Starting a Business Being sued by investors without a written contract

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antonio

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I developed a product and was searching for investors because I could not afford it obviously. A Doctor who I work with offered to fund it along with a second investor friend of his. The first meeting took place on June 4, 2013 in which I presented a mock up of my product to these two investors. I have no knowledge of the cost to bring this to market and I had heard it would be about 100k. I mentioned this to the two of them and they chuckled and said it could run up to 1.5 to 2 million. One of the investor said he was not worried about the money and he could fund it, he was more concerned about the product working. Since he said he would fund the money I offered 60%, the two investors said they would think about it. Shortly after, the doctor I work with said they were in and they would establish a business name other than the product name and open a bank account. So I began to look for manufacturers and patent attorneys. The invoices started to flow in and I would forward those to the Doctor/investor. We had reached approximately 15k when I handed a subsequent invoice to the investor and he asked how much was the total spent thus far. I told him it was close to 15k. He stated that he only intended to invest 10k along with the other investor/friend a total of 20k combined. I told him that I would not give 60% for 20k. He became aggressive and told me that I had agreed to that during the meeting. The other investor was not engaged at all and was not responding to my messages or calls. It then escalated to threats of suing me and taking the patent away since they payed for it. During this time ( a period of 3 months) of going back and fourth, other invoices were piling up and I acquired a third investor. This really upset the Doctor/investor I work with and confronted me about acquiring this new investor. I told him the reason was because they had changed the amount to a new limit and I needed the invoices payed since i was broke by now. One week later this doctor approaches me with an operations procedure contract that clearly stated that the two initial investors contributed 10k each for 30% equity of my product each. A total of 20k investment for 60% equity. I never agreed to that and never signed anything and now he has forced me to seek legal advise to protect myself and my product. My lawyer says that they can sue for anything and I am worried because I can not afford to go to litigation. I feel like my back is against the wall and I am broke. I need to know if a discussion took place where I agreed to terms verbally and than their terms where changed after by them, will I have a chance to win even though no contract was signed? I don"t see how they can back down from what they said they would offered and I can't back down from what I said..how would this play out? I would never have agreed to 20k to 60% of my business, will the judge see it like I do? I am so worried I will lose everything and end up in the street. I have offered a couple of extra percents to show them that I am not unreasonable, even offered to pay them their money back by selling my car if I had to. Even though they new very clear that this was a risk on their part to lose this money, I tried to reason but they want their 60% for 20k not the couple million they said it would cost to bring it to market....I need advice please.
 
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It's always best to have a written & signed contract. I believe you do need to work with a lawyer.
 
I concur. You have multiple issues not in your favor regarding this issue. Was a legal corporation formed? You need to actively take steps to dissolve this while a court might rule in your favor under Sec. 34-372. Events causing dissolution and winding up of partnership business.
 
The business was formed but only because I acquired the third investor. It seemed to me that the reason they expedited the formation was to secure their "60%". The first and only meeting between us three was June 4, 2013 and the business was formed on August 28, 2013. This LLC was formed and I agreed that it should. What I didn't agree on and still don't, is the operating agreement which I had no say in it and it was formulated by their attorney. Thank you for the response Disagreeable.
 
Thank you for that. I guess since I was not paying for it and I knew the Doctor investor for 9 years, I thought he would ask for my input instead of just formulating his own articles and expect me to sign.
 
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