Attached files

file filename
EX-31.1 - INVENT Ventures, Inc.last10kex311123110.htm
EX-32.1 - INVENT Ventures, Inc.last10kex321123110.htm
EX-32.2 - INVENT Ventures, Inc.last10kex322123110.htm
EX-31.2 - INVENT Ventures, Inc.last10kex312123110.htm
 
 


UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year ended December 31, 2010

Commission file number 814-00720

LOS ANGELES SYNDICATE OF TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)

NEVADA
20-5655532
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)

3651 Lindell Road, Suite D #146, Las Vegas, NV  89103
(Address of Principal Executive Offices) (Zip Code)
 
 (702) 943-0320
(Registrant’s telephone number)

Securities Registered under Section 12(b) of the Exchange Act: None

Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [  ] No [X]

Indicate by check mark whether the registrant (1) filed all reports to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [  ] No [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [  ]
 
 
 
 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [X] Smaller reporting company [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.  The shares outstanding are reduced by shares of voting stock held by each officer and director and by each person who owns 5% or more of the outstanding voting stock. This determination of affiliate status is not necessarily conclusive.  $85,810.

The number of shares outstanding of the issuer's Common Stock, $.001 par value, as of March 31, 2011 was 11,889,399 shares.

DOCUMENTS INCORPORATED BY REFERENCE

No documents are incorporated by reference into this report except those Exhibits so incorporated as set forth in the Exhibit Index.
 
 
 
Page 2 of 62

 
 
LOS ANGELES SYNDICATE OF TECHNOLOGY, INC.

INDEX


                                                                                                                          
    Page 
PART I
   
     
ITEM 1:
BUSINESS
4
ITEM 1A:
RISK FACTORS
9
ITEM 2:
PROPERTIES
15
ITEM 3:
LEGAL PROCEEDINGS
15
ITEM 4:
[REVMOVED AND RESERVED]
16
     
PART II
   
     
ITEM 5:
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
16
ITEM 6:
SELECTED FINANCIAL DATA
18
ITEM 7:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
19
ITEM 7A:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
23
ITEM 8:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
24
ITEM 9:
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
50
ITEM 9AT:
CONTROLS AND PROCEDURES
50
ITEM 9B:
OTHER INFORMATION
51
     
PART III
   
     
ITEM 10:
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
52
ITEM 11:
EXECUTIVE COMPENSATION
56
ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
58
ITEM 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
59
ITEM 14:
PRINCIPAL ACCOUNTANT FEES AND SERVICES
60
     
PART IV
   
     
ITEM 15:
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
61


 
 
Page 3 of 62

 
 
INTRODUCTION

This report contains forward-looking statements and the Company's actual results could differ materially from those anticipated in these forward looking statements as a result of numerous factors, including those set forth below and elsewhere in this report.

In this Annual Report on Form 10-K, or Annual Report, the “Company,” “last.vc,” “we,” “us” and “our” refer to Los Angeles Syndicate of Technology, Inc. unless the context otherwise requires.

PART I

ITEM 1:     BUSINESS

General Development of Business

Los Angeles Syndicate of Technology, Inc. (“last.vc”) builds technology companies focused on social media, web-based software, and mobile applications. Our goal is to develop businesses that generate capital appreciation and realized gains, and we currently have seven companies in our portfolio. We believe that by developing technology internally and partnering with entrepreneurs at inception, we can generate the highest return and add the most value.

The increasing adoption of social media and the proliferation of smart phones continue to make people more connected, resulting in faster information sharing and the creation of some of the world’s fastest growing companies. Social media companies have exhibited unprecedented growth in the last twelve months – at rates rivaled only by the projections for the industry in the coming years. We focus on developing businesses that exploit these secular shifts.

Our process begins with the sourcing of compelling concepts, which are developed internally or brought to us by entrepreneurs seeking support from the last.vc network. We provide our portfolio companies with the capital to cultivate their product as well as comprehensive support services to reduce costs and accelerate their time to market. Such services include office space, managerial assistance, marketing and branding, product development and design, legal, finance and accounting services, corporate formation and structure, and exposure to additional financing rounds. By offering these support services, we enable our network of entrepreneurs to focus on developing their products. This parallel process is vital in the rapidly evolving web-technology industry and results in efficiencies in how companies are built and brought to market.

last.vc operates as an internally-managed, non-diversified, closed-end investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the "1940 Act").  The application of the BDC structure to early-stage technology venture capital is a unique model that promotes innovation and provides retail investors with access to markets previously unavailable to them. We believe last.vc is the only such company in the market.

