The Company now has 520 worldwide clients and more than 13,000 individual users of its Boardbooks products, servicing customers across a wide range of industry segments.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to revenue recognition, deferral of costs, the allowance for accounts receivable, software development costs, the impairment of long-lived assets and note receivable, income taxes and assumptions for stock-based compensation. Management bases its estimates and judgments on historical experience, known trends or events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our “critical accounting policies” as those that require us to make subjective estimates about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations or that concern the specific manner in which we apply GAAP. Our estimates are based upon assumptions and judgments about matters that are highly uncertain at the time the accounting estimate is made and applied and require us to assess a range of potential outcomes.

We believe the following critical accounting policies to be both those most important to the portrayal of our financial condition and those that require the most subjective judgment.

Revenues and Accounts Receivable

We derive our revenues from set-up and training fees (“installation fees”) of the Boardbooks system and license fees for the ongoing use of our Diligent Boardbooks software. We have no other significant sources of revenues at this time.

The Company recognizes revenue when all of the following criteria are met: (a) persuasive evidence of the arrangement exists, (b) delivery has occurred or services have been rendered, (c) the seller’s price to the buyer is fixed and determinable and (d) collectability is reasonably assured. Revenue from the Boardbooks licenses is recorded ratably over the contract period, which is generally twelve months. License fees paid in advance are recorded as deferred revenue until recognized. The Company generally invoices its customers in annual installments. Accordingly, the deferred revenue balance does not represent the total contract value of annual or multi-year, noncancelable subscription agreements. The Company also earns fees for set-up and training (“installation fees”) of the Boardbooks system. Installation fees are recorded ratably over the contract period.

Accounts receivable are recorded at estimated net realizable value. A provision for doubtful accounts is based on management’s assessment of amounts considered uncollectable for specific customers based on age of debt, history of payments and other relevant information. An allowance for doubtful accounts is provided for accounts receivable which management determines will not be collectable in full.

Cost of Revenues and Operating Expenses

Cost of Revenues. Cost of revenues consists of direct expenses related to account management, customer support and IT hosting. We do not allocate indirect overhead to cost of revenues.

Selling and Marketing Expenses. Selling and marketing expenses are comprised of sales commissions, salaries for sales and marketing employees, and direct advertising expenses, including mailings and travel. We do not allocate indirect overhead to selling and marketing.

General and Administrative Expenses. General and administrative expenses consist of compensation and related expenses for executive, finance, accounting, administrative, legal, professional fees, other corporate expenses and overhead costs such as rents, utilities etc.

Research and Development Expenses. Research and development expenses are incurred as we upgrade and maintain our software, and develop product enhancements. Such expenses include compensation and employee benefits of engineering and testing personnel, materials, travel and all direct overhead associated with design and required testing of our product line. We do not allocate indirect overhead to research and development.

Software development costs are expensed as they are incurred until technological feasibility has been established, at which time those costs are capitalized until the product is available for general release to customers. To date, software has been available for general release concurrent with the establishment of technological feasibility and, accordingly, the Company has not capitalized any development costs. Costs incurred to enhance products after the general release of the service using the product are expensed in the period they are incurred and included in research and development costs in our consolidated statements of operations.

Share-Based Compensation. In November 2007 we adopted our 2007 Stock Option and Incentive Plan and in June 2010 we adopted the 2010 Stock Option and Incentive Plan, pursuant to which we have issued share-based compensation from time to time, in the form of stock and stock options.

The Company measures the cost of employee services received in exchange for an equity-based award using the fair value of the award on the date of the grant, and recognizes the cost over the period that the award recipient is required to provide services to the Company in exchange for the award. The Company measures compensation cost for awards granted to non-employees based on the fair value of the award at the measurement date, which is the date performance is satisfied or services are rendered by the non-employee.

Interest Income (Expense), net

Interest income is derived from interest bearing bank deposits held by US, UK and New Zealand bank accounts, together with investment income from the Note receivable due from our affiliate, SSH LLC.

