Due Diligence Framework

Charting Your Course

“We can get this done” Joel Brownstein

Brownstein Associates is a strategic planning and development consultancy focused on positioning corporate client prospects into investor awareness campaigns highlighting the merits of outstanding emerging growth and early stage companies.

Brownstein Associates provides access to capital by assisting in the structuring and capital formation of companies, on an individual basis, through individual investors, angel and private equity groups, broker-dealer networks and it’s strategic alliances in the securities industry. The firm utilizes it’s long standing relationships and experience to provide structure, advisory, growth planning, coaching and capital formation.

Success is actualized by our client’s drive, desire and determination to create and implement sound business plans, proper documentation and chief level “investor ready” thinking in it’s funding proposals.

Navigating Your Future


“We’ve met a lot of people and most of them are still quite active”. Since the early 80's, Brownstein Associates has participated in the financing of emerging growth companies.

Client Engagement Criteria

Brownstein Associates consults and advises to entrepreneurial ventures and emerging growth companies seeking to raise between $1 million and $5 million of equity capital to reach the next plateau and become organically profitable. The client candidate must demonstrate it possesses a clearly defined business model, a well positioned business opportunity and an exceptional management team capable of executing it’s growth agenda from implementation through investor’s exits.

Client Services

Management consulting, strategic planning, targeted research, business planning, comparative market and competitive analysis, raising capital, forming strategic alliances, performing due diligence, and mentoring the executives via coaching throughout the entire funding process.

Managing client Business Plan Development and the Capital Formation process:

Assisting in clarifying feasibility concepts and business ideas

Consulting to formulate financial markets “Go-To” strategy

Reviewing existing business plans from the perspective of capital formation

Writing business plans from the investor’s perspective

Developing plateau strategies and private to public market migration plans

Consulting in preparation of a concise Pitch, Presentation and Road Show

Consulting for readiness to the Due Diligence process

Arrangement and coordination of Investor Group Presentations

Investor Relations and Executive Development during the Presentation Process

Brownstein Associates,LLC - Overview Navigating Client Requirements through World Class People and Best Practices 2 of 30


Be Prepared to focus on important issues. You will need to have :

Clarified your idea in which you describe who you are in 20 words or less Developed a concept pitch in conjunction with a 15 - 20 point slide presentation Identify team members for both internal and external management strength

Management teams are important Board of Advisors or Directors are crucial at the early stages

Provide proof of concept, market feedback, and customer acceptance Industry standard financial comparables and unique selling position or niche strategy How much capital you believe is required and the use of funds projection Analysis of the size and scope of your market Defined and aligned business model

General Outline of the Client Engagement Process:

Provide your company’s current business plan for evaluation Arrange for conferencing to determine actionable recommendations Discuss going forward options to Capital Formation Begin due diligence process Formulate and finalize due diligence process Review potential engagement letter variations Prepare documentation when appropriate Finalize Negotiations and Enter into Client Agreements Arrange and manage Presentations and RoadShows geared to raising equity capital Provide continuing support through non-executive participation on board of directors Manage preparation of investor acquisition and investor relations campaigns

Services

Capital is necessary, but growing a business is much more than just raising capital. Furthermore, “Who you may know”; many times is not sufficient to open the right doors to funding. More often than not it becomes a matter of “what you know and who knows you”. As emerging growth companies navigate through the early stages of development, it is not necessarily the funding that is required preventing your firm from moving to the next level, but rather the strength of your management and the expertise of your outside advisors. The added value of a top team with a well-presented and coherent business plan prepares the foundation for success that will support the funding process. If Capital is the destination, we’ll chart the course that keeps the capital markets interested to learn more, while you build your organization.



Business Plan Development

High quality strategic business plans and professional presentations will provide your company with a competitive edge in the capital markets just as they will anchor your operating plans as you search out the necessary capital to support your company. In today's competitive environment, start-ups, acquisitions, and emerging growth companies need high-visibility in the right places, professional strategic business plans and presentations that make a significant impact on the investment community to fuel the company's growth. We will determine what creative solutions can serve your company in obtaining the necessary capital financing once we discover, or develeop, your competitive differentiation, approach to long-term success and map out the niche you’ll be most inclined to secure in your marketplace.