Our stock is publicly listed on the OTCBB and OTCQB markets under the symbol “LAST”.
 
 
 
Page 4 of 62

 


Market Opportunity

The web and mobile technology industry is a rapidly growing sector of the U.S. economy, and companies building social media applications have grown their user bases and revenues at unprecedented rates over the last 24 months. Companies that didn’t exist two years ago now command valuations in the tens of billions of dollars, and more established businesses have seen their valuations swell by multiples of what they were only twelve months ago. We believe that an attractive opportunity exists for a public investment company focused on building a portfolio of early-stage technology companies, and key elements of our opportunity include:

·  
Global adoption of Internet infrastructure and the proliferation of mobile technology. The cost of Internet access continues to decline, facilitating an increasing number of Internet users and driving up time spent online. This trend is magnified by the proliferation of smartphones and mobile technology, resulting in users with perpetual access to the Internet. As the Internet becomes more accessible, more data is being transmitted online, requiring evolving applications and businesses to manage this flow of information.

·  
Dramatic shifts in the way people share and consume information. The growing usage and availability of the Internet results in an increasing number of human connections. As more people are connected, an increasing volume of information is being shared. The benefits of this information flow manifest themselves in more ways than simply interacting with friends, and the Internet is becoming an increasingly important tool in businesses’ marketing programs. Connectivity among humans, when harnessed by businesses, can drive marketing costs down to virtually zero. We believe that as more consumption occurs on the Internet, more mediums of efficiently disseminating information are required. This secular shift creates vast opportunities for companies creating and investing in these technologies.

·  
Declining costs to build web- and mobile-based technology. The cost of starting and operating an Internet-based business has dramatically declined over the last decade as a result of dropping hardware costs and maturing open-source software. This decline has resulted in a shift in the capabilities web technology founders look for in a partner. Increasingly, entrepreneurs are valuing business support, brand connections, marketing and product support over the level of funding available from a partner. This adaptation creates a large and growing opportunity for web-technology incubators providing comprehensive support services to entrepreneurs.

·  
Increasing focus on web-based technology companies by the capital market. The explosive growth of social media companies has attracted significant capital from investors. Approximately 50 technology companies founded in the last seven years have raised over $100 million of funding, and in aggregate, ten of the most popular web companies have raised close to $6 billion. These investments, coupled with recent and impending IPOs, demonstrate the growing appetite for investments in web-based technology companies. As builders of technology businesses, we benefit from this heightened desire for social media investments through greater subsequent financing and sale opportunities for our portfolio companies.


 
Page 5 of 62

 


Our Business Strategy

Our goal is to build and invest in web and mobile technology companies that will generate capital appreciation and realized gains. We invest up to $500,000 per portfolio company, and believe that by developing technology internally and partnering with entrepreneurs at inception, we can generate the highest return and add the most value. The following are key elements of our strategy:

·  
Guide our portfolio companies through the challenges of early development.  We provide portfolio companies with the capital to cultivate their product and grow into profitability. Beyond capital support, last.vc reduces costs and time to market through managerial assistance, marketing resources, and technological collaboration. As the companies mature, we prepare them for subsequent financing rounds or other liquidity events by providing strategic guidance, legal and accounting resources, and access to the capital markets.

·  
Apply a structured investment process to our deployment of capital. Web-based technology is becoming increasingly capital-efficient, and our model is optimized to leverage this trend. By investing in the earliest stages of our companies’ lifecycles we are able to generate significant returns with minimal capital investment. Capital is deployed based on pre-determined development milestones, with a maximum investment of $500,000 per portfolio company. The last.vc diligence process includes both qualitative and quantitative analyses, and input from our network constituents to determine the value proposition, viability and defensibility of each business.

