Sample due diligence checklist

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  • Great! Such sample can help business owners to identify risks, potential liabilities and weaknesses in their investor. And I have also seen an excellent article for due diligence tips: http://www.datasite.com/due-diligence-tips-SMEs-looking-venture-capital090.htm
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Sample due diligence checklist

  1. 1. Sample Due Diligence ChecklistI. Financial InformationA. Annual and quarterly financial information for the pastthree years1. Income statements, balance sheets, cash flows, and footnotes2. Planned versus actual results3. Management financial reports4. Breakdown of sales and gross profits by:a. Product Typeb. Channelc. Geography5. Current backlog by customer (if any)6. Accounts receivable aging scheduleB. Financial Projections1.Quarterly financial projections for the next three fiscal yearsa. Revenue by product type, customers, and channelb. Full income statements, balance sheets, cash2. Major growth drivers and prospects3. Predictability of business4. Risks attendant to foreign operations (e.g., exchange ratefluctuation, government instability)5. Industry and company pricing policies6. Economic assumptions underlying projections (differentscenarios based on price and marketfluctuations)7. Explanation of projected capital expenditures, depreciation, andworking capital arrangements8. External financing arrangement assumptionC. Capital Structure1. Current shares outstanding2. List of all stockholders with shareholdings, options, warrants, ornotes3. Schedule of all options, warrants, rights, and any otherpotentially dilutive securities with exerciseprices and vesting provisions.4. Summary of all debt instruments/bank lines with key terms andconditions5. Off balance sheet liabilitiesD. Other financial information
  2. 2. 1. Summary of current federal, state and foreign tax positions,including net operating loss carryforwards2. Discuss general accounting policies (revenue recognition, etc.)3. Schedule of financing history for equity, warrants, and debt(date, investors, dollar investment,percentage ownership, implied valuation and current basis for eachround)II. ProductsA. Description of each product1. Major customers and applications2. Historical and projected growth rates3. Market share4. Speed and nature of technological change5. Timing of new products, product enhancements6. Cost structure and profitabilityIII. Customer InformationA. List of top 15 customers for the past two fiscal years andcurrent year-to-date by application(name, contact name, address, phone number, product(s) owned,and timing of purchase(s))B. List of strategic relationships(name, contact name, phone number, revenue contribution,marketing agreements)C. Revenue by customer(name, contact name, phone number for any accounting for 5percent or more of revenue)D. Brief description of any significant relationships severedwithin the last two years.(name, contact name, phone number)E. List of top 10 suppliers for the past two fiscal years andcurrent year-to-date with contactinformation(name, contact name, phone number, purchase amounts, supplieragreements)IV. CompetitionA. Description of the competitive landscape within eachmarket segment including:
  3. 3. 1. Market position and related strengths and weaknesses asperceived in the market place2. Basis of competition (e.g., price, service, technology,distribution)V. Marketing, Sales, and DistributionA. Strategy and implementation1. Discussion of domestic and international distribution channels2. Positioning of the Company and its products3. Marketing opportunities/marketing risks4. Description of marketing programs and examples of recentmarketing/product/publicrelations/media information on the CompanyB. Major Customers1. Status and trends of relationships2. Prospects for future growth and development3. Pipeline analysisC. Principal avenues for generating new businessD. Sales force productivity model1. Compensation2. Quota Average3. Sales Cycle4. Plan for New HiresE. Ability to implement marketing plan with current andprojected budgetsVI. Research and DevelopmentA. Description of R&D organization1. Strategy2. Key Personnel3. Major ActivitiesB. New Product Pipeline1. Status and Timing2. Cost of Development3. Critical Technology Necessary for Implementation4. RisksVII. Management and PersonnelA. Organization ChartB. Historical and projected headcount by function andlocation
  4. 4. C. Summary biographies of senior management, includingemployment history, age, service withthe Company, years in current positionD. Compensation arrangements1. Copies (or summaries) of key employment agreements2. Benefit plansE. Discussion of incentive stock plansF. Significant employee relations problems, past or presentG. Personnel Turnover1. Data for the last two years2. Benefit plansVIII. Legal and Related MattersA. Pending lawsuits against the Company(detail on claimant, claimed damages, brief history, status,anticipated outcome, and name of theCompany’s counsel)B. Pending lawsuits initiated by Company(detail on defendant, claimed damages, brief history, status,anticipated outcome, and name ofCompany’s counsel)C. Description of environmental and employee safety issuesand liabilities1. Safety precautions2. New regulations and their consequencesD. List of material patents, copyrights, licenses, andtrademarks(issued and pending)E. Summary of insurance coverage/any material exposuresF. Summary of material contacts G. History of SEC or other regulatory agency problem, if any

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