0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member dil:EmployeesMember 2014-07-24 2014-07-24 0001433269 dil:SpringStreetPartnersLPMember 2014-03-04 2014-03-05 0001433269 dil:CarrollCapitalHoldingsMember 2014-03-02 2014-03-03 0001433269 us-gaap:CommonStockMember 2014-01-01 2014-09-30 0001433269 us-gaap:RetainedEarningsMember 2014-09-30 0001433269 us-gaap:AdditionalPaidInCapitalMember 2014-09-30 0001433269 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2014-09-30 0001433269 us-gaap:RetainedEarningsMember 2013-12-31 0001433269 us-gaap:AdditionalPaidInCapitalMember 2013-12-31 0001433269 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2013-12-31 0001433269 dil:NewRemunerationPackageMember 2014-01-01 2014-09-30 0001433269 us-gaap:FairValueInputsLevel2Member 2014-09-30 0001433269 us-gaap:CommonStockMember 2014-09-30 0001433269 us-gaap:CommonStockMember 2013-12-31 0001433269 dil:IncentivePlan2013Member us-gaap:CommonStockMember dil:EmployeesMember 2014-07-24 2014-07-24 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2013-06-01 2013-06-30 0001433269 dil:ReplacementIncentiveAwardsMember 2013-12-22 2013-12-23 0001433269 dil:ReplacementGrantAgreementMember dil:IncentivePlan2013Member dil:EmployeesMember 2014-07-24 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-15 2014-09-15 0001433269 dil:IncentivePlan2013Member us-gaap:CommonStockMember us-gaap:ExecutiveOfficerMember 2014-09-15 2014-09-15 0001433269 2014-01-01 2014-03-31 0001433269 dil:ReplacementIncentiveAwardsMember 2013-05-03 0001433269 us-gaap:EmployeeStockOptionMember dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-15 0001433269 dil:IncentivePlan2013Member 2013-05-03 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2013-06-30 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2013-12-31 0001433269 us-gaap:PerformanceSharesMember 2013-12-31 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2013-06-11 2013-06-12 0001433269 us-gaap:EmployeeStockOptionMember 2013-06-11 2013-06-12 0001433269 dil:SeriesARedeemableConvertiblePreferredStockMember 2014-09-30 0001433269 dil:SeriesARedeemableConvertiblePreferredStockMember 2013-12-31 0001433269 2013-01-01 2013-12-31 0001433269 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2014-01-01 2014-09-30 0001433269 dil:OperatingLossCarryForwardsUtilizedMember 2014-09-30 0001433269 us-gaap:RetainedEarningsMember 2014-01-01 2014-09-30 0001433269 2014-09-01 2014-09-30 0001433269 us-gaap:CustomerRelationshipsMember 2014-01-01 2014-09-30 0001433269 us-gaap:EmployeeStockOptionMember 2014-09-30 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2014-09-30 0001433269 us-gaap:PerformanceSharesMember 2014-09-30 0001433269 dil:RecognitionPeriodYearTwoMember dil:ReplacementIncentiveAwardsMember 2014-09-30 0001433269 dil:RecognitionPeriodYearThreeMember dil:ReplacementIncentiveAwardsMember 2014-09-30 0001433269 dil:RecognitionPeriodYearOneMember dil:ReplacementIncentiveAwardsMember 2014-09-30 0001433269 dil:RecognitionPeriodYearFourMember dil:ReplacementIncentiveAwardsMember 2014-09-30 0001433269 dil:RecognitionPeriodReminderOfFiscalYearMember dil:ReplacementIncentiveAwardsMember 2014-09-30 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-15 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member dil:ExecutiveOfficerAndEmployeeMember 2014-06-20 0001433269 us-gaap:SeriesAPreferredStockMember 2014-07-01 2014-09-30 0001433269 us-gaap:SeriesAPreferredStockMember 2014-01-01 2014-09-30 0001433269 dil:SpringStreetPartnersLPMember us-gaap:SeriesAPreferredStockMember 2014-09-30 0001433269 us-gaap:FairValueInputsLevel2Member us-gaap:USTreasurySecuritiesMember 2013-12-31 0001433269 us-gaap:FairValueInputsLevel2Member us-gaap:MoneyMarketFundsMember 2013-12-31 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2014-07-01 2014-09-30 0001433269 us-gaap:PerformanceSharesMember 2014-07-01 2014-09-30 0001433269 us-gaap:EmployeeStockOptionMember 2014-07-01 2014-09-30 0001433269 dil:ReplacementIncentiveAwardsMember 2014-07-01 2014-09-30 0001433269 us-gaap:OfficerMember 2014-04-01 2014-06-30 0001433269 us-gaap:RestrictedStockUnitsRSUMember 2014-01-01 2014-09-30 0001433269 us-gaap:PerformanceSharesMember 2014-01-01 2014-09-30 0001433269 us-gaap:EmployeeStockOptionMember 2014-01-01 2014-09-30 0001433269 dil:ReplacementIncentiveAwardsMember 2014-01-01 2014-09-30 0001433269 2013-06-11 2013-06-12 0001433269 dil:ReplacementIncentiveAwardsMember 2013-01-01 2013-12-31 0001433269 us-gaap:SeriesAPreferredStockMember 2009-03-10 2009-03-11 0001433269 2012-10-01 2012-12-31 0001433269 us-gaap:USTreasurySecuritiesMember us-gaap:MinimumMember 2014-01-01 2014-09-30 0001433269 us-gaap:MinimumMember 2014-01-01 2014-09-30 0001433269 us-gaap:MaximumMember 2014-01-01 2014-09-30 0001433269 dil:Plan2010Member 2013-06-01 2013-06-30 0001433269 dil:Plan2010Member us-gaap:ChiefExecutiveOfficerMember 2012-12-31 0001433269 dil:Plan2010Member dil:EmployeesMember 2012-12-31 0001433269 dil:Plan2007Member us-gaap:ChiefExecutiveOfficerMember 2012-12-31 0001433269 2012-12-31 0001433269 us-gaap:RestrictedStockUnitsRSUMember us-gaap:OfficerMember 2013-06-01 2013-06-30 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member dil:ExecutiveOfficerAndEmployeeMember 2014-06-19 2014-06-20 0001433269 us-gaap:EmployeeStockOptionMember dil:IncentivePlan2013Member dil:ExecutiveOfficerAndEmployeeMember 2014-06-19 2014-06-20 0001433269 dil:SpringStreetPartnersLPMember us-gaap:SeriesAPreferredStockMember 2013-01-03 0001433269 dil:ReplacementGrantAgreementMember 2013-12-23 0001433269 dil:ReplacementGrantAgreementMember 2014-08-01 2014-08-31 0001433269 us-gaap:OtherNoncurrentLiabilitiesMember 2014-09-30 0001433269 dil:AccruedExpensesAndOtherCurrentLiabilitiesMember 2014-09-30 0001433269 us-gaap:OtherNoncurrentLiabilitiesMember 2013-12-31 0001433269 dil:AccruedExpensesAndOtherCurrentLiabilitiesMember 2013-12-31 0001433269 dil:NewRemunerationPackageMember 2014-09-30 0001433269 us-gaap:DirectorMember 2014-07-10 2014-07-10 0001433269 us-gaap:DirectorMember 2014-04-09 2014-04-09 0001433269 us-gaap:DirectorMember 2014-03-13 2014-03-14 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-14 2014-09-15 0001433269 us-gaap:EmployeeStockOptionMember dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-14 2014-09-15 0001433269 dil:IncentivePlan2013Member us-gaap:ExecutiveOfficerMember 2014-09-14 2014-09-15 0001433269 us-gaap:RestrictedStockUnitsRSUMember dil:IncentivePlan2013Member dil:EmployeesMember 2014-07-23 2014-07-24 0001433269 dil:NzxrMember 2014-01-01 2014-09-30 0001433269 dil:NzxDisciplineFundMember 2014-01-01 2014-09-30 0001433269 2013-09-30 0001433269 2013-12-31 0001433269 2014-07-01 2014-09-30 0001433269 2013-07-01 2013-09-30 0001433269 2014-09-30 0001433269 us-gaap:ComputerEquipmentMember 2013-01-01 2013-09-30 0001433269 dil:ComputerEquipment1Member 2013-01-01 2013-09-30 0001433269 2013-01-01 2013-09-30 0001433269 dil:ReplacementGrantAgreementMember 2013-12-22 2013-12-23 0001433269 us-gaap:AdditionalPaidInCapitalMember 2014-01-01 2014-09-30 0001433269 2014-11-05 0001433269 2014-01-01 2014-09-30 iso4217:USD xbrli:shares dil:installment dil:item xbrli:pure iso4217:USD xbrli:shares false --12-31 Q3 2014 2014-09-30 10-Q 0001433269 86802226 Yes Accelerated Filer Diligent Board Member Services, Inc. 253000 253000 P1Y 240000 0.03804 0.05449 14000 28000 -267000 800000 800000 900000 0 2500000 200000 0 0 -133000 -139000 1300000 1900000 1532000 1343000 0.050 -248000 -189000 1105000 1171000 <div> <div style="margin-left:0pt;margin-right:0pt;">   2)Investigations and restatement   Special Committee   In December 2012, the Board of Directors (the “Board”) of Diligent appointed a Special Committee of independent directors to examine certain of Diligent’s past stock issuances and stock option grants that may not have been issued in compliance with the relevant stock option and incentive plans. The Special Committee’s members were not on the Board at the time of the issuance of such grants, were not involved in their issue, and are not the recipients of any option grants. The Special Committee was delegated broad powers from the Board to take all such action in respect of the issuances as it deemed necessary and advisable.   The Special Committee, assisted by attorneys in the U.S. and New Zealand, conducted a thorough review and analysis of all stock issuances and stock option grants during the relevant period.  As discussed in Note 7, the Special Committee found that three option awards exceeded the applicable plan caps on the number of shares covered by an award issued to a single recipient in a particular year. The Special Committee was delegated the authority to develop appropriate alternative compensation packages for the affected employees.  