Will Brownstein Associates prepare the plan for my organization?

Using the Fact Gathering Outline that follows, Brownstein Associates will arrange to create distinct variations of the Business Plan your company requires. This is accomplished through professional resources, both inhouse and through external specialists. This will depend on the area of concentration and the importance that particular assumptions hold to your overall mission. The plan most envisioned is a targeted and executable plan focused on the concerns of investors, stakeholders and industry participants. However, an elaborated executive summary (25 pages) to a fully researched and investor ready plan, (60-80 pages) including all necessary backup documentation can be derived from our work product to be tailored for banking and debt worthiness proposals or refocused to serve core executive management as an operating blueprint which will allow for measured performance against benchmarks and corporate development.

Fact Gathering Outline Situational Analysis: The current problems in the industry or unfulfilled market niche Market Analysis: The size and scope of the market opportunity your firm is pursuing Business Summary: The company's solution for the industry situation and explanation of plans

and initiatives to fulfill the market opportunity gap Target Market Analysis: Profile of the market for the company's products or services Competitive Analysis: Competitor comparatives of the company's products and services Marketing Plan: Advertising, public relations, brand building, and internet strategy Sales and Distribution Plan: Strategy for increasing sales and optimizing distribution Operations Plan: Gantt Charts, key milestones and operational issues Manufacturing Plan: Strategy for manufacturing, sourcing and technology development Organizational Summary: Organizational charts, management team, outside advisors, depth of

personnel qualifications and timing recognition to fill personnel gaps Financial Analysis: Income Statements, Balance Sheets, Cash Flows, Proformas, investment

offering, return of/on investment and investor exit strategies



Business Plan Preparation Instruction and Facilitation Investor Ready Business Plans Preparing Investor Correspondence Developing and Investor Relations Campaign Assisting with Offering Memorandum Preparation Now, more than ever, entrepreneurs need to understand how the financial community will evaluate

their business and need to be able to self-assess when their company is "investor ready". Prepare and present a professional business plan, including actionable plans for growing their business.

Capital Formation Manage Equity Raise Provide Access to Capital through

High net worth investors Angel Groups and Private Equity Funds Corporate Investors, Joint Venture Partners and Strategic Alliances Venture Capital Funds Registered Broker/Dealers and Investment Bankers

Private Placement Offerings Negotiation and Structuring of Financial Transactions

Advisory Services Provide management consulting Coaching entrepreneurs through the funding process Manage investor/shareholder relations

Industry Network Management Consultants Industry Sector Specialists Corporate Executives Fund Managers Financial Institutions Certified Financial Analysts Compliance and Corporate Governance Professionals SEC Attorneys Certified Public Accountants New Business Development Professionals



Hypothetical Entry

Avian Securities, Inc. is a Boston-based NASD member firm specializing in brokerage services and information technology research geared towards institutional investors, ranging from very large mutual fund families to smaller more agile hedge funds and cross over funds. Avian strives to assist its clients in their development of a more complete understanding of new trends in the technology marketplace and important strategic changes for more established technology companies. Through unbiased in-depth analysis of end markets and key technologies, Avian provides customers with insightful commentary regarding investment opportunities. Customers of Avian have come to expect relevant individualized responses to their investment needs, and their commitment is to fulfill each request by leveraging market and industry relationships, comprehensive knowledge base, and focused analytical staff. Avian prides themselves on providing customers with excellent execution, timely information flow, and attentive service.