Foreign Exchange

As a worldwide company, certain of Diligent’s revenues and expenses are denominated in foreign currencies, which are recorded at the approximate rates of exchange in effect at the transaction dates. Assets and liabilities are translated at the exchange rates in effect at the balance sheet dates, with differences recorded as foreign exchange gains or losses in the statements of operations. Additionally, the Company has cash balances maintained in New Zealand Dollars (NZD) and British Pound Sterling (GBP).

The Company’s wholly-owned subsidiaries, Diligent Boardbooks Limited (“DBL”), Diligent Board Member Services NZ Limited (“DBMS NZ”) and Diligent APAC Board Services PTE. Ltd. (“DAP”), utilize the GBP, NZD and Singapore Dollar (SGD), respectively, as their functional currencies. Assets and liabilities of these subsidiaries are translated to US dollars at exchange rates in effect at the balance sheet dates, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive income.

Income taxes

Diligent Board Member Services, Inc. files U.S. federal and state income tax returns. Foreign operations file income tax returns in their respective foreign jurisdictions. The Company accounts for deferred income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Note receivable from affiliate

The note receivable from affiliate represents amounts due from Services Share Holding, LLC (“SSH LLC”, the Company’s predecessor entity), under a Promissory Note and Security Agreement dated October 1, 2007 (the “Note”), as amended by the Prepayment and Amendment Agreement entered into in February 2010 and approved by our stockholders in June 2010.

Prior to the prepayment and amendment, the principal balance of the Note was $7,161,791, which bore interest at 5% per annum, and was scheduled to mature on October 1, 2010. It was originally secured by 25,000,000 shares of the Company’s stock which was pledged as collateral by members of SSH LLC. A portion of the pledged shares were subsequently sold by SSH LLC in order to obtain funds to make the quarterly interest payments. At December 31, 2009, there were 21,678,597 shares securing the Note.

The Prepayment and Amendment Agreement with SSH LLC provided for:

The sale in February 2010 by SSH LLC of a block of 4,823,000 shares of the pledged stock to a third party for US$0.24 per share, for a total of US$1,157,011 (after commissions), which would be applied to the interest due for the period from January through May 2010 ($146,581) and prepayment of principal ($1,010,430). The proceeds of this sale were placed in escrow pending stockholder approval of the agreement.

The prepayment of an additional US$3,075,676 of principal through the surrender of 11,650,000 pledged shares to the Company at US$0.26 per share,

The extension of the maturity date on the Note from October 1, 2010 to October 1, 2012, and

Effective in June 2010, adjustment of the annual interest rate from 5.0% to 6.5%, payable annually on January 1 of each year, in arrears.

This agreement was subject to the approval of the Company’s shareholders at the annual meeting on June 8, 2010, and was contingent on the receipt of an appraisal attesting to the fairness of the transaction to the shareholders unrelated to SSH LLC. The agreement was approved and the proceeds from the February 2010 sale which had been placed in escrow were delivered to the Company on June 8, 2010. After the transaction, the amended Note had a contractual outstanding principal balance of $3,075,685 and was secured by 5,205,597 shares of the Company’s common stock pledged by the members of SSH LLC. In a series of transactions in December 2010 and early January 2011, SSH LLC sold an additional 275,000 shares of the Company’s common stock pledged as collateral for the Note, as permitted under the Note agreement to fund interest payments. As a result, the number of shares pledged as collateral for the Note as of March 31, 2011 has been reduced to 4,930,597.

In January 2011, SSH LLC overpaid the interest due by $4,122, which was applied to the principal balance, in accordance with the Note agreement, reducing the contractual loan balance to $3,071,563.