·  
Create a network of entrepreneurs who are incentivized to collaborate.  Once part of the last.vc syndicate, entrepreneurs with whom we’ve partnered are offered equity interests in last.vc. As a result, each network constituent has a financial interest in the success of both their company and of last.vc as a whole. This shared ownership structure incentivizes every member of our network to collaborate. As more members are connected, an increasing amount of information is shared, and the value of the network grows. New concepts are developed at a more rapid pace, potential investments can be vetted by a larger audience, technical challenges can be solved by a wider support base, and increased productivity will reduce costs and drive efficiencies in how our companies are built.

·  
Build a diverse portfolio of innovative and dynamic technology companies. The low capital investment requirements of our target industries, coupled with the short development timeline of technology companies, enable us to spread our capital base across a wide spectrum of investments. Some companies will achieve positive cash flow, some will require further capital, and some will fail. Through the construction of a diverse portfolio we believe we will mitigate risk and enhance the value of our network.


 
Page 6 of 62

 


Corporate History

The Company, formerly Bay Street Capital (“BSC”), Small Cap Strategies (“SCS”), and Photonics Corporation (“Photonics”), was re-domiciled in Nevada through a reverse merger effective on September 30, 2006 where Photonics, a California corporation, merged into Small Cap Strategies, Inc., a Nevada corporation, with SCS being the surviving entity.  The effect of this corporate action was to change the Company’s state of incorporation from the State of California to the State of Nevada.

On December 5, 2006, the board of directors authorized a reverse stock split of one share for each twenty shares outstanding, to be effective December 21, 2006.  On May 15, 2007, the board of directors authorized a second reverse stock split of one share for each twenty shares outstanding, to be effective the date filed with the Nevada Secretary of State, May 21, 2007.

On March 7, 2006 we filed a notification under Form N-54A with the SEC indicating our election to be regulated as a BDC under the 1940 Act.  In connection with this election, we adopted corporate resolutions and operated as a closed-end management investment company.

On November 24, 2008, we filed Form N-54C with the SEC to notify the SEC of the withdrawal of our previous election to be regulated as a BDC under the 1940 Act.  This action was taken to best facilitate our planned business model of developing and producing oil and natural gas.  The company entered into a letter of intent to acquire all the major oil and gas properties of Xtreme Oil & Gas, Inc. (XTOG.PK), which was a major shareholder of the Company.  After several attempts to reach a deal to purchase the properties of Xtreme, it became evident that a deal could not be reached in the 4th Quarter of 2009.

The Board of Directors resolved on November 15, 2009 that the company would again pursue the business model of an investment and management company. On April 12, 2010, we filed Form N-54A with the SEC to elect to be treated as a BDC governed under the 1940 Act. The Company currently operates as an internally managed closed-end non-diversified BDC and is traded on the OTCBB under the symbol SMCA.OB.

Pursuant to Regulation S-X, Rule 6, the Company operates on a non-consolidated basis.  Operations of portfolio companies are reported at the portfolio company level and only the appreciation or impairment of these investments is included in the Company’s financial statements.  Pursuant to FASB Topic 250, the Company had a change in accounting principle when it re-elected to BDC status.  Topic 250 requires retroactive restatement of the company’s financial statements to conform to the current presentation for all periods presented.



A BDC must make significant managerial assistance available to the issuers of eligible portfolio securities in which it invests. Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted does provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.

We provide a variety of services to portfolio companies, including the following:
 
 
 
Page 7 of 62

 

·  
product development and design;

·  
corporate formation and structure;

·  
investment of our capital;

·  
introductions to sources of outside capital;

·  
office space and related office services;

·  
marketing, branding and public relations

·  
formulating operating strategies and corporate goals;

·  
formulating intellectual property and other legal strategies;

·  
introductions to investment bankers and other professionals;

·  
mergers and acquisitions advice;

·  
introductions to potential joint venture partners, suppliers and customers; and

·  
assisting in financial planning.


We may derive income from our portfolio companies for the performance of these services, which may be paid in cash or securities.

Under the 1940 Act, a BDC is subject to restrictions on the amount of warrants, options, restricted stock or rights to purchase shares of capital stock that it may have outstanding at any time. In particular, the amount of capital stock that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase capital stock cannot exceed 25% of the BDC'stotal outstanding shares of capital stock. This amount is reduced to 20% of the BDC'stotal outstanding shares of capital stock if the amount of warrants, options or rights issued pursuant to an executive compensation plan would exceed 15% of the BDC'stotal outstanding shares of capital stock.