These awards were determined by the Board to be reasonable compensation at the time, and were an important incentive component of the employees’ compensation packages.   As part of its work, the Special Committee also reviewed the Company’s compliance with applicable regulations, including U.S. and New Zealand securities regulations and the NZSX Listing Rules. The Special Committee identified a number of instances where it appears that Diligent was not, or may not have been, in compliance with its U.S. and New Zealand regulatory obligations.   The Special Committee determined that these instances of non-compliance were inadvertent and attributable in part to the constrained resources of Diligent in a period of financial difficulty in the years following its listing on the NZSX, and the complex regulatory and compliance obligations across multiple jurisdictions with differing regulations and requirements. It recommended, and the Board fully endorsed, that the Company work with its regulators to resolve these issues. In September 2013 the NZ Markets Disciplinary Tribunal approved a settlement reached by the Company and the New Zealand Stock Exchange regarding the previously disclosed breaches of the NZSX Listing Rules by the Company. The settlement provided for the payment of fines and costs by the Company, consisting of NZ $15 thousand as a penalty to the NZX Discipline Fund and NZ $4 thousand towards the costs of NZSX.   Costs for the Special Committee for the three and nine months ended September 30, 2013 were $0 and $2.3 million, respectively. An additional $0.3 million was incurred in the fourth quarter of 2012.  Included in Special Committee expenses were professional fees incurred for legal, accounting and compensation consultants, NZX penalties and compensation paid to Special Committee members. During the second quarter of 2013, the Special Committee was disbanded and the Company is in the process of implementing the recommendations of the Special Committee to remediate the compliance and internal control weaknesses identified.   Audit Committee Investigation   On July 2, 2013, the Audit Committee of the Board engaged outside company counsel to investigate the accounting errors that gave rise to the need to restate the Company’s financial statements, as well as other historical accounting practices impacting the timing of recognition of revenue. In connection with the investigation, it was determined that the Company included in its financial results certain customer agreements that, while having an effective date within a quarter, had not been signed by all parties within the quarter, as would be required to commence revenue recognition under U.S. GAAP. The early inclusion of such contracts did not have a material impact on previously reported revenue for fiscal quarters including the first quarter of 2010 through the first quarter of 2013. The Audit Committee investigation resulted in no finding of intentional misconduct or fraud. Costs of the investigation for the three months ended September 30, 2014 and 2013 were $0 and $0.2 million, respectively. Costs of the investigation for the nine months ended September 30, 2014 and 2013 were $0 and $2.5 million, respectively.   Restatement and Re-audit Engagements   In August, 2013, we announced that Diligent’s historical financial statements for the years ended December 31, 2012, 2011 and 2010 and the quarter ended March 31, 2013 would be restated due to revenue recognition errors. The Company completed the restatement process in April 2014. Costs for the restatement and re-audits incurred during the three months ended September 30, 2014 and 2013 were $0 and $0.8 million, respectively. Costs for the restatement and re-audits incurred during the nine months ended September 30, 2014 and 2013 were $0.9 and $0.8 million, respectively. These costs are comprised of professional fees incurred for accounting, auditing and consulting services and restatement bonuses. </div> </div> 3282000 939000 916000 15000 4000 0.75 0.15 0.15 -2861000 -2861000 4 2 4 3 5 2 2 2 P20D P20D P20D 130000 50000 0.50 0.50 1600000 600000 1400000 1400000 1400000 62500 0.07 P20D 240000 545000 489000 <div> <div style="margin-left:0pt;margin-right:0pt;"> 6)Redeemable Preferred Stock   On March 11, 2009, Diligent issued 30 million shares of Series A Preferred Stock at $0.10 per share in a private offering, for aggregate gross proceeds of $3.0 million.  Expenses relating to the preferred stock issuance were $139 thousand.   The carrying value of the Preferred Stock at September 30, 2014 and December 31, 2013 was as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 80.00%;margin-left:54pt;"> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;"> September 30, </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;"> December 31, </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="5" valign="bottom" style="width:33.12%;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;">   </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Gross proceeds </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Less: Issuance costs </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(139 </td> <td valign="bottom" style="width:03.12%;"> ) </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(139 </td> <td valign="bottom" style="width:01.26%;"> ) </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,861 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,861 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Issuance of PIK shares </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>267 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>267 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Conversion of PIK shares </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(267 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:15.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Cumulative amortization of offering costs </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>139 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>133 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Carrying value </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,261 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   The Preferred Stock is entitled to a fixed, cumulative, dividend of 11% per annum (adjusted for stock splits, consolidation, etc.).  The dividend, which is due on the first business day of each calendar year for the prior year, may (at the Company’s option) be paid either in cash or in kind by the issuance of additional Preferred Stock (paid-in-kind shares), to be issued at the same issue price as the Series A Preferred Stock of $0.10 per share.  The 11% annual dividend on the Preferred Stock will have preference over the declaration or payment of any dividends on the Company’s common stock.  In addition to the 11% preferred dividend, the holders of the Preferred Stock will also be entitled to participate pro rata in any dividend paid on the Company’s common stock.   In 2014, Diligent anticipates that accumulated unpaid dividends will be paid in cash on the Series A Preferred Stock.  Accordingly, preferred stock dividends of $83 thousand and $253 thousand for the three and nine months ended September 30, 2014 are included in accrued expenses.   Spring Street Partners, L.P., a holder of the Series A Preferred Stock, waived its right to the preferred stock dividend payable on January 3, 2013 of $240 thousand.  This was recorded as a capital contribution in 2013 when waived. The founder and managing partner of Spring Street Partners, L.P. is also the Chairman of the Board and the holder of 5.9 million shares of common stock of the Company.   On March 3 and 5, 2014, Carroll Capital Holdings and Spring Street Partners, L.P. converted 889,219 and 1,777,904 shares of Series A Preferred Stock, respectively, to an equivalent number of shares of common stock.   </div> </div> P12M P30D P1Y 0.25 0.25 2 3 1600000 250000 2500000 3 3000000 0.82 2500000 1600000 1600000 2.79 2400000 0.14 2250000 250000 250000 P365D P90D P3M 300000 2300000 0 549000 183000 400000 100000 -267000 -267000 0.10 <div> <div style="margin-left:0pt;margin-right:0pt;"> Short-term investments — Short-term investments consist of U.S. treasury bills with original maturities of more than three months at the time of purchase and term deposits with banks, with maturities greater than three months at inception.   </div> </div> 32667000 32667000 30632000 30000000

