DealOverview · Verification Memo
Recreational goods manufacturer — Texas
Deal code
DO-SAMPLE-01
Prepared for
Buyer (independent sponsor)
Prepared by
DealOverview
Delivered
Day 5 of 5
Scope
Full Pre-LOI Verification
Period
TTM · FY-1 · FY-2
Status
Final
Illustrative — composite of anonymized engagements. Figures fictional. No specific business represented.
Scope of work
We reconciled reported financials against source data across three fiscal periods. Sources connected: business checking (Chase, 36 mo), Stripe (36 mo), Shopify Payments (36 mo), QuickBooks Online backup (36 mo), Gusto payroll exports (24 mo), and 12 months of merchant statements from the acquiring bank.
This memo is a forensic screen. It is not a Quality of Earnings report and does not constitute audit-grade assurance.
Revenue & EBITDA reconciliation
| Line | Seller CIM | Verified | Δ |
|---|---|---|---|
| Revenue — TTM | $4,120,000 | $3,867,400 | −6.1% |
| Revenue — FY-1 | $3,780,000 | $3,742,100 | −1.0% |
| Revenue — FY-2 | $3,120,000 | $3,118,900 | −0.0% |
| COGS — TTM | $1,648,000 | $1,706,200 | +3.5% |
| Gross profit — TTM | $2,472,000 | $2,161,200 | −12.6% |
| Operating expenses | $1,544,000 | $1,533,800 | −0.7% |
| Reported EBITDA | $928,000 | $627,400 | −32.4% |
| Add-backs (see App. B) | $312,000 | $198,500 | −36.4% |
| Adjusted EBITDA | $1,240,000 | $1,061,900 | −14.4% |
Add-back audit — Appendix B
| Item | Claimed | Supported | Verdict |
|---|---|---|---|
| Owner compensation (excess of market) | $140,000 | $118,000 | Partial |
| Personal auto — 2 vehicles | $38,400 | $18,600 | Partial |
| One-time legal (2023 settlement) | $61,900 | $61,900 | Supported |
| Discretionary travel | $42,700 | $0 | Unsupported |
| "Consulting" — related party | $29,000 | $0 | Unsupported |
| Total | $312,000 | $198,500 | −36.4% |
Red-flag register
- HighTop customer represents 34% of TTM revenue. Contract renews Q3; no successor identified.
- MediumTwo months (May, Nov) show wholesale deposits materially inconsistent with reported invoices. See §4.2.
- MediumAR aging: 22% of receivables >90 days; up from 9% two years prior.
- LowPayroll on file matches Gusto exports; no ghost employees detected.
Finding
Reported adjusted EBITDA overstates verified adjusted EBITDA by 14.4%. The gap is driven by two unsupported add-backs and revenue mis-recognition in the wholesale channel.
Customer concentration is the material qualitative risk. Renewal of the top customer's contract in Q3 will drive real value; the seller's asking price does not price this risk.
Suggested next step: introduce lender and QoE firm on the revised basis. This memo hands them a running start.