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socrateaser, Attorney
Category: Business Law
Satisfied Customers: 38442
Experience:  Retired (mostly)
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Since late 2005, I had been working on developing a website

Resolved Question:

Since late 2005, I had been working on developing a website which would offer a unique service to doctors, attorneys and other professionals. Going it alone was proving to be very expensive. Therefore, I decided to raise funds from the high net-worth people I knew. I had lawyer on the east coast draw up a PPM and a Subscription Agreement. I gave the PPM to prospective investors. About 15 of them chose to invest a total of about $1.2 million. The project turned out to be a lot more complex than I had envisioned. The funds ran out. The product is now beginning to sell. However, the investors are not inclined towards investing anymore. I believe that the product could take off if only I had the funds to market it. To keep the operations going, the website requires certain minimum expenditure. For the last 8 months, I have been funding the development, enhancement and limited marketing from my own pocket (about $150,000).

I neglected to file the subscription agreement (drafted under Reg D 504) in 2007 with the state of California. Soon after the fund raising, I worked almost 80 hours a week to build the project with the help of developers. I never took the time to file this investment with the state. From my readings, I am now finding out that it could result into serious consequences.

Question: Can I file with the state now? Would the state beat me up? What type of attorney should I be looking for?
Submitted: 5 years ago.
Category: Business Law
Expert:  socrateaser replied 5 years ago.
Failure to file the Notice, or to file same within the required time limits, does not affect availability of the exemption. The only consequence of failure to file is a fee penalty (based upon your fact: ~$2,500).

However, willful failure to file Notice is a felony. So, now that you know, you can't avoid filing, or you could be prosecuted criminally for ignoring the state securities laws.

Hope this helps.

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