Hypothetical EntryDexia Ventures is the Private Equity and Venture Capital arm of Dexia.Created in 1996 in view of the introduction of the euro, Dexia is currently unifying its structure to form the first banking group with a truly European identity. As a precursor of the new European banking sector, the group continues to increase its profitability in conditions of exemplary security that are reflected in its ratings, which are among the highest awarded to listed banks worldwide. The group is active in almost all of the countries of the European Union as well as in the United States and is listed on the Brussels, Paris and Luxembourg stock exchanges and ranks in the first third of the Euronext100. The group totals 348 EUR bln in assets and has a market cap of EUR 20 bln. Year 2000 net income increased by 31.5% to EUR 1 billion. H1/2001 net income rose by 58.4% to EUR 814 mln compared to H1/2000. This policy of vigorous, targeted and profitable growth has enabled Dexia today to be one of the 25 largest market capitalizations in Europe in the field of financial services and to feature in the list of the top 10 of these in terms of growth of EPS.


http://www.dexia.be/

http://www.aviansecurities.com/


Hypothetical Entry

TrustCapital Partners is an independent investment company, specialized in 'private equity', i.e. taking participating interests in unlisted companies. TrustCapital Partners endeavours to achieve the optimum return on its invested capital. This return consists mainly of capital gains generated by the growth in value of the companies in which TrustCapital Partners invests. By endeavouring to achieve maximum profitability, TrustCapital builds up a widely diversified portfolio of stakes in various types of companies, at different stages of growth and across a broad range of sectors. TrustCapital usually participates directly in companies. In addition, it also invests in other investment companies or private equity funds because of their know-how in well-defined foreign markets or specific sectors. TrustCapital Technology N.V. is a wholly owned subsidiary of TrustCapital Partners N.V. (TCP), an independent investment company. TCP focuses on private equity and is listed on the Euronext Brussels.

Hypothetical EntryMercator Ventures Fund I, LLC was formed in 1998 to make privately-negotiated minority equity and equity-oriented investments in start-up and emerging growth companies in the Northeast United States. The focus of the fund was in emerging technologies, with an emphasis on Internet technologies. The fund is fully invested.

Hypothetical EntryHeadquartered in Boston, MA, Seedling Group is the leader in high-impact high-tech retained search. Chuck Ramsey, formerly of Ramsey/Beirne Associates, is the chief investor and board member of the company. Seedling clients include Rocket Software, Cedar Point Communications, AIG Horizon Partners, Dolphin Networks, eMaven and TA Associates.


http://www.seedlinggroup.com/

http://www.mercatorventures.com/

http://www.trustcapital.be/


Hypothetical EntryFounded in 1930, Allen & Overy is a premier international law firm with over 390 partners and some 4,600 staff working in 25 major centres world-wide. Allen & Overy provides global capability of effective, co-ordinated and decisive legal advice, extended across three continents. Allen & Overy were credited in February of this year, by the Legal Business Awards in London for our success in advising on over e 100bn of European telecoms finance deals, being awarded Banking Team of the Year. Allen & Overy is committed to servicing the needs of the community. The firm's pro bono and community affairs programme is an integral part of its day-to-day operation. In October 1999, this commitment was recognised when Allen & Overy won a Dragon Award for helping to improve inner city life. The City Firm Award, one of seven Dragon Awards managed by Business in the Community in association with the Corporation of London, was judged by a team including the Lord Mayor of London, Lord Levene, and governor of the Bank of England, Eddie George.

Hypothetical EntryBased in Massachusetts, Texas, and the greater Virginia/Maryland area, Accelerant's mission is to accelerate growth and reduce risk in emerging companies. Accelerant provides the critically needed management expertise to develop and implement tactical operating plans, to acquire the necessary capital funding, and to define and secure the necessary management team. They take a "rolled-up shirt sleeves" approach to each and every one of their clients, investing their time wisely and focusing on transferring their management and operating experience so their clients become successful in their own right. The emphasis is on short-term results while positioning clients for long-term success.


http://www.accelerant.com/

http://www.allenovery.com/


Hypothetical EntryWith offices in Europe and the US, ABRENA is an international market and business development group that teams with emerging high-technology companies to efficiently grow their businesses. The ABRENA partners, a well-knit group of senior executives with domestic and international experience, takes a "hands-on" approach to achieving business objectives - from developing the business, market, and competitive strategies, to successfully executing marketing and sales plans. ABRENA partners are committed to applying their collective expertise and experience to ensure both the short and the long-term success of its clients.