2402000

1095000

1750000

1685000

350000

8856000

9530000

-41000

-50000

28861000

31186000

1768000

6000

1000000

2900000

66000

433000

2800000

578000

771000

419000

-570000

200000

495000

238000

459000

100000

360000

1500000

78350000

92584000

65839000

77277000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Basis of presentation — The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2013 Form 10-K.   In the opinion of management, the accompanying unaudited condensed 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 and nine months ended September 30, 2014 are not necessarily indicative of results expected for the full year.   The preparation of financial statements in conformity with U.S. 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. Significant estimates and assumptions made by management include the deferral and recognition of revenue, the fair value of share-based compensation, accounting for income taxes, including the realization of deferred tax assets and uncertain tax positions, and the useful lives of tangible and intangible assets. Actual results could differ from those estimates.   </div> </div>

1300000

847000

762000

1306000

767000

156000

<div> <div style="margin-left:0pt;margin-right:0pt;"> 4)Obligations Under Capital Leases   During the first nine months of 2013, we entered into two capital leases for computer equipment which mature in February 2016.  The leases have a total obligation of $1.3 million and bear interest at rates of 5.449% and 3.804%, with monthly payments of $28 thousand and $14 thousand, respectively.  We did not enter into any new capital leases during the first nine months of 2014.   </div> </div>

33311000

36369000

43583000

23000000

4500000

66837000

3058000

23254000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Cash and cash equivalents — The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.  The Company invests its excess cash primarily in bank and money market funds of major financial institutions.  Accordingly, its cash equivalents are subject to minimal credit and market risk. </div> </div>

0.001

250000000

83776155

86765836

83776155

86765836

5900000

84000

87000

5522000

2208000

7142000

2721000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Principles of consolidation — The condensed consolidated financial statements include the accounts of Diligent and its wholly-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated. </div> </div>

