Private Placements / Investment Banking

Due Diligence

I  Due diligence on business

A. Corporate documents
1. Articles, including amendments
2. By-laws, including amendments
3. Minutes
4. Subsidiary documents
B. Shareholder information
1. Lists of current shareholders and percentage owned
2. Stock options, warrants, and shareholder agreements
3. Voting trusts, or other similar agreements
C. Financial information
1. Detailed financial statements and tax returns
2. Monthly financial statements for past two years
3. Interim financial statements for two years to date
4. Information concerning any material subsequent events
5. Accounts receivable aging schedule
6. Business plan and financial projections
7. Bank line of credit agreements or other loans
8. Lease financing agreements
D. Company background
1. Narrative history and milestone events
2. Description of facilities
3. Real and material personal property, including equip.
4. Lease terms, if facilities leased
5. Description of products or services sold & markets
6. Details on customers (number and concentrations)
7. Long term sales contracts and customer agreements
8. Warranties & guarantees provided customers
9. Supplier requirements, number, and concentrations
10.Marketing methods used, sales literature, etc.
11.Distributor agreements
12.Research and marketing studies
E. Employees, officers and directors
1. Number of employees by major job classification
2. Employee benefit plans
3. Collective bargaining agreements
4. Organizational chart of key employees and experience
a. Age, health, education, experience, and duties
b. Ease of replacement
c. Board of directors, and extent of involvement
5. Schedule of compensation paid to officers & directors
6. Other management incentive agreements
7. Insider transactions
F. Other company information
1.Patents, trademarks, trade names, and service marks
2. Proprietary processes or trade secrets
3. Licensing agreements
4. List of non-productive or non-operating assets
5. Information on litigation
6. Insurance policies
7. Joint venture agreements
8. Information on bona fide offers/appraisals for company


II  Competition

A. Extent of competition
1. Who are the company's major competitors?
2. Where are they located?
3. How big are they?
4. What is their market share?
5. How diversified are they?
6. Are any direct competitors publicly held?
B. Size and market share of competitors
C. Company's competitive strengths and weaknesses


III  Industry

A. Barriers to entry
B. Growth prospects
1. Rapid growth with more expected
2. Flat or at inflationary levels
3. Declining and further decline likely

IV. Company expectations

A. Relevant past and expected future trends
1. Growth patterns
2. Expansion or cutbacks of business segments
3. Possible spin-offs
4. Mergers & acquisitions

V. Observations

A. Growth expectations
B. Financial condition
C. Management depth and competence
D. Product, customer, and geographic diversification

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