Hypothetical EntrySharelink Financial Services Ltd. (SFS) is the leading provider of financial services in Cyprus with a fine reputation of being dynamic and innovative. Established in 1988 as a brokerage and investment consultancy house, Sharelink has greatly broadened its investment horizon and expanded into a financial services group, which consists of a number of subsidiary and associated companies. The subsidiary companies include Share Link Securities Ltd., AAA United Stockbrokers Ltd., Share Link Asset Management Ltd., SFS Custodian & Trust Services Ltd., Cypensions Ltd., SFS Corporate Analysis Ltd., SFS Corporate Management Ltd., CapitalAsset Link Ltd. and Sharelink Mutual Funds Management Co Ltd. The associated companies are White Knight Holdings Ltd., CyVenture Capital Ltd., Leda Investment Co Ltd., Triena Investments Ltd., Unifast Finance & Investments Ltd., Ellinas Finance Ltd., TFI Ltd., and Dot.Cy Developments Ltd.


http://www.sfs.com.cy/

http://www.abrena.com/


Hypothetical EntryAbryl Ltd. was formed in 1996 with a mission to turn good companies into great companies by nurturing entrepreneurs and management, and establishing relationships with industry leaders and the financing community. Abryl provides its "umbrella" services, including business acceleration, management advisory, transaction and idea incubation, as well as matchmaking assistance, to entrepreneurs. In addition Abryl provides a consulting and regulation services to medical devices companies in various levels. Abryl operates its headquarters in Israel with a satellite office operating from New York City (USA). The Team has international, multi-sector expertise and experience and is backed by a vast operational global network.


http://www.abryl.com/


Going Public Key steps to a public offering

Timing Duration Activity DescriptionCumulative Activity

3 to 6 weeks 3 to 6 weeks Business Plansa. Corporate Master Planb. Underwriter/legal/accounting planc. Executive Summaryd. Identity seed financing

5 to 10 weeks 2 to 4 weeks Identification of Associates

a. Retain attorneys

b. Retain accountants

c. Identify underwriters

d. Establish seed financing

6 to 14 weeks 1 to 4 weeks Form Corporation

a. File incorporation papers

b. Structure public offering

• Identify founders

• % to founders

• % to seed capital financiers

• % private offering

• % public (dilution)

8 to 20 weeks 2 to 6 weeks Private Placement pre-preparation

a. Approve private placement documents

• Corporation

• Underwriter

• State

11 to 32 weeks 3 to 12 weeks Raise Private Funds

a. Establish escrow account

b. Solicit private monies

c. Pre-prepare public registration

d. Break private escrow



Going Public (continued) Key steps to a public offeringTiming Duration Activity Description

Cumulative Activity

13 to 36 weeks 2 to 4 weeks Audit & Registration Preparationa. Complete initial auditb. Retain printer (for offering circular)c. Retain transfer agentd. Obtain approval of SEC registration document(s)

19 to 48 weeks 6 to 12 weeks Filingsa. Submit registration to SECb. File with Blue-Sky States (e.g., M11 in NY)c. Clear with NASDd. Initial comment letter from SECe. Print red herring (offering circular)f. Second letter of comment and reply, (SEC)g. Third letter of comment and reply, if necessaryh. File SEC acceleration request, if necessary

23 to 60 weeks 4 to 12 weeks Raise Public Funds a. Arrange due diligence scheduleb. Sign underwriter's agreementc. Establish public offering escrow accountd. Print copies of prospectuse. File with NASDAQf. Establish underwriting syndicateg. Distribute prospectush. Conduct due diligence meetingsi. Place tombstonej. Complete public offering

Legal and accounting optionsClosing papers

Post Completion a. Break escrow

• Corporation, attorneys, bank, transfer agent, etc.b. Establish market makers/quotation

• Pink sheets• Bulletin board• NASDAQ

c. Establish tradingd. File 8-K with SEC



Brownstein AssociatesDue Diligence Work List

Instructions to Recipient

Complete and careful compilation and submission of the following information will expedite the due diligence process.