267000

9017000

3244000

11827000

4133000

3.79

-1245000

-1411000

27428000

31651000

10471000

11584000

3111000

4476000

3607000

3654000

1130000

515000

1953000

765000

1130000

1953000

<div> <div style="margin-left:0pt;margin-right:0pt;"> 7)Stock option and incentive plan   On May 3, 2013, the Board adopted the Diligent Board Member Services, Inc. 2013 Incentive Plan (the “2013 Plan”), which was approved by the Diligent’s stockholders in June 2013. An aggregate of 8.5 million shares of the Company’s common stock may be issued pursuant to the Plan to employees, directors and consultants of Diligent and its affiliates. Of the shares available under the Plan, 4.1 million were utilized in connection with the replacement incentive awards issued in accordance with the CEO Replacement Grant Agreement as discussed below. Upon approval of the 2013 Plan the Company discontinued the use of the Company’s 2007 Stock Option and Incentive Plan (the “2007 Plan”) and the 2010 Stock Option and Incentive Plan (the “2010 Plan”).   Awards under the 2013 Plan may be made in the form of stock options (which may constitute incentive stock options or nonqualified stock options), share appreciation rights, restricted shares, restricted share units, performance awards, bonus shares and other awards.  In addition, certain awards under the 2013 Plan may be denominated or settled in cash, including performance awards.   In 2013, the Board and the Company’s stockholders approved a remuneration package for non-executive directors for the 2013 and subsequent fiscal years (the “New Remuneration Package”). The New Remuneration Package consists of both a cash component, designed to compensate members for their service on the Board and its Committees, and an equity component. The total value of the New Remuneration Package for standard board service is $130 thousand per annum, $50 thousand of which will be payable in cash.   Diligent’s non-executive directors, other than the chairman of the Board, are to receive an annual stock grant with a total value of $80 thousand, which would generally be paid to such non-executive directors in equal installments at the end of each quarter of the calendar year. In connection with the non-executive directors’ 2013 service, on March 14, 2014, the Company issued 86.5 thousand restricted shares to its directors based on the volume weighted average trading price of our common stock on its primary trading market for the 20 trading days immediately prior to such date. In connection with the non-executive directors’ 2014 service, on April 9, 2014, the Company issued 27 thousand restricted shares to its directors and on July 10, 2014, the Company issued 24 thousand restricted shares to its directors, in each case based on the volume weighted average trading price of our common stock on its primary trading market for the 20 trading days immediately prior to such date. The grants for 2013 and 2014 services were pro-rated for any director who served on the Board for less than the full calendar year.   In December of 2012 Diligent’s Board authorized a Special Committee of independent directors to conduct a review of certain of the Company’s past stock issuances and stock option grants to determine whether they were in accordance with the relevant incentive plans.  The Special Committee found that three option awards exceeded the applicable plan caps on the number of shares covered by an award issued to a single recipient in a particular year. Specifically, a 2009 award to the chief executive officer exceeded the cap in the 2007 Plan by 1.6 million shares, a 2011 award to the chief executive officer exceeded the cap in the 2010 Plan by 2.5 million shares, and a 2011 award to another employee exceeded the cap in the 2010 Plan by 250 thousand shares.   In May 2013, we entered into a Replacement Grant Agreement with our CEO providing for the cancellation of certain stock options and the issuance of a replacement award, which was to become effective upon the occurrence of certain future events.   On June 12, 2013, Diligent entered into an agreement providing for the cancellation of options for 250 thousand shares issued to the other employee in excess of the applicable plan cap, under which the vesting schedule for the remaining nonvested options was extended over a four and a half year period and replaced with 150 thousand restricted stock units, with graded vesting over four and a half years.  The modification of this award resulted in additional expense of $66 thousand, which will be recognized on a graded basis through December 2017.   On December 23, 2013, we entered into an Amendment to Replacement Grant Agreement with our CEO which finalized the terms of the incentive compensation package to be provided to our CEO in substitution for certain awards that exceeded the applicable plan caps.   Under the terms of the Amendment to Replacement Grant Agreement, on December 23, 2013 (the “Grant Date”), our CEO’s fully vested option to purchase 2.4 million shares of Diligent’s common stock for an exercise price of U.S. $0.14 per share was cancelled to the extent it was in excess of the applicable plan cap, consisting of 1.6 million of such shares. In exchange for the cancellation of the relevant portion of the award, our CEO received:   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:18pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:18pt;"></td><td align="left" valign="top"> An option to purchase 1.6 million shares of common stock having an exercise price of U.S. $2.79, which was the Company’s closing price per share expressed in U.S. dollars on the last trading day on the NZSX immediately prior to the Grant Date (the “Exercise Price”) of December 23, 2013. The option vested on December 31, 2013, and will have a term of ten years from the Grant Date.</td></tr></table></div>   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:18pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:18pt;"></td><td align="left" valign="top"> A performance cash award of U.S. $4.2 million, determined based on 1.6 million multiplied by the excess of the Exercise Price of U.S. $2.79 over U.S. $0.14. The CEO’s right to receive such cash award was contingent on the Company achieving revenue growth of at least 7% during the twelve month period ended June 30, 2014 and his continued employment through such date. This revenue target was achieved and the cash award will be paid in three equal annual installments. The first installment in the amount of $1.4 million was paid in August 2014, the second installment will be paid in the first quarter of 2015 and the final installment will be paid in the first quarter of 2016, or, if earlier, upon a change in control of the Company or the CEO’s separation from service. Any payment due on any installment date will be proportionally reduced if the sum of our stock price plus dividends for a measurement period prior to each payment date falls below 75% of the Exercise Price.</td></tr></table></div>   In addition, the CEO held an option to purchase 3 million shares of Diligent’s common stock for an exercise price of U.S. $0.82 per share, which remained subject to vesting. Under the terms of the Amendment to Replacement Grant Agreement, we cancelled the portion of such option in excess of the applicable plan cap, consisting of 2.5 million of such shares. In exchange for the cancellation of the relevant portion of the award, the CEO received:   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:18pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:18pt;"></td><td align="left" valign="top"> Performance share units for 2.25 million shares of common stock contingent on Diligent achieving revenue growth of at least 7% during the twelve month period ended June 30, 2014. For purposes of clarification, performance share units in this context are units of common stock issued to Diligent’s CEO upon satisfaction of the performance criteria outlined herein. Effective June 30, 2014, the Company’s revenues met the performance requirement of at least seven percent (7%) growth over the performance period as compared to the period from July 1, 2012 through June 30, 2013. The performance share units were determined to be earned and the award will vest in four equal installments based on continued employment, commencing June 30, 2015, with full vesting occurring on June 30, 2018. The delivery dates for the vested performance shares will be 50% in 2018 and 50% in 2019 or, if earlier, upon a change in control of the Company or the CEO’s separation from service.</td></tr></table></div>   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:18pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:18pt;"></td><td align="left" valign="top"> Performance share units for up to 250 thousand shares of common stock contingent on Diligent achieving either at least 15% fully diluted EPS growth (adjusted to exclude stock-based compensation expense and extraordinary items) or 15% total stockholder return (“TSR”) growth in four one-year measurement periods beginning April 1, 2013. As of June 30, 2014, the first TSR performance goal was not achieved. TSR growth is measured based on Diligent’s stock price performance during the 20 trading days prior to the relevant measurement date. Performance share units for 62.5 thousand shares of common stock will be earned in each year for which the applicable target is met, with the additional opportunity to earn such shares at the end of the four year performance period if the cumulative fully diluted EPS growth or TSR growth meet the cumulative performance target. The delivery dates for the vested performance shares will be in 2018 or, if earlier, upon a change in control of the Company or the CEO’s separation from service.</td></tr></table></div>   The vesting of the options, performance cash award and performance stock units described above will be subject to certain acceleration provisions in the event of a change in control of the Company, upon death or disability or if the CEO is terminated without cause or resigns for good reason.   $1.4 million of the liability for the performance cash award is recorded in “Accrued expenses and other current liabilities” and $1.4 million is recorded in “Other non-current liabilities” on the Condensed Consolidated Balance Sheet as of September 30, 2014. At December 31, 2013, $1.6 million of the liability for the performance cash award was recorded in “Accrued expenses and other current liabilities” and $0.6 million was recorded in “Other non-current liabilities” on the Condensed Consolidated Balance Sheet.   The Company recorded performance stock and cash award compensation expense of $0.2 million and $2.8 million during the three and nine months ended September 30, 2014, respectively, and $2.9 million in 2013 relating to the replacement award. The replacement award is expected to result in compensation cost of $0.2 million for the remainder of 2014, $0.7 million in 2015, $0.4 million in 2016, $0.2 million in 2017 and $0.1 million in 2018.   On July 24, 2014, Diligent entered into an agreement providing for the cancellation of 250 thousand shares issued to an employee and replaced with 217,760 restricted stock units, under the 2013 Plan. The restricted stock units vest in five equal installments, the first vesting on the grant date and the remaining installments vesting on each anniversary of December 9, 2013.   On September 15, 2014, the Company entered into a new employment agreement with an executive, pursuant to which the Company issued options to purchase 250 thousand shares of stock and 125 thousand restricted stock units under the 2013 Plan. The options have an exercise price of $3.79 per share and vest in two equal installments on September 15, 2015 and September 15, 2016. The restricted stock units also vest in two equal installments on September 15, 2015 and September 15, 2016, upon which the vested portion will convert into an equal number of shares of common stock.   Stock Options — On June 20, 2014, the Company agreed to issue 1,120,000 stock options to executives and employees under the 2013 Plan. These options vest 25% per year over the next four years, as long as such executive or employee remains in the employ of the Company on each vesting date. On September 15, 2014, the Company agreed to issue 250,000 options to an executive of the Company under the 2013 Plan. These options vest in two equal installments on September 15, 2015 and September 15, 2016, as long as such executive remains in the employ of the Company on each vesting date. Upon the final vesting date, the vested portion will convert into an equal number of shares of common stock. A summary of stock option activity for the nine months ended September 30, 2014 is as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 86.00%;margin-left:36pt;"> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> Weighted average </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;padding:0pt;"> Weighted average </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> remaining </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Options </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> exercise price </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> contractual term </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Outstanding at January 1, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,758 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1.97 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;"> 7.97 years </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Granted </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,370 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3.83 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Exercised </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(95 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>0.15 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Cancelled </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(250 </td> <td valign="bottom" style="width:02.88%;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>0.46 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Forfeited </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(260 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>6.12 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Outstanding at September 30, 2014 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>6,523 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2.28 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> 7.75 years </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Exercisable at September 30, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,633 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1.44 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;"> 7.05 years </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   Performance Stock Units — As noted above, in 2013, the Company issued Performance Stock Units (“PSUs”) to its CEO as part of his substitute compensation package.  A summary of activity in PSUs for the nine months ended September 30, 2014 is as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 86.00%;margin-left:36pt;"> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;padding:0pt;"> Weighted Average Grant </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Performance Stock Units </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Date Fair Value Per Share </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Nonvested January 1, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,500  </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:21.78%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2.79  </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;"> Granted </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;padding:0pt;"> — </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;padding:0pt;"> — </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Vested </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;"> Forfeited </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> — </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> — </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Nonvested September 30, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,500  </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:21.78%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2.79  </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   The Company estimates the fair value of the PSU’s as of the grant date utilizing the closing price of its common stock on that date.   Restricted Stock Units — As noted above, in June 2013, the Company agreed to issue 150,000 Restricted Stock Units (“RSUs”) as replacement compensation for the 250,000 stock options issued to an employee of the Company in excess of the 2010 Plan cap. In June 2013, the shareholders of the Company approved the 2013 Plan, under which the Company had agreed to issue 164,000 RSUs to two officers, which vest 25% per year over the next four years, as long as the officers remain in the employ of the Company on each vesting date. 110,000 of these awards were forfeited as of June 30, 2014.  The fair market value of the stock on the date of grant of the RSUs was $5.38 per share.   On June 20, 2014, the Company issued 846,000 RSUs to executives and employees under the 2013 Plan. These RSUs, which vest 25% per year over the next four years, as long as such executive or employee remains in the employ of the Company on each vesting date, have a grant date fair market price of $3.84 per share for an aggregate of $3.3 million to be recognized over the vesting period. On July 24, 2014, the Company agreed to issue 217,760 RSUs to an employee of the Company as replacement compensation for 250,000 stock options which were cancelled. These RSUs have a grant date fair market price of $3.57 per share and did not result in any incremental stock compensation expense. On September 15, 2014, the Company issued 125,000 RSUs to an executive under the 2013 plan. These RSUs vest in two equal installments on September 15, 2015 and September 15, 2016 and have a grant date fair market price of $3.79 per share for an aggregate of $474 thousand to be recognized over the vesting period.   A summary of RSU activity for the nine months ended September 30, 2014 is as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 86.00%;margin-left:36pt;"> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;padding:0pt;"> Weighted Average Grant </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Restricted Stock Units </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Date Fair Value Per Share </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Nonvested January 1, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>314 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:21.78%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5.38 </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;"> Granted </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,189 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:23.08%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3.79 </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Vested </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(87 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:23.08%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3.58 </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;padding:0pt;"> Forfeited </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(110 </td> <td valign="bottom" style="width:02.88%;"> ) </td> <td colspan="2" valign="bottom" style="width:23.08%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5.38 </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:46.90%;background-color: #CCEEFF;padding:0pt;"> Nonvested September 30, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:23.08%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,306 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:21.78%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>4.05 </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   The Company estimates the fair value of the RSUs as of the grant date utilizing the closing price of Diligent’s common stock on the grant date.   For the three months ended September 30, 2014, the Company recognized aggregate share-based compensation expense related to stock options, PSUs and RSUs of $495 thousand, $238 thousand and $459 thousand, respectively, which is included in General and administrative expenses in the Condensed Consolidated Statement of Income. For the nine months ended September 30, 2014, Diligent recognized aggregate share-based compensation expense related to stock options, PSUs and RSUs of $578 thousand, $771 thousand and $419 thousand, respectively, which is included in general and administrative expenses in the Condensed Consolidated Statement of Income. Awards granted to the Company’s former CFO were forfeited upon his resignation during the second quarter of 2014 resulting in expense adjustments in the amount of $570 thousand. Total share-based compensation expense recognized for the three and nine months ended September 30, 2013 was $433 thousand and $1.0 million, respectively, which was entirely related to outstanding stock options. At September 30, 2014, there was $8.0 million of unrecognized share-based compensation expense which includes $3.0 million for stock options, $1.6 million for PSUs and $3.4 million for RSUs. The weighted average period for this cost to be recognized is 1.26 years.  Such amounts do not include any impact of the CEO performance cash award.   </div> </div>