We will be permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, we may not be permitted to declare any cash dividend or other distribution on our outstanding common shares, or purchase any such shares, unless, at the time of such declaration or purchase, we have asset coverage of at least 200% after deducting the amount of such dividend, distribution, or purchase price. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes.
 

 
 
Page 8 of 62

 

Compliance with the Sarbanes-Oxley Act of 2002

On July 30, 2002, then-President Bush signed into law the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act"). The Sarbanes-Oxley Act imposes a wide variety of new regulatory requirements on publicly held companies and their insiders. Many of these requirements affect us. For example:

Our chief executive officer and chief financial officer must now certify the accuracy of the financial statements contained in our periodic reports;

Our periodic reports must disclose our conclusions about the effectiveness of our controls and procedures;

Our periodic reports must disclose whether there were significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses; and

We may not make any loan to any director or executive officer and we may not materially modify any existing loans.

Income Tax Considerations

The Company has not elected to be a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, the Company will be subject to U.S. federal income taxes on sales of investments for which the sales prices are in excess of their tax basis.
 
Income taxes are accounted for using an asset and liability approach for financial reporting. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities and net operating loss and tax credit carry forwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.  Interest and penalties when incurred are charged to current operations.

EMPLOYEES

At December 31, 2010 and 2009, we had 7 and 1 full-time employees, respectively.

Our employees are not represented by a labor union.  We have experienced no work stoppage and believe that our employee relationships are good.

ITEM 1A:      RISK FACTORS

We recently undertook our current business model and as a result, historical results may not be relied upon with regard to our operating history

In March 2010, we formally began implementing our current business model of providing seed capital and support to web and mobile technology companies. We are classified as an investment company under the 1940 Investment Company Act. As such, we have presented our financial results and accompanying notes in such fashion. Conversely, in previous years our operating results were presented in the format and style of an operating company. As a result, our financial performance and statements may not be comparable between these years.
 
 
 
Page 9 of 62

 

We and our portfolio companies are in early stages of development, and are among many that have entered the emerging web-based technology market. Specific risks to our business include our:

·  
ability to source and market innovative businesses and acquire ownership interests in attractive companies;
·  
dependence on our portfolio companies to reach positive cash flow generation, a liquidity event, or our ability to access the capital markets;
·  
 need to manage our expanding portfolio and operational footprint; and
·  
continuing need to increase spending to retain and attract key personnel, build the last.vc brand and increase awareness of our portfolio companies.

Our business model is largely unproven and may not generate the returns we anticipate
       
Our approach to venture capital investing is based on a new, untested business model involving sourcing, cultivating and operating businesses in an evolving web-based technology market. While competitors pursuing a similar strategy exist, insufficient time has elapsed to judge whether their portfolio companies will ultimately be successful. As an increasing number of incubators compete for the same ideas and innovative companies, the cost of acquiring ownership of such companies may increase, driving potential returns down.  In addition, due to the inherent long-term nature of venture capital investments, we may forego short-term gains that we could otherwise realize by selling interests in our portfolio companies.

The Company Historically Lost Money and Losses May Continue in the Future

The Company has historically lost money and future losses could occur. Accordingly, we may experience significant liquidity and cash flow problems if we are not able to raise additional capital as needed and on acceptable terms.  No assurances can be given we will be successful in reaching or maintaining profitable operations.

The Company's expenses are higher than our current cash flow, which will require the Company to issue equity to raise capital. This could result in substantial dilution to our shareholders’ equity or hinder our ability to continue in operations should additional capital not be raised

In 2010, the Company had $45,000 in operating revenues. Consequently, the Company will have to sell shares of the Company's common stock or issue promissory notes to raise the cash necessary to pay ongoing expenses. Moreover, there is no assurance the Company will be able to find investors willing to purchase Company shares at a price and on terms acceptable to the Company, in which case, the Company could further deplete its cash resources.

