Ann: ANNREP: DIL: Diligent Board Member Services

• Release Date: 19/03/13 11:46
• Summary: ANNREP: DIL: Diligent Board Member Services Inc 2012 10K
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DIL
19/03/2013 09:46
ANNREP

REL: 0946 HRS Diligent Board Member Services INC (NS)

ANNREP: DIL: Diligent Board Member Services Inc 2012 10K

19 March 2013

ANNOUNCEMENT

DILIGENT BOARD MEMBER SERVICES, INC

("DILIGENT")

Diligent Board Member Services, Inc. ("Diligent" or "the Company") has today
filed with the U.S. Securities and Exchange Commission its Annual Report on
Form 10-K pursuant to the Securities Exchange Act of 1934.  A copy of the
Form 10-K, including Diligent's final accounts for the fiscal year ended 31
December 2012, has also been filed with NZX (see attached).

Please be advised that since the release of Diligent's unaudited preliminary
announcement, there have been several changes in our Consolidated Statement
of Cash Flows for 2012.  Net cash provided by operating activities has
increased from $US 22,088,306 to $US 22,712,648, net cash used in investing
activities has increased from $US (1,717,894) to $US (2,460,112) and net cash
provided by financing activities has increased from $US 3,939,756 to $US
4,058,167.  These changes net to zero, therefore causing no change to our net
income, earnings per share or net increase in cash and cash equivalents for
the year.  The reasons for the changes in our Consolidated Statement of Cash
Flows for 2012 are as follows: an adjustment to the manner of reporting the
cash flow from the excess tax benefits realized from share-based
compensation; and an adjustment to the cash used for purchases of property
and equipment to properly reflect the cash expended in 2012 for purchases of
property and equipment acquired with accounts payable in 2011.

As was reported in Diligent's preliminary results announcement to the NZX on
1 March 2013 the 2012 financial year was an outstanding one for the Company
in terms of revenue growth, margin expansion and profitability.  It was the
Company's most profitable year so far. Revenue for 2012 was $US43.7 million,
an increase of 143 percent compared to 2011. In the past year, Diligent also
achieved a number of key milestones: the Company expanded its client base to
2,571 Boards and almost 52,000 users worldwide, and retained, what it
believes is an already best-in-class customer retention rate of 97%.

As previously disclosed in December of 2012, Diligent's Board authorized a
Special Committee of independent directors to conduct a review of certain
stock and option grants that may not have been issued in compliance with the
relevant stock option and incentive plans.  As a result of the review, the
Special Committee identified a number of instances of inadvertent
non-compliance with applicable regulations, and determined that certain
executive's options were issued in excess of applicable plan caps. This was
disclosed by the Company to both the NZX and the Financial Markets Authority.

The Form 10-K also discloses that the Board of Directors has now received the
final report of the Special Committee, and unanimously adopted resolutions
calling for remedial and other actions relating to the improvement of
Diligent's internal controls and governance (see Item 9A of the Form 10-K for
more information).  The work of the Special Committee to complete a
corrective compensation package for the two members of management affected by
the non-compliant option grants, including the Company's Chief Executive
Officer, is ongoing.

The Chairman of Diligent, David Liptak said: "The completion of the Special
Committee report and the Board's unanimous support of measures for
improvement represent important steps forward for Diligent.  The Company and
the Board look forward to strengthening their efforts in this area to the
standard of excellence that Diligent is known for as a company."

As a U.S. company, Diligent's financial statements are required to be audited
in accordance with U.S. law and Diligent applies U.S. GAAP. Its financial
statements have been audited by Holtz Rubenstein Reminick, LLP (HRR). HRR, is
registered with The Public Company Accounting Oversight Board and the
American Institute of Certified Public Accountants and has audited Diligent's
financial statements since 2008. However, it is a requirement of the
Financial Reporting Act 1993 and the Auditor Regulation Act 2011 that
Diligent's accounts be audited by a firm that is registered in New Zealand
with the Financial Markets Authority as a registered audit firm.  HRR is not
a registered audit firm with the Financial Markets Authority.  As noted in
the Form 10-K Diligent is working to engage an audit firm which will be able
to comply with these requirements in the future.

Diligent will file its annual report required by the NZX Rules by 31 March
2013.

Forward Looking Statements

This document contains forward-looking statements within the meaning of the
safe harbor provisions of the Securities Litigation Reform Act of 1995. Terms
such as "expect," "believe," "continue," and "intend," as well as similar
comments, are forward-looking in nature.   Important factors that could cause
actual results to differ materially from Diligent's expectations include: our
Special Committee investigation identified a number of instances in which we
were not, or may not have been, in compliance with applicable New Zealand and
U.S. regulatory obligations and such instances may expose us to potential
regulatory actions and/or contingent liabilities; certain of our past stock
issuances and stock option grants may expose us to potential contingent
liabilities, including potential rescission rights; we are subject to New
Zealand Stock Exchange Listing Rules and compliance with securities and
financial reporting laws and regulations in the United States and New Zealand
and face higher costs and compliance risks than a typical U.S. public company
due to the need to comply with these dual regulatory regimes; as of 31
December 2012 we identified material weaknesses in our internal controls over
financial reporting and concluded that our disclosure controls were not
effective; we must address the material weaknesses in our internal controls,
which otherwise may impede our ability to produce timely and accurate
financial statements; our business is highly competitive and we face the risk
of declining customer renewals or upgrades; and we may fail to manage our
growth effectively. Please refer to Diligent's Annual Report on Form 10-K for
the fiscal year ended 31 December 2012 filed with the Securities and Exchange
Commission for further information.
About Diligent Board Member Services, Inc (NZX:DIL)
Over 2,500 boards and almost 52,000 users worldwide rely on Diligent Board
Member Services, Inc. to speed and simplify how board materials are produced,
delivered and reviewed. Providing the world's most widely used secure board
portal, Diligent has pioneered ease of use, stringent security, and superior
training and support since 2001. We serve 252 of the US Fortune 1000, 129 of
the TSX, 33 of the FTSE100 and a variety of private firms, not-for-profits
and government agencies globally. Diligent is a public company with annual
revenues of $US 43.7 million. Our ranking in the 2012 Deloitte Technology
Fast 500 places us among the fastest growing technology companies in America.
Offices are located in New York (corporate headquarters), Montreal, London,
Sydney, Christchurch, Singapore and Hong Kong.
Diligent Boardbooks is a registered trademark of Diligent Board Member
Services, Inc. with all rights reserved. 2013 Diligent Board Member Services,
Inc.

Please direct all investor inquiries to Sonya Joyce at +64 4 894 6912

Please direct all media inquiries to Geoff Senescall +64 21 481 234
End CA:00234289 For:DIL    Type:ANNREP     Time:2013-03-19 09:46:34