253000

83000

0.05

0.02

0.06

0.02

0.04

0.02

0.06

0.02

<div> <div style="margin-left:0pt;margin-right:0pt;"> Earnings per share - Basic earnings per share is computed by dividing the net income attributable to common stockholders, after deducting accrued preferred stock dividends, by the weighted average number of common and preferred shares outstanding for the period. The preferred stockholders are entitled to participate on an “as converted” basis in any dividends paid on Diligent’s common stock, and as such are considered participating securities to which earnings should be allocated using the two-class method.   Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised, settled or converted into common stock, unless the effect is anti-dilutive. Stock options and employee share awards are included as potential dilutive securities for the applicable periods, except 1.5 million stock options which have been excluded for the three and nine months ended September 30, 2014, respectively because their effect is anti-dilutive. There were 360,000 anti-dilutive equity instruments for the comparable three and nine month periods in 2013.   The computation of shares used in calculating basic and diluted earnings per common share are as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 100.00%;margin-left:0pt;"> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Three months ended September 30, </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Nine months ended September 30, </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="7" valign="bottom" style="width:55.50%;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average common shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>87,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,776  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>86,240  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,755  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Basic weighted average preferred shares outstanding </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,000  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,632  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>117,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,443  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,872  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,422  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of stock options </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,577  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,218  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,552  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,404  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive effect of performance stock units </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,171  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,105  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of restricted stock units </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>661  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>320  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>37  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>122,020  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,744  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>120,849  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,863  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   </div> </div>