Regulations governing operations of a BDC will affect the Company's ability to raise capital, which could result in the Company not being able to raise additional capital

Applicable law requires that business development companies must invest 70% of their assets in privately held U.S. companies, small, publicly traded U.S. companies with market capitalizations under $250 million, certain high-quality debt, and cash. The Company is not generally able to issue and sell common stock at a price below net asset value per share. The Company may, however, sell common stock, or warrants, options or rights to acquire common stock, at prices below the current net asset value of the common stock if the Board of Directors determines that such sale is in the best interests of the Company, and its stockholders approve such sale. In any such case, the price at which the Company's securities are to be issued and sold may not be less than a price which, in the determination of the Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).
 
 
 
Page 10 of 62

 

The success of the Company will depend on management's ability to make successful investments

If the Company is unable to select profitable investments, the Company will not achieve its objectives and miss any projected earnings targets.

The Company's investment activities are inherently risky
 
The Company's investment activities involve a significant degree of risk. The performance of any investment is subject to numerous factors which are neither within the control of, nor predictable by, the Company. Such factors include a wide range of economic, political, competitive and other conditions which may affect investments in general, or specific industries or companies.

The Company's equity investments may lose all or part of their value, causing the Company to lose all or part of its investment in those companies

The equity interests in which the Company invests may not appreciate in value and may decline in value. Accordingly, the Company may not be able to realize gains from its investments and any gains realized on the disposition of any equity interests may not be sufficient to offset any losses experienced. Moreover, the Company's primary objective is to invest in early-stage web and mobile technology companies whose products will frequently not have demonstrated market acceptance. Many portfolio companies will lack depth of management and have limited financial resources. All of these factors make investments in the Company's portfolio companies particularly risky.

Our common stock is traded on the "Over-the-Counter Bulletin Board," which may make it more difficult for investors to resell their shares due to suitability requirements

Our common stock is currently listed on the OTCBB and OTCQB markets under the symbol (“LAST”).  Some broker-dealers decline to trade in OTCBB stocks given the markets for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.

Our officers and directors have the ability to exercise significant influence over matters submitted for stockholder approval and their interests may differ from other stockholders

Our executive officers and directors have the ability to appoint a majority to the Board of Directors. Accordingly, our directors and executive officers, whether acting alone or together, may have significant influence in determining the outcome of any corporate transaction or other matter submitted to our Board for approval, including issuing common and preferred stock, appointing officers, which could have a material impact on mergers, acquisitions, consolidations and the sale of all, or substantially all, of our assets, and the power to prevent or cause a change in control. The interests of the executive officers and directors may differ from the interests of the other stockholders.
 
 
 
Page 11 of 62

 

Our share ownership is concentrated

Our Company's Management team beneficially owns more than 90% of the Company's voting shares. As a result, Management will exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger, consolidation or sale of all, or substantially all, of the assets, as well as any charter amendment and other matters requiring stockholder approval. In addition, the chief executive officer may dictate the day to day management of the business. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price of the Company's common stock by discouraging third party investors. In addition, the interests of Company Management may not always coincide with the interests of the Company's other stockholders.

We may change our investment policies without further shareholder approval

Although we are limited by the 1940 Act with respect to the percentage of our assets that must be invested in qualified portfolio companies, we are not limited with respect to the minimum standard that any investment company must meet, neither are we limited to the industries in which those portfolio companies must operate. We may make investments without shareholder approval and such investments may deviate significantly from our historic operations. Any change in our investment policy or selection of investments could adversely affect our stock price, liquidity, and the ability of our shareholders to sell their stock.

The Company's common stock may be subject to the penny stock rules, which might make it harder for stockholders to sell

As a result of our stock price, our shares are subject to the penny stock rules. Because a "penny stock" is, generally speaking, one selling for less than $5.00 per share, the Company's common stock may be subject to the following rules. The application of these penny stock rules may affect stockholders' ability to sell their shares because some broker-dealers may not be willing to make a market in the Company's common stock because of the burdens imposed upon them by the penny stock rules which include but are not limited to:

·  
Section 15(g) of the Securities Exchange Act of 1934 and SEC Rules 15g-1 through 15g-6, which impose additional sales practice requirements on broker-dealers who sell Company securities to persons other than established customers and accredited investors.
·  
Rule 15g-2 declares unlawful any broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.
·  
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer the current quotation prices or similar market information concerning the penny stock in question.
·  
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
·  
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales person’s compensation.