1. It is recommended that one individual be assigned to coordinate the compilation and submission of the requested information. This is a dedicated effort and the individual should be held accountable for the project results.

2. Before submitting the information, please mark each item with:(a) the Section (I or II) and Ref. Code shown to the left of the item, and(b) the name and phone number for the person(s) to whom we should address any questions.

3. Please submit the information by overnight delivery or e-mail to our offices at the business address or e-mail address provided. If you or any preparer of information has any questions, do not hesitate to contact our administrative offices.



I. Overview - Brownstein Associates – Due Diligence Work ListCategory Ref.

CodeItem/Action Requested Date

Received Status Resp. Party Due Date

Business Plan

I.1. Two (Separately Collated) Copies of:a. Business Plan if Different from Offering

Memorandab. Current and Previous Offering Memoranda

Company Timetable

I.2. A detailed company history to include a timeline of all major events such as: formation, key employees, advisors, & directors, acquisitions, divestitures, contracts, legal events, and all financings

Products and Services

I.3. a. Detailed Description of Currently Planned Products and Services

b. Potential Products and Services that May be Offered.

MarketStudies, if any

I.4. Any internal or externally generated reports or analyses that discuss the market supply and demand in the geographies, products, services, segments you are targeting. Sample relevant topics include market sizing, market growth, demand and supply drivers and pricing.

Strategy/Operations Studies, if any

I.5. Any internal or externally generated reports or analyses that discuss the internal operations of the company. Sample relevant topics include systems, technology, strategy, sales and marketing.

Feasibility Studies, if any

I.6. Any externally generated reports or analyses performed by an independent, nationally recognized third party that renders an opinion concerning the feasibility of the business plan or project.






Industry Studies, if any

I.7. a. Background Industry Information and Statistics Sourced or Confirmed by a Nationally Recognized Third Party (i.e., government agency, industry trade group, independent research)

b. Break-Out Company’s Products and Services from Background Industry Statistics (by product and service)

c. Estimate Initial Market Share (by product and service) for Region and Overall.

d. Estimate Growth Rate (by product and service) for Region and Overall.

Competition I.8. a. Competitive Analysis Summary Table (in matrix form with a row for each significant current or anticipated competitor, its web site address, stock symbol (if public), short description of its business, management, financial resources, significant investors, and assessment of its strengths and weaknesses versus the company’s list of geographic, products, services, segments markets where competitor competes directly against you).

b. Current and Anticipated Competition by Market Area (Regional, National)

i. current and anticipated competitors with estimated market shares

ii. product/service points of differentiation

iii.color coded maps to show competing company sites (by product and service) as well as dates of completion and expected deployment for planned sites.





Received Status

Resp. Party Due Date

Customer Base

I.9. a. Customer Summary Table (in matrix form with a row for each significant current or anticipated customer, its web site address, stock symbol (if public), short description or its business plan as it relates to you, description of the relationship and its history, internal contact person for the relationship, list of geographic, products, services, segments markets where this customer will buy from you and the amount of sales concerned.)

b. Target Customer Base by Product and Service Line

c. Types of Customers for each Product and Service

d. Report on all LOIs, MOUs and Executed Contracts

e. Outline of Contracts - Terms, Conditions, Volume, Pricing, Other

f. Current and Anticipated Customers by Market Area (Regional, National)i. color coded maps to show customers

sites (by product and service)

Pricing Policy and Sales Strategy

I.10. a. Pricing Model (i.e. sale, subscription and/or transaction, lease, license)

b. Price Determination (i.e. fixed, variable, presale or volume discounts)

c. Terms

Sales and Marketing

I.11. a. Distribution Channels b. Advertising and Promotional Activitiesc. Referral Sourcesd. Marketing Brochurese. Rate Schedules






Sales Organization

I.12. a. Relationships Between Regional and National Customer Classes

b. Sales Personnel – Depth and Experiencec. Sales Alliances and Strategic Relationships