0.38

0.39

0.44

-93000

-9000

3300000

474000

8000000

200000

100000

700000

200000

400000

P1Y3M4D

1600000

3400000

3000000

302000

<div> <div style="margin-left:0pt;margin-right:0pt;"> 5)Fair Value of Financial Instruments   The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. As of September 30, 2014 and December 31, 2013, the carrying amounts of cash and cash equivalents, accounts receivables, accounts payable and accrued expenses and other liabilities approximated fair value due to the short-term nature of these instruments. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for input into valuation techniques as follows:   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:0pt;"></td><td valign="top" align="left" style="width: 16.00pt; display: inline;"> i. </td><td style="width:20pt;"></td><td align="left" valign="top"> Level 1 input - unadjusted quoted prices in active markets for identical instrument;</td></tr></table></div>   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:0pt;"></td><td valign="top" align="left" style="width: 16.00pt; display: inline;"> ii. </td><td style="width:20pt;"></td><td align="left" valign="top"> Level 2 input - observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are active or not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and</td></tr></table></div>   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:0pt;"></td><td valign="top" align="left" style="width: 16.00pt; display: inline;"> iii. </td><td style="width:20pt;"></td><td align="left" valign="top"> Level 3 input - unobservable inputs developed using management’s assumptions about the inputs used for pricing the asset or liability.</td></tr></table></div>   Level 2 inputs were utilized to determine the fair value of the Company’s investments in U.S. treasury bills, U.S treasury money market funds, and term deposits.  Due to the short-term nature of these investments, which mature between 90 days and 365 days, amortized cost is used to estimate the fair value.   At September 30, 2014, cash equivalents include investments in U.S. treasury money market funds and treasury bills totaling $31 million, which are carried at cost, which approximates fair value. The fair value of money market funds was determined by reference to quoted market prices.   At December 31, 2013, cash and cash equivalents include investments in U.S. treasury bills of $4.5 million and U.S. treasury money market funds of $23 million, which are carried at cost, which approximates fair value. The fair value of money market funds was determined by reference to quoted market prices. At December 31, 2013, short-term investments include investments in U.S. treasury bills of $12.5 million, which are carried at cost which approximates fair value.   </div> </div>

<div> <div style="margin-left:0pt;margin-right:0pt;"> Fair value of financial instruments — The fair value of Diligent’s accounts receivable, accounts payable and accrued expenses and other liabilities approximates book value due to their short term settlements.   </div> </div>

P9Y

-149000

32000

-25000

-126000

13664000

5371000

21086000

6437000

37556000

13991000

49066000

17290000

9096000

3492000

11773000

4809000

5558000

3862000

1430000

3485000

1339000

4622000

2107000

3490000

-766000

684000

-65000

8970000

5335000

-1600000

1780000

424000

748000

-50000

268000

1000000

462000

28000

-13000

5404000

5218000

2552000

2577000

37000

83000

320000

661000

25000

67000

41000

-58000

-24000

30000

59000

53405000

58430000

78350000

92584000

39533000

43388000

13872000

15042000

100000

-271000

-1122000

-13640000

8284000

17062000

16101000

5611000

2153000

7151000

2702000

5341000

2064000

6898000

2619000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Recent accounting pronouncements — In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. The new guidance is effective for annual and interim periods beginning after December 15, 2016 with no early adoption permitted. The Company is currently evaluating the impact, if any, the adoption of this guidance will have on Diligent’s financial position, results of operations and cash flows.   From time to time, new accounting pronouncements are issued by the FASB and are adopted as of the specified effective date. Unless otherwise discussed, the impact of other recently issued accounting pronouncements are not expected to have a material impact on the consolidated financial position, results of operations, and cash flows, or do not apply to the Company’s operations.   </div> </div>

-207000

8000

5000

-67000

28253000

10507000

37298000

12414000

9303000

3484000

11768000

4876000

350000

4900000

-89000

55000

-9000

19000

2634000

3302000

109000

82000

120000

359000

-139000

25000

2282000

4160000

10999000

0.11

270000

89000

253000

83000

0.00825

4753000

0.001

50000000

32667123

30000000

32667123

30000000

3261000

3000000

1936000

2936000

302000

3000000

74000

14000

103000

12497000

8228000

10924000

418000

695000

3088000

1209000

5259000

2486000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Research and development  — Research and development expenses are incurred as we upgrade and maintain the Diligent Boardbooks software, and develop product enhancements.  Such expenses include compensation and employee benefits of engineering and testing personnel, materials, travel and direct costs associated with the design and required testing of the product line.  Diligent does not allocate indirect overhead to research and development. Direct development costs related to software enhancements that add functionality have been expensed as incurred as we have not historically maintained sufficiently detailed records of development efforts to be able to capitalize such costs.   </div> </div>

676000

704000

-7220000

-69000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Deferred Revenue — Deferred revenue represents installation and subscription fees for which cash has been received but for which we have not yet delivered services or the criteria for the recognition of revenue have not yet been met.  Deferred revenues presented in the consolidated balance sheet do not include amounts receivable (both billed and unbilled) for executed subscription agreements for which we have not yet received payment.  Accordingly, the deferred revenue balance does not represent the total contract value of annual, non-cancelable subscription agreements.   Long term deferred revenue consists of installation fees that will be recognized over the estimated life of the customer relationship which is generally nine years.  Installation fees expected to be recognized within the next 12 months of the balance sheet date are included in the current portion of deferred revenue.   </div> </div>

<div> <div style="margin-left:0pt;margin-right:0pt;"> Revenue Recognition — Diligent derives revenues primarily from subscription fees and installation fees, including training. The Company sells subscriptions to Diligent’s cloud-based application that are generally one year in length. Diligent’s arrangements do not include a general right of return and automatically renew unless the Company is notified 30 days prior to the expiration of the subscription term. Diligent’s subscription agreements do not provide the customer the right to take possession of the software that supports the application. Installation fees consist of the configuration of the Company’s service and training of its customers.   Revenue recognition commences when all of the following conditions are met:   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> There is persuasive evidence of the arrangement;</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The service has been made available to the customer;</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The fee is fixed or determinable; and</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The collectability of the fees is reasonably assured.</td></tr></table></div>   To qualify as a separate unit of accounting, the delivered item in a multiple element arrangement must have value to the customer on a standalone basis. The Company has determined that the installation fee does not have standalone value, so accordingly it accounts for its arrangements as a single unit of accounting.   Revenue from Diligent’s subscription service is recognized on a daily basis over the subscription term as the services are delivered. The service is considered delivered, and hence revenue recognition commences, when the customer has access to the Diligent Boardbooks product. Revenue is recorded ratably through the end of the subscription term, which is generally twelve months from the date of the contract.   Installation fees paid by customers in connection with the subscription service are deferred and are recognized ratably over the expected life of the customer relationships, generally nine years. In estimating the expected customer relationship period, the Company looked to guidance on the determination of the useful life of an intangible asset for the appropriate factors to be considered in estimating expected customer life and specifically focused on its customer renewal rate. Diligent’s customer contracts contain a standard “autorenew” feature which provides for one-year renewals unless either party provides written notice of termination. In addition, Diligent’s renewal history with its customers has been and remains at very high rates. As a result, we believe that Diligent’s customers will renew numerous times during their tenure with us.  Consequently, Diligent has had a very low annual attrition rate which historically has been less than 5.0%. After considering these factors, we determined that a nine year estimated customer life was appropriate as of September 30, 2014.  The Company evaluates its estimated customer life on an annual basis.   </div> </div>