A portion of the contractual loan balance is reserved on our balance sheet by a valuation allowance of $1,200,000, resulting in a net receivable balance of $1,871,563. The Note is considered to be collateral dependent, as SSH LLC’s primary means of repayment is through liquidation of the underlying collateral. At December 31, 2008, the then-outstanding loan balance of $7,161,791 was reduced by a $5.8 million valuation allowance, which was based on the estimated fair value of the underlying collateral at that time. As discussed below, in the fourth quarter of 2009, the Company recorded a recovery in the value of the Note of $300,000 and a corresponding decrease in the valuation allowance to $5.5 million. At March 31, 2010, the Company recorded an additional recovery in the value of the note of $3.2 million, and at September 30, 2010 the Company recorded a further recovery of $1.1 million, as described below.

In the absence of an active market for the Company’s common stock, or other observable inputs for similar instruments, the Company originally based its valuation of the underlying collateral on the value of the March 2009 issuance of Series A Preferred Stock, adjusted using an assumed discount rate of 20%, which was management’s estimate of the fair value of the preferred features of the Series A Preferred Stock. In addition, management assumed that SSH LLC and/or its members would sell a portion of the underlying collateral to meet their quarterly interest payments, thereby reducing the amount of collateral expected to be available when the Note was to mature in October 2010.

The recovery of $3.2 million at March 31, 2010 was based on the re-measurement of a significant input used to value the underlying collateral of the Note. The February 2010 sale of shares to a third party indicated that the preferred stock price was no longer the best measure of the fair value of our common stock. The Company believed that a better benchmark for fair value was the US$0.24 per share obtained by SSH LLC for the 4.8 million shares sold to a third party in February 2010. The additional recovery at September 30, 2010 is based on the subsequent re-measurement of the underlying collateral at $0.47 per share, which is the price obtained for the 3 million shares issued by the Company in a private placement in October 2010. The Company reviews the valuation of the Note each reporting period and believes the value is properly stated at March 31, 2011. In assessing the adequacy of the valuation allowance at March 31, 2011, we considered the prices obtained by SSH LLC for the December 2010/January 2011 sales of 275,000 shares, which were approximately equal to the price received for the shares issued in the October 2010 private placement. Additionally, there have been no other third party sales which would cause us to believe that $0.47 per share is not the best measure of the value of the underlying collateral.

Recent Accounting Pronouncements

See Note 2 to the consolidated financial statements at Item 1 of this Form 10-Q.

Results of Operations for the Three Months Ended March 31, 2011 and 2010

Revenues

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Revenues	$	2,976,229	$	1,747,476	$	1,228,753

The growth in revenues of 70% in the quarter ended March 31, 2011 when compared with the 2010 first quarter is a result of the cumulative addition of license agreements each quarter. The Company has continued to add license agreements each quarter since inception. At March 31, 2011, the cumulative license agreements were 520, compared with 320 at March 31, 2010, a 63% increase. This increase in revenues is in line with our targets and was achieved at a significantly lower customer acquisition cost. All of the deferred revenue of $3.6 million recorded on the balance sheet at March 31, 2011 will be recognized as revenue in the next twelve months.

Cost of Revenues and Operating Expenses

Cost of Revenues

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Cost of Revenues	$	819,849	$	622,664	$	197,185

Cost of revenues is comprised of account management, customer support and IT services. For the quarter ended March 31, 2011, employee costs included in cost of revenues increased by approximately $111,000 as compared to the quarter ended March 31, 2010, primarily as a result of an increase in head count to support our larger client base. Additionally, hosting costs increased by approximately $73,000, primarily due to hosting facilities the Company has added as a result of the growth in the number of users. The remainder of the increase in cost of revenues is attributable to increases in printing, publications and phone support to service our larger client base.

The Company’s gross profit percentage increased to 72.5% for the first quarter of 2011, from 64.4% for the first quarter of 2010, reflecting the Company’s ability to control cost increases while significantly increasing revenues.