Research & Development and Product Development, if any

I.13. a. Impact of Changing Technology on Company Products & Services

b. R&D and Product Development Expenses, Historical (3 year) and Projected (5 year)

Company Facilities/Projects

I.14. a. Facilities/Projects (type, products anufactured, services provided, location, capacity, square footage, owned (copy of deed) vs. leased (copy of lease)

Engineering, Procurement & Construction (EPC) Contract Issues, if any

I.15 a. Summary Description – site plans, firm(s) involved, fixed price, fixed schedule, completion standards, performance incentives, non-performance provisions (to include liquidated damage provisions)

b. Status of Contract Negotiations and Expected Date of Contract Execution

Supplier/Vendor

I.16. Supplier Summary Table (in matrix form with a row for each significant current or anticipated supplier, its web site address, stock symbol (if public), short description of its offering as it relates to you, description of the relationship and its history, internal contact person for the relationship, list of geographic, products, services, segments markets where this supplier will sell to you.






Suppliers/Vendors & Cost of Equipment and Services

I.17. a. Description of Equipment and Servicesb. Pricingc. Supplier/Vendor Concentration & Alternative

Suppliersd. Supplier/Vendor Contractse. Length of Supplier/Vendor Relationshipsf. Current and Expected Inventory Levels

Supplier/Vendor Financing, if any

I.18. a. Terms and Conditions, Executed and Under Development

b. Copies of all Supplier/Vendor Agreements

Warranty Policies, if any

I.19. a. Lengthb. Description

Regulatory Environment, if any

I.20. a. Classification of the Company and Competitors

b. Compliance Expense – Current & Projected

c. Relationship with Regulatorsc. Discussion of any Regulatory Issues that

might affect performance, Including any regulatory changes currently being discussed






Regulation, if any

I.21. Regulator Summary Table, if applicable, (in matrix with a row for each significant current or anticipated regulator who can influence your business plan directly its web site address, short description of its jurisdiction as it relates to you, description of the relationship and its history, internal contact person for the relationship, list of geographic, product, services, segments markets where this regulator will affect to you.)

Accounting Issues & Relationships

I.22. a. Auditors and Auditory History (Internal & Outside)

b. Revenue and Income Recognitionc. Tax Treatmentd. Contact Names, Addresses, Telephone #’s,

Fax #’s, E-mails (Offices & Home)

Legal Issues & Relationships

I.23. a. Legal Counsel and Legal History (Internal & Outside)

b. Legal Proceedings, if anyi. Backgroundii. Description of Product or Service

Liabilityiii. Current Statusiv. Settlementsv. Lawsuits and/or Contingent Liabilities

c. Contact Names, Addresses, Telephone #’s, Fax #’s, E-mails (Offices & Home)






Capital Market Relationships (Investment Banking, Commercial Banking, Other Funding Sources)

I.24. a. Who, What, When, Where and Howb. Copies of all Past, Present, and Proposed

Agreements



II. Overview - Brownstein Associates – Due Diligence Work List - Charts, Documents & SchedulesCategory Ref.



Corporate Organization

II.1. Current Organizational Chart showing the name and title of all midlevel and senior management personnel (generally show as low as one level below Vice President). Show the number of heads that report to each person, and an overall total of employees. Show any vacant positions, and indicate when you expect that the position will be filled.

Ownership Structure – Chart

II.2. Corporate Structure Chart showing the ownership structure for the company that is seeking capital (the “Investment Vehicle”), together with any subsidiaries or other entities in which the Investment Vehicle (or its controlling shareholder, if applicable) has an ownership interest. Show the % ownership interest at each level in the chart.

Corporate Information

II.3. For the Investment Vehicle, please provide:a. Full Legal Nameb. Form of Organization

(i.e. Corporation, LLC, etc.)c. Jurisdiction in Which the Investment

Vehicle is Formed d. Taxpayer ID Numbere. Web Site Addressf. Copies of Materials Distributed to the

Board of Directors for the Most Recent Twelve Months.