46573000

17235000

60893000

21423000

<div> <div style="margin-left:0pt;margin-right:0pt;"> <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 86.00%;margin-left:36pt;"> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> Weighted average </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;padding:0pt;"> Weighted average </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> remaining </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Options </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> exercise price </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> contractual term </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Outstanding at January 1, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,758 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1.97 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;"> 7.97 years </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Granted </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,370 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3.83 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Exercised </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(95 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>0.15 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Cancelled </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(250 </td> <td valign="bottom" style="width:02.88%;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>0.46 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Forfeited </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(260 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:13.84%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>6.12 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;padding:0pt;"> Outstanding at September 30, 2014 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>6,523 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2.28 </td> <td valign="bottom" style="width:02.88%;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;padding:0pt;"> 7.75 years </td> <td valign="bottom" style="width:01.16%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:48.66%;background-color: #CCEEFF;padding:0pt;"> Exercisable at September 30, 2014 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,633 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:12.54%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1.44 </td> <td valign="bottom" style="width:02.88%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:13.84%;background-color: #CCEEFF;padding:0pt;"> 7.05 years </td> <td valign="bottom" style="width:01.16%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   </div> </div>

<div> <div style="margin-left:0pt;margin-right:0pt;"> <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 80.00%;margin-left:54pt;"> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;"> September 30, </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;"> December 31, </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="5" valign="bottom" style="width:33.12%;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;padding:0pt;">   </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Gross proceeds </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Less: Issuance costs </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(139 </td> <td valign="bottom" style="width:03.12%;"> ) </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(139 </td> <td valign="bottom" style="width:01.26%;"> ) </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,861 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,861 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Issuance of PIK shares </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>267 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>267 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Conversion of PIK shares </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>(267 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;"> ) </td> <td colspan="2" valign="bottom" style="width:15.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;padding:0pt;"> Cumulative amortization of offering costs </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>139 </td> <td valign="bottom" style="width:03.12%;padding:0pt;">   </td> <td colspan="2" valign="bottom" style="width:15.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>133 </td> <td valign="bottom" style="width:01.26%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:62.48%;background-color: #CCEEFF;padding:0pt;"> Carrying value </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,000 </td> <td valign="bottom" style="width:03.12%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:01.30%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;padding:0pt;"> $ </td> <td valign="bottom" style="width:13.70%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>3,261 </td> <td valign="bottom" style="width:01.26%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   </div> </div>

<div> <div style="margin-left:0pt;margin-right:0pt;"> <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 100.00%;margin-left:0pt;"> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Three months ended September 30, </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Nine months ended September 30, </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="7" valign="bottom" style="width:55.50%;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average common shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>87,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,776  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>86,240  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,755  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Basic weighted average preferred shares outstanding </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,000  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,632  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>117,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,443  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,872  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,422  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of stock options </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,577  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,218  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,552  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,404  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive effect of performance stock units </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,171  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,105  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of restricted stock units </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>661  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>320  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>37  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>122,020  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,744  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>120,849  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,863  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   </div> </div>

7089000

2473000

8084000

2726000

1225000

2057000

P4Y

P4Y6M

P10Y

P4Y

0.25

110000

5.00

1189000

3.79

3.84

3.57

3.79

2500000

314000

2500000

1306000

5.38

2.79

5.38

2.79

4.04

87000

4.00

1120000

8500000

250000

4100000

3633000

1.44

P7Y18D

-260000

250000

-250000

1370000

250000

125000

5758000

250000

6523000

1.97

2.28

P7Y11M19D

P7Y9M

4200000

150000

164000

150000

846000

217760

250000

125000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Share-based compensation — Diligent 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 fair value of restricted stock units and performance stock units are estimated using the market price of Diligent’s common stock at the date of the grant and we recognize compensation expense for the portion of the award that is expected to vest. Diligent 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.   </div> </div>