Selling and Marketing Expenses

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Selling and Marketing Expenses	$	873,036	$	566,885	$	306,151

Selling and marketing expenses increased in the first quarter of 2011 as compared to the comparable 2010 quarter as a result of an increase in salaries and commissions for our US sales force of approximately $207,000 and related travel of $15,000. Our foreign selling expenses increased by approximately $125,000, primarily due to increased sales in the UK and our expansion into the Asia-Pacific region. Net labor costs for marketing decreased by approximately $55,000, as we decreased our in-house marketing staff while increasing the use of outside consultants. Printing, mailing and web-based advertising expenses increased marketing costs by approximately $24,000. Other miscellaneous expenses decreased by approximately $10,000, primarily relating to selling and marketing support.

General and Administrative Expenses

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
General and Administrative Expenses	$	1,052,356	$	1,001,619	$	50,737

The increase in general and administrative expenses is primarily attributable to an increase of approximately $26,000 in share-based compensation expense related to employee stock options. The remainder of the increase consists of increases in employee costs of approximately $20,000 and office costs of $14,000, due to a slight increase in salaries and the expansion of our New York headquarters office space. This is offset by decreases in travel expenses and professional fees of $6,000 and $2,000, respectively.

Research and Development Expenses

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Research and Development Expenses	$	319,554	$	177,146	$	142,408

The increase in research and development expenses for the first quarter of 2011 as compared to the first quarter of 2010 is due to increased staffing for new product development and support, including development of a Diligent Boardbooks app for the Apple iPad.

Depreciation and Amortization

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Depreciation and Amortization	$	117,969	$	115,196	$	2,773

The increase in depreciation and amortization is attributable to the net increase in property and equipment, consisting principally of computer equipment and computer software.

Impairment recovery on note receivable from affiliate

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Impairment recovery on note receivable from affiliate	$	-	$	3,200,000	$	(3,200,000	)

The carrying value of the Note had previously been reduced by a valuation allowance to reflect the estimated fair value of the Company’s common stock which is held as collateral for the Note, as the Note is deemed to be collateral dependant. At March 31, 2010, the Company remeasured a significant input used to value the underlying collateral and recorded a recovery of $3.2 million, based on recent events and activity which indicated that the revised measurement is the best representation of fair value of the underlying collateral for the Note. At March 31, 2011, no change in the valuation allowance was deemed necessary.

Interest Income, net

	Three months ended March 31,
	2011		2010		Increase/(Decrease)
Interest Income, net	$	44,820	$	75,847	$	(31,027	)

Interest income, net, includes interest income on the Note Receivable from our affiliate, as well as interest on the Company’s cash and cash equivalents and term deposits which are interest-bearing. The decrease in interest income is attributable to the prepayment and amendment of the Note in June 2010. Although the interest rate increased from 5.0% to 6.5%, the principal balance decreased by approximately $4.1 million, resulting in less interest income overall.

Foreign Exchange Transaction Loss

	Three months ended March 31,
	2011			2010			Increase/(Decrease)
Foreign Exchange Transaction Loss	$	(12,189	)	$	(39,629	)	$	(27,440	)

The parent Company maintains a portion of its cash balances in NZD and GBP. The foreign exchange loss for the quarter ended March 31, 2011 is a result of the strengthening of the US dollar against NZD, offset by a weakening of the US dollar against GBP. During the quarter ended March 31, 2010, the US dollar strengthened against both NZD and GBP.

Liquidity and Capital Resources

Historically, as the Company grew its business and sustained negative cash flow, its primary source of liquidity had been the cash received from stock issuances, including $16.4 million obtained in December 2007 from the Company’s initial public offering and $2.9 million obtained from the issuance of Series A preferred stock issued in March 2009. Additionally, in June 2010, the Company received a $1.0 million principal prepayment on the Note receivable from affiliate, and on October 20, 2010, the Company received $1.4 million in an offshore private placement of 3 million shares of newly issued common stock by First NZ Capital Securities Limited.

In the third and fourth quarters of 2010, the Company generated positive cash flows from operations of $0.2 million and $0.7 million, respectively, resulting in approximately $18 thousand net cash generated from operations for the full year. This marked the first year since inception of the Company that Diligent achieved positive cash flows from operations. The Company continued this trend in the first quarter of 2011, generating positive cash flows from operations of $0.6 million.