Project –Related Documents, if applicable

II.4. a. Engineering, Procurement & Construction (EPC) Reports

b. Environmental Issues, if any c. Other Reports (e.g. licenses, inspection

reports, etc.)d. Color Coded Maps to show current project

sites (by product and service) as well as Dates of Completion and Expected Deployment for Planned Sites

Corporate Capitalization Table

II.5. a. Current Capitalization TableComplete on fully-diluted basis showing exercise at all current stock options and warrants.i. security holdersii. type of securities

(all debt and equity inclusive to bank debt, preferred and common stock)

iii. principal value of securitiesiv. strike price, date of issuance/

expiration and other relevant terms






Financial Information– Historical

II.6. a. Historical Annual Financial Statements (audited when available) for Last 5 Years.i. balance sheetsii. income statementsiii. cash flow statements

b. Management Letters from Auditor for Last 3 Years

c. Historical Monthly Financial Statements i. monthly financial statements from the

beginning of the most recently completed fiscal year until the latest month/quarter for which such information is available.

ii. attach a comparison of key income statement and capital expenditure items to budget and explanations for significant variances from budget.

d. Listing of Non-recurring Items Impacting (both positively and negatively) Past Financial Results (e.g., lawsuits, reclassifications of expenses, extraordinary penalties, business interruptions, etc.)

e. Accounts Receivable and Accounts Payable Aging Schedules

f. Listing of All Company Debtsi. principal amounts

outstandingii. amortization schedulesiii. interest ratesiv. maturityv. accrued interest due, if anyvi. financing documents (e.g., closing

documents to include official statements, trust indentures, loan agreements).

g. – k. See following page






Financial Information– Historical

II.6.Con’t

a.-f. see previous page..g. Substantive Past Events, (e.g., conversion

to fixed rate, forbearance agreements, defaults, major draws of reserve accounts, supplemental indentures).

h. Listing of Needed Capital Improvements and Deferred Maintenance (description and approximate cost)

i. Taxes (real estate, payroll, etc.)i. anticipated taxesii. tax and/or parcel identification

numbersiii. explanation of timing of tax payments

j. Income Tax Return for Most Recent Fiscal Year.

k. Listing of Major Unfunded Liabilities, if applicable i. including expenses that were

accrued and/or liabilities (e.g., refundable deposits, insurance expense, taxes, etc.)

Financial Information – Detailed Use of Proceeds

II.7. Detailed Analysis Month by Month, Concerning Both Corporate (general and administrative) and Capital Expenditures





Received StatusResp. Party Due Date

Financial Information – Projected

II.8. Electronic and printed copies of management’s latest financial projection model, containing balance sheet, income statement and cash flow statement.a. Detailed Underlying Assumptions

i. by markets broken down to class and category, as applicable

ii. by product and business segment, as applicableiii. unit pricingiv. unit volume

b. Projected Financial Statementsprojections should be:i.annual for the current and not less than five future years; and monthly for at least the next fiscal year, and for any additional periods until the enterprise is projected to have positive EBITDA.

Management Information Systems

II.9. a. What type and supplier/vendorb. Last reviewed on what date by whom.

Business Combinations , Alliances and Affiliations, if applicable

II.10 List, Summary Description and Copy of All:

i. Joint Venture Agreementsii. Corporate Alliancesiii. Corporate Affiliations

Sales Contracts (Signed and Pipeline)

II.11. a. List, Summary, Description and Copy of Executed Major Contract(s)

a. Sales Pipeline Identified, Prioritized and Timed

b. Need Due Diligence with Potential Customers






Management and Key Employee Information

II.12. a. Biographies/Resumes of Management and Key Employee Personnel (include all education and employment with mm/yy of start and end dates, and location for each)i. CEOii. Presidentiii. COOiv. CFOv. Marketing/Salesvi. General Counsel

b. Management Quality & Experiencec. Management and Key Employee

Agreementsd. Management and Key Employee

Compensationi. salariesii. options, warrants, etc.iii. other compensation, material benefits,

etc.e. Accrued Salaries, Management Fees and/or

Other Compensation (if any)f. Lexis/Nexis Search

If we proceed further, we will request the following information :

Personal information for all officers:1. Full name,2. Date of birth,3. Social security number (or equivalent,

for non US personnel),4. List of states/countries resided in by

year since age 18,5. Name, phone number, relationship and

email address (if available) for five business references.