83776000

86766000

12497000

12500000

31000000

<div> <div style="margin-left:0pt;margin-right:0pt;">   3)Significant accounting policies   Basis of presentation — The accompanying interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the SEC.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to SEC rules. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2013 Form 10-K.   In the opinion of management, the accompanying unaudited condensed 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 and nine months ended September 30, 2014 are not necessarily indicative of results expected for the full year.   The preparation of financial statements in conformity with U.S. 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. Significant estimates and assumptions made by management include the deferral and recognition of revenue, the fair value of share-based compensation, accounting for income taxes, including the realization of deferred tax assets and uncertain tax positions, and the useful lives of tangible and intangible assets. Actual results could differ from those estimates.   Principles of consolidation — The condensed consolidated financial statements include the accounts of Diligent and its wholly-owned subsidiaries.  All significant intercompany balances and transactions have been eliminated.   Cash and cash equivalents — The Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.  The Company invests its excess cash primarily in bank and money market funds of major financial institutions.  Accordingly, its cash equivalents are subject to minimal credit and market risk.   Short-term investments — Short-term investments consist of U.S. treasury bills with original maturities of more than three months at the time of purchase and term deposits with banks, with maturities greater than three months at inception.   Fair value of financial instruments — The fair value of Diligent’s accounts receivable, accounts payable and accrued expenses and other liabilities approximates book value due to their short term settlements.   Revenue Recognition — Diligent derives revenues primarily from subscription fees and installation fees, including training. The Company sells subscriptions to Diligent’s cloud-based application that are generally one year in length. Diligent’s arrangements do not include a general right of return and automatically renew unless the Company is notified 30 days prior to the expiration of the subscription term. Diligent’s subscription agreements do not provide the customer the right to take possession of the software that supports the application. Installation fees consist of the configuration of the Company’s service and training of its customers.   Revenue recognition commences when all of the following conditions are met:   <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> There is persuasive evidence of the arrangement;</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The service has been made available to the customer;</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The fee is fixed or determinable; and</td></tr></table></div> <div style="width:100%"><table style="width:100%;" cellpadding="0" cellspacing="0"><tr><td style="width:36pt;"></td><td valign="top" align="left" style="width: 00.00pt; display: inline;"> · </td><td style="width:36pt;"></td><td align="left" valign="top"> The collectability of the fees is reasonably assured.</td></tr></table></div>   To qualify as a separate unit of accounting, the delivered item in a multiple element arrangement must have value to the customer on a standalone basis. The Company has determined that the installation fee does not have standalone value, so accordingly it accounts for its arrangements as a single unit of accounting.   Revenue from Diligent’s subscription service is recognized on a daily basis over the subscription term as the services are delivered. The service is considered delivered, and hence revenue recognition commences, when the customer has access to the Diligent Boardbooks product. Revenue is recorded ratably through the end of the subscription term, which is generally twelve months from the date of the contract.   Installation fees paid by customers in connection with the subscription service are deferred and are recognized ratably over the expected life of the customer relationships, generally nine years. In estimating the expected customer relationship period, the Company looked to guidance on the determination of the useful life of an intangible asset for the appropriate factors to be considered in estimating expected customer life and specifically focused on its customer renewal rate. Diligent’s customer contracts contain a standard “autorenew” feature which provides for one-year renewals unless either party provides written notice of termination. In addition, Diligent’s renewal history with its customers has been and remains at very high rates. As a result, we believe that Diligent’s customers will renew numerous times during their tenure with us.  Consequently, Diligent has had a very low annual attrition rate which historically has been less than 5.0%. After considering these factors, we determined that a nine year estimated customer life was appropriate as of September 30, 2014.  The Company evaluates its estimated customer life on an annual basis.   Deferred Revenue — Deferred revenue represents installation and subscription fees for which cash has been received but for which we have not yet delivered services or the criteria for the recognition of revenue have not yet been met.  Deferred revenues presented in the consolidated balance sheet do not include amounts receivable (both billed and unbilled) for executed subscription agreements for which we have not yet received payment.  Accordingly, the deferred revenue balance does not represent the total contract value of annual, non-cancelable subscription agreements.   Long term deferred revenue consists of installation fees that will be recognized over the estimated life of the customer relationship which is generally nine years.  Installation fees expected to be recognized within the next 12 months of the balance sheet date are included in the current portion of deferred revenue.   Accounts receivable —The Company generally invoices our customers on an annual or quarterly basis.  Accounts receivable represents amounts due from Diligent’s customers for which revenue has been recognized.  A provision for doubtful accounts is recorded based on management’s assessment of amounts considered uncollectable for specific customers based on age of the receivable, history of payments and other relevant information.  At each of September 30, 2014 and December 31, 2013, the Company recorded a provision for doubtful accounts of $100 thousand.   Research and development  — Research and development expenses are incurred as we upgrade and maintain the Diligent Boardbooks software, and develop product enhancements.  Such expenses include compensation and employee benefits of engineering and testing personnel, materials, travel and direct costs associated with the design and required testing of the product line.  Diligent does not allocate indirect overhead to research and development. Direct development costs related to software enhancements that add functionality have been expensed as incurred as we have not historically maintained sufficiently detailed records of development efforts to be able to capitalize such costs.   Share-based compensation — Diligent 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 fair value of restricted stock units and performance stock units are estimated using the market price of Diligent’s common stock at the date of the grant and we recognize compensation expense for the portion of the award that is expected to vest. Diligent 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.   Earnings per share - Basic earnings per share is computed by dividing the net income attributable to common stockholders, after deducting accrued preferred stock dividends, by the weighted average number of common and preferred shares outstanding for the period. The preferred stockholders are entitled to participate on an “as converted” basis in any dividends paid on Diligent’s common stock, and as such are considered participating securities to which earnings should be allocated using the two-class method.   Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised, settled or converted into common stock, unless the effect is anti-dilutive. Stock options and employee share awards are included as potential dilutive securities for the applicable periods, except 1.5 million stock options which have been excluded for the three and nine months ended September 30, 2014, respectively because their effect is anti-dilutive. There were 360,000 anti-dilutive equity instruments for the comparable three and nine month periods in 2013.   The computation of shares used in calculating basic and diluted earnings per common share are as follows:   <div style="width:100%"><table cellpadding="0" cellspacing="0" style="border-collapse:collapse;width: 100.00%;margin-left:0pt;"> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Three months ended September 30, </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="3" valign="bottom" style="width:26.50%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> Nine months ended September 30, </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2014 </td> <td valign="bottom" style="width:02.50%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;padding:0pt;"> 2013 </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;">   </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td colspan="7" valign="bottom" style="width:55.50%;padding:0pt;"> (in thousands) </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average common shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>87,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,776  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>86,240  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83,755  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Basic weighted average preferred shares outstanding </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,000  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>30,632  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>32,667  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Basic weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>117,611  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,443  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,872  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt none #D9D9D9 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>116,422  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of stock options </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,577  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,218  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>2,552  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>5,404  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive effect of performance stock units </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,171  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>1,105  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;background-color: #CCEEFF;padding:0pt;"> — </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;padding:0pt;"> Dilutive effect of restricted stock units </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>661  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>83  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>320  </td> <td valign="bottom" style="width:02.50%;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt none #D9D9D9 ;border-left:1pt none #D9D9D9 ;border-bottom:1pt solid #000000 ;border-right:1pt none #D9D9D9 ;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>37  </td> <td valign="bottom" style="width:01.00%;padding:0pt;">   </td> </tr> <tr> <td valign="bottom" style="width:41.00%;background-color: #CCEEFF;padding:0pt;"> Dilutive weighted average shares outstanding </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>122,020  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,744  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>120,849  </td> <td valign="bottom" style="width:02.50%;background-color: #CCEEFF;padding:0pt;">   </td> <td valign="bottom" style="width:12.00%;border-top:1pt solid #000000 ;border-left:1pt none #D9D9D9 ;border-bottom:2pt double #000000 ;border-right:1pt none #D9D9D9 ;background-color: #CCEEFF;;font-family:Times New Roman;font-size:10pt;text-align:right;" nowrap="nowrap"><div style="float:left"></div>121,863  </td> <td valign="bottom" style="width:01.00%;background-color: #CCEEFF;padding:0pt;">   </td> </tr> </table></div>   Recent accounting pronouncements — In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. The new guidance is effective for annual and interim periods beginning after December 15, 2016 with no early adoption permitted. The Company is currently evaluating the impact, if any, the adoption of this guidance will have on Diligent’s financial position, results of operations and cash flows.   From time to time, new accounting pronouncements are issued by the FASB and are adopted as of the specified effective date. Unless otherwise discussed, the impact of other recently issued accounting pronouncements are not expected to have a material impact on the consolidated financial position, results of operations, and cash flows, or do not apply to the Company’s operations.   </div> </div>

80000

21684000

-41000

28861000

84000

-7220000

31154000

-50000

31186000

87000

-69000

2667000

889219

1777904

30000000

137000

91000

86500

27000

24000

217760

95000

267000

264000

3000

538000

14000

<div> <div style="margin-left:0pt;margin-right:0pt;"> Accounts receivable —The Company generally invoices our customers on an annual or quarterly basis.  Accounts receivable represents amounts due from Diligent’s customers for which revenue has been recognized.  A provision for doubtful accounts is recorded based on management’s assessment of amounts considered uncollectable for specific customers based on age of the receivable, history of payments and other relevant information.  At each of September 30, 2014 and December 31, 2013, the Company recorded a provision for doubtful accounts of $100 thousand.   </div> </div>

121863000

121744000

120849000

122020000

83755000

83776000

86240000

87611000

116422000

116443000

116872000

117611000