At March 31, 2011, the Company’s sources of liquidity consist of cash and term deposits of approximately $3.6 million. The Company also has a $1.0 million revolving line of credit facility with Spring Street Partners, L.P. This line of credit offers the Company additional cash flow support if needed. As of March 31, 2011, the Company has had no borrowings under this credit facility.

The Company’s current operating expenses and expected capital expenditures are predictable and adequate to support our budgeted growth. However, with the recent acquisition of additional capital, the Company is evaluating strategic growth opportunities that could change our current expense and capital forecasts, particularly in light of our expansion into the Asia-Pacific region. The Company’s expected cash receipts from operations are adequate to support budgeted expenses for 2011. The primary uncertainty concerning the Company’s capital needs pertains to its ability to continue to achieve the expected sales growth in a timely manner.

Cash flows

	Three months ended March 31,
	2011			2010
Cash provided by (used in):
Operating activities	$	623,523		$	(421,411	)
Investing activities	$	(175,837	)	$	(50,084	)
Financing activities	$	(174,382	)	$	(31,865	)

Net Cash Flows from Operating Activities

Cash provided by operations for the quarter ended March 31, 2011 was $623,523, compared with cash used in operating activities for the quarter ended March 31, 2010 of $421,411. The Company has been reducing its cash burn rate from operations, primarily from increased revenues coupled with a leveling off of cash-based operating expenses (operating expenses less depreciation and share-based compensation). By the end of 2010, the Company had achieved positive cash flow from operations for the full 12-month period, marking the first year since inception that the Company generated positive cash flow from operations. The Company continued this trend by controlling expenses while significantly adding to our revenues.

Net Cash Flows from Investing Activities

Cash used in investing activities increased to $175,837 in the first quarter of 2011 from $50,084 in the comparable 2010 quarter, entirely due to purchases of property and equipment.

Net Cash Flows from Financing Activities

In the first quarter of 2011, cash used in financing activities of $174,382 included $159,338 of cash dividends paid on preferred stock. In the first quarter of 2010, the dividends on the Company’s preferred stock were paid as PIK dividends, and accordingly there was no cash used for dividend payments. Financing activities in the first quarter of 2010 consisted solely of repayments of obligations under capital leases.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Because the Company qualifies as a smaller reporting company, as defined by §229.10(f)(1) it is not required to provide the information required by this Item.

Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. As of the end of the quarter ended March 31, 2011, our Chief Executive Officer and Chief Financial Officer have each reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have each concluded that our current disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and include controls and procedures designed to ensure that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There has been no change in the Company’s internal control over financial reporting required by Exchange Act Rule 13a-15 or 15d-15 that occurred during the fiscal quarter ended March 31, 2011 that has materially affected, or is reasonably likely to materially affect Diligent Board Member Services, Inc.’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

Not required

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

Not applicable

Item 4. [Reserved]

Item 5. Other Information.

Not applicable

Item 6. Exhibits.

Exhibit Numbers		Exhibits

31.1		CEO Certification pursuant to Rule 13a-14(a)

31.2		CFO Certification pursuant to Rule 13a-14(a)

32.1		CEO Certification furnished pursuant to Rule 13a-14(b) and 18 U.S.C. 1350

32.2		CFO Certification furnished pursuant to Rule 13a-14(b) and 18 U.S.C. 1350

SIGNATURES

Pursuant to the requirements on the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DILIGENT BOARD MEMBER SERVICES, INC.

Dated: May 11, 2011	By:	/s/ Alessandro Sodi
		Alessandro Sodi, Chief Executive Officer (Principal Executive Officer)

Dated: May 11, 2011	By:	/s/ Steven P. Ruse
		Steven P. Ruse, Chief Financial Officer (Principal Financial Officer)

Diligent Corp - FORM 10-Q - May 12, 2011

Attached files

Diligent Corp Reports