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.
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)
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.
• 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,
• Existing debt obligations
• Any conflict of interest transactions or arrangements involving the
company and its current owners
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.
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
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.
• 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?.
Call Now 1 416 444-4001, 1 313 918 1320