Board of Directors and Advisor Information

II.13. a. Biographies/Resumesb. Shareholder Agreementsc. Board of Director and Advisor

Compensationc. Lexis/Nexis Search

Employee Information

14. a. Listing of All Officers, Employees (with department heads and project managers identified (or future hires))

b. Union vs. Non-Union. Contract Renewal Information and History

Press Articles 15. Please provide copies of recent releases or articles regarding the company and/or its management and relevant articles regarding the industry and/or its competitors. (Alternatively, indicate where such items are available on the Internet).

Company References

16. Name, phone number, email address and nature of relationship for each of the following parties:a. Accounting Firmb. Legal Counselc. Each Bank and Lenderd. Directorse. 5 Largest Customers (by revenue)f. 5 Largest Suppliers/Vendors (by cost of

sales or expense)






Contracts II.17. Two (separately collated) copies of all material contracts and letters relating to:a. Suppliers/Vendors (to address all

representations, warrantees and guarantees)

b. Customers (to address all representations, warrantees and guarantees)

c. Financing (all material forms of equity, debt and leases)

d. Corporate Governance Issues (articles, bylaws)

e. Shareholder Agreements

f. Employment of Key Personnel

g. Board of Directors and Advisors to the Board

h. Insurance

Terms of Security

II.18. Corporate Governance Issues and Investor Rights

Company Contacts

II.19. Names, Addresses, Telephone #’s, Fax #’s, E-mails (Office & Home)






II.20. a. Written Statement answering the following:i. What is your vision of the company and what is the company’s mission statement? Is it a shared vision and if so, with whom?ii. Aside from capital constraints, what are the weaknesses of the company? What steps are being taken to address the weaknesses?iii. Who are your top competitors? Do you have a sustainable competitive advantage versus these companies? If so, for how long?iv. What is the greatest risk to your company’s competitive advantage?v. Whom among the management team do you rely upon the most? Who among the management team is more complementary to your abilities, and what skill set does each member provide?vi. Who in the company would be able to replace you on a temporary basis? On a permanent basis, if necessary?vii. Who are your most valuable board members? Are you contemplating removing or adding board members? If so, whom?viii. Whom do you rely upon for key decision-making besides the board, both inside and outside the company?ix. Who are your five most important customers and why? What percentage of revenues do these customers account for? Who are your three most important potential customers and why?x. Are you planning to invest your own capital in this financing? If so how much? If not why not?



Important Industry Links

Securities and Exchange Commission - www.sec.gov

National Association of Securities Dealers Automated Quotations - www.nasdaq.com

OTCQX, OTCQB and OTC Pink Marketplaces – www.otcmarkets.com

Financial Industry Regulatory - www.finra.org/industry/otcbb/otc-bulletin-board-otcbb

American Institute of Certified Public Accountants - www.aicpa.org

New York Society of Certified Public Accountants - www.nysscpa.org

Financial Accounting Standards Board - www.fasb.org

International Financial Reporting Standards - www.ifrs.com

Public Company Accounting Oversight Board - www.pcaobus.org

Federal Reserve Board - www.federalreserve.gov

Internal Revenue Service - www.irs.ustreas.gov/cover.html

NYS Department of Taxation and Finance - www.tax.state.ny.us


http://www.tax.state.ny.us/

http://www.irs.ustreas.gov/cover.html

http://www.federalreserve.gov/

http://www.pcaobus.org/

http://www.ifrs.com/

http://www.fasb.org/

http://www.nysscpa.org/

http://www.nysscpa.org/

http://www.aicpa.org/

http://www.aicpa.org/

http://www.sec.gov/

Due Diligence Framework

Documents

Transcript of Due Diligence Framework