Research and Due Diligence

We provide our clients with timely, insightful and useful research and investment strategies. Our team can identify compelling investment opportunities in the form of high-quality, undervalued companies before they are recognized by the market at large.

Due diligence
Once a business plan is set up, in preparation of a PPM, it is necessary to perform "due diligence" and corporate "clean-up." Due diligence is the investigation that ensures that the company-related information and summaries included in the PPM are accurate and complete. More often than not, issues with the text are detected during this phase and need to be addressed prior to the company issuing securities to outside investors.

Areas covered by the due diligence investigation vary from company to company, but often include:

• Organizational documents (e.g., articles, bylaws, operating agreement)
• Shareholder and option/warrant holder lists
• Copies of agreements that affect equity holders (e.g., shareholder agreements, voting agreements, registration rights agreements)
• Financial statements
• Summaries of litigation or threatened litigation
• Governmental licenses and filings (including patent applications)
• Biographical summaries of officers and directors
• Material contracts with purchasers, consultants, employees, suppliers, lessors/lessees
• Existing debt obligations
• Any conflict of interest transactions or arrangements involving the company and its current owners
The PPM should include summaries and descriptions of relevant items listed above and the business plan, as well as anything else that may be material to a prospective investor's decision.

There is no definitive list of items that must be included in a disclosure document. For example, a company seeking funding to support clinical trials might also include a summary of additional funding that the company may require following the initial funding to get the drug or product through all phases of the clinical trials. Every company is different and each due diligence process must be tailored to the nature of the offering, the company and the industry in which it operates.

Corporate clean-up
The remedying of issues within the PPM is often referred to as “corporate clean-up”. During this clean-up process, the following questions should be considered:
• Have your key employees signed appropriate nondisclosure, assignment of inventions, and non-compete agreements?
• Have you granted stock options or issued restricted stock to your key employees (perhaps as previously promised or alluded to)?
• Are your shareholder and director meeting minutes up to date and in compliance with statutory and organizational document requirements?
• Have all previous stock issuances and significant agreements been properly authorized in the board meeting minutes?
• Have you filed applicable patent applications (or at least provisional patent applications)?
• Do you have any agreements or arrangements with others that should be reduced to writing?.
Conducting a thorough due diligence and corporate clean-up are essential when offering securities. Doing both creates the foundation for a solid PPM: one that provides a prospective investor with an accurate picture of the company and limits the liability exposure of the company and its officers and directors.

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