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Due Diligence Checklist
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Every investor approaches due diligence differently. Some angel investors may request information in a detailed manner all at once, while others may simply request information at different times or stages. Regardless of an investor’s method to obtain information on a potential company, it is a proven fact that exercising thorough due diligence is indicative of more profitable returns. The following documents may be requested in due diligence.

General Corporate Materials
These documents include:

  •  The company’s
    • articles of Incorporation (and all amendments)
    • bylaws (and all amendments), minute book (including all minutes and resolutions of shareholders and directors, executive committees, and other governing groups)
    • organizational chart
    • list of shareholders (and number of shares held by each)
  • Copies of
    • agreements (relating to options, voting trusts, warrants, puts, calls, subscriptions, and convertible securities)
    • active status reports (in the state of incorporation for the last three years)
  • A list of
    • all states where the company is authorized to do business (and annual reports for the last three years)
    • all states, provinces, or countries where the company owns or leases property, maintains employees, or conducts business
    • all of the company's assumed names and copies of registrations
  • A Certificate of Good Standing from the Secretary of State of the state where the company is incorporated

Financial Information

  • The most recent financial statements
    • that have been audited for three years (including the auditor's reports)
    • that have not been audited (including comparable statements of the previous year)
  • The auditor's letters and replies for the past five years
  • A schedule of
    • all indebtedness and contingent liabilities
    • inventory
    • accounts receivable
    • accounts payable
  • A description of depreciation and amortization methods and changes in accounting methods over the past five years
  • Any analysis of
    • projections, capital budgets, and strategic plans
    • fixed and variable expenses
    • gross margins
  • If available
    • the company's credit report
    • analyst reports
  • The company's general ledger
  • A description of the company's internal control procedures

Physical Assets

  • A schedule of
    • fixed assets and their locations
    • sales and purchases of major capital equipment during the last three years
  • All U.C.C. (Uniform Commercial Code) filings
  • All leases of equipment

Real Estate

  • A schedule of the company's business locations
  • Copies of all real estate leases, deeds, mortgages, title policies, surveys, zoning approvals, variances, or use permits

Intellectual Property

  • A schedule of
    • domestic and foreign patents and patent applications
    • trademark and trade names
    • copyrights
    • (copies of) and copies of all consulting agreements, agreements regarding inventions, licenses, or assignments of intellectual property to or from the company
    • (summary of) any claims or threatened claims by or against the company regarding intellectual property
  • A description of
    • important technical know-how
    • methods used to protect trade secrets and know-how
  • Any
    • "work for hire" agreements
    • patent clearance documents

Employees and Employee Benefits

  • A list of
    • employees, including positions, current salaries, salaries, and bonuses paid during last three years, and years of service
    • (and description of) benefits of all employee health and welfare insurance policies or self-funded arrangements
  • A description of
    • all employee problems within the last three years, including alleged wrongful termination, harassment, and discrimination
    • any labor disputes, requests for arbitration, or grievance procedures currently pending or settled within the last three years
    • worker's compensation claim history
    • unemployment insurance claims history
  • Copies of
    • collective bargaining agreements, if any
    • all stock option and stock purchase plans and a schedule of grants
  • All employment, consulting, nondisclosure, nonsolicitation, or noncompetition agreements between the company and any of its employees
  • Resumes of key employees
  • The company's personnel handbook and a schedule of all employee benefits including holiday, vacation, and sick leave policies
  • Summary plan descriptions of qualified and nonqualified retirement plans

Licenses and Permits

  • Copies of any governmental licenses, permits, or consents
  • Any correspondence or documents relating to any proceedings of any regulatory agency

Environmental Issues

  • Environmental audits, if any, for each property leased by the company
  • A list
    • of hazardous substances used in the company's operations
    • of environmental permits and licenses
    • identifying and describing any environmental litigation or investigations
    • identifying and describing any known superfund exposure
    • identifying and describing any contingent environmental liabilities or continuing indemnification obligations
  • A description of the company's disposal methods
  • Copies of all correspondence, notices, and files related to EPA, state, or local regulatory agencies

Tax matters

  • Federal, state, local, and foreign income tax returns for the last three years
  • States sales tax returns for the last three years
  • Employment tax filings for three years
  • Excise tax filings for three years
  • Any
    • audit and revenue agency reports
    • tax settlement documents for the last three years
    • tax liens

Material Contracts

  • A schedule of all subsidiary, partnership, or joint venture relationships and obligations, with copies of all related agreements
  • Agreements
    • loan and bank financing contracts, line of credit, or promissory notes to which the company is a party
    • security, mortgages, indentures, collateral pledges, and similar contracts (including guaranties to which the company is a party)and any installment sale contracts
    • distribution, sales representative, marketing, and supply contracts
    • any options and stock purchase contracts involving interests in other companies
    • nondisclosure or noncompetition agreements to which the company is a party
  • Copies of all contracts between the company and any officers, directors, five-percent shareholders, or affiliates
  • Any letters of intent, contracts, and closing transcripts from any mergers, acquisitions, or divestitures within the last five years
  • The company's standard quote, purchase order, invoice, and warranty forms
  • All other material contracts

Product or Service Lines

  • A list of all existing products or services and products or services that are under development
  • Copies of all correspondence and reports related to any regulatory approvals or      disapprovals of any of the company's products or services  
  • A summary of
    • all complaints or warranty claims
    • results of all tests, evaluations, studies, surveys, and other data regarding existing products or services and products or services under development

Customer Information

  • A schedule of
    • the company's twelve largest customers in terms of sales thereto and a description of sales thereto over a period of two years
    • unfilled orders
  • Any supply or service agreements
  • A description or copy of
    • the company's purchasing policies
    • the company's credit policy
    • the company's major competitors
  • A list and explanation for any major customers lost over the last two years
  • All surveys and market research reports relevant to the company or its products or services
  • The company's current advertising programs, marketing plans, budgets, and printed marketing materials

Litigation Issues

  • A schedule of all pending litigation
  • A description of any threatened litigation
  • Copies of insurance policies possibly providing coverage as to pending or threatened litigation
  • Documents relating to any injunctions, consent decrees, or settlements to which the company is a party
  • A list of unsatisfied judgments

N. Insurance Coverage

  • A schedule of
    • (and copies of) the company's general liability, personal and real property, product liability, errors and omissions, key-man, directors and officers, worker's compensation, and other insurance
    • the company's insurance claims history for past three years

Professionals

  • A schedule of all law firms, accounting firms, consulting firms, and similar professionals engaged by the company in the past five years

Articles and Public Relations

  • Copies of all advertising and marketing articles relating to the company within the past three years
  • Press releases and clippings
  • Analyst reports
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