 
 
Page 12 of 62

 

Limited regulatory oversight may require potential investors to fend for themselves

The Company has elected to be treated as a BDC under the 1940 Act which makes the Company exempt from some provisions of that statute. The Company is not registered as a broker-dealer or investment advisor because the nature of its proposed activities does not require it to do so; moreover it is not registered as a commodity pool operator under the Commodity Exchange Act, based on its intention not to trade commodities or financial futures. However, the Company is a reporting company under the Securities Exchange Act of 1934. As a result of this limited regulatory oversight, the Company is not subject to certain operating limitations, capital requirements, or reporting obligations that might otherwise apply and investors may be left to fend for themselves.

The Company's concentration of portfolio company securities

The Company will attempt to hold the securities of several different portfolio companies. However, a significant amount of the Company's holdings could be concentrated in the securities of only a few companies. This risk is particularly acute during this time period of early Company operations, which could result in significant concentration with respect to a particular issuer or industry. The concentration of the Company's portfolio in any one issuer or industry would subject the Company to a greater degree of risk with respect to the failure of one or a few issuers or with respect to economic downturns in such industry than would be the case with a more diversified portfolio.

Because many of the Company's portfolio securities will be recorded at values as determined in good faith by the Board of Directors, the prices at which the Company is able to dispose of these holdings may differ from their respective recorded values

The Company values its portfolio securities at fair value as determined in good faith by the Board of Directors. For privately held securities, and to a lesser extent, for publicly-traded securities, this valuation is more of an art than a science. The Board of Directors may retain an independent valuation firm to aid it on a selective basis in making fair value determinations. The types of factors that may be considered in fair value pricing of an investment include the markets in which the portfolio company does business, comparison of the portfolio company to (other) publicly traded companies, discounted cash flow of the portfolio company, and other relevant factors. Because such valuations are inherently uncertain, may fluctuate during short periods of time, and may be based on estimates, determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. As a result, the Company may not be able to dispose of its holdings at a price equal to or greater than the determined fair value. Net asset value could be adversely affected if the determination regarding the fair value of Company investments is materially higher than the values ultimately realized upon the disposal of such securities.

Holding securities of privately held companies may be riskier than holding securities of publicly held companies due to the lack of available public information

The Company will primarily hold securities in privately held companies which may be subject to higher risk than holdings in publicly held companies. Generally, little public information exists about privately held companies, and the Company will be required to rely on the ability of management to obtain adequate information to evaluate the potential risks and returns involved in investing in these companies. If the Company is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and it may lose some or all of the money it invests in these companies. These factors could subject the Company to greater risk than holding securities in publicly traded companies and negatively affect investment returns.
 

 
 
Page 13 of 62

 

The Company is subject to risks created by the valuation of its portfolio investments

There is typically no public market for equity securities of the small privately held companies in which the Company will invest. As a result, the valuations of the equity securities in the Company’s portfolio are stated at fair value as determined by the good faith estimate of the Company’s Board of Directors. In the absence of a readily ascertainable market value, the estimated value of the Company’s portfolio of securities may differ significantly, favorably or unfavorably, from the values that would be placed on the portfolio if a ready market for the equity securities existed. Any changes in estimated value are recorded in the statement of operations as “Change in unrealized appreciation (depreciation) of investments.”

The Company’s portfolio investments are illiquid

Most of the Company’s investments are, and will be, equity securities acquired directly from small companies. The Company’s portfolio of equity securities is, and will usually be, subject to restrictions on resale or otherwise have no established trading market. The illiquidity of most of the Company’s portfolio may adversely affect the ability of the Company to dispose of the securities at times when it may be advantageous for the Company to liquidate investments.

Investing in private companies involves a high degree of risk

The Company will invest a substantial portion of its assets in small, private companies. These private businesses may be thinly capitalized, unproven companies with risky technologies, may lack management depth, and may not have attained profitability. Because of the speculative nature and the lack of a public market for these investments, there is significantly greater risk of loss than is the case with traditional investment securities. The Company expects that some of its venture capital investments will be a complete loss or will be unprofitable and that some will appear to be likely to become successful but never realize their potential.  Even if the Company’s portfolio companies are able to develop commercially viable products, the market for new products and services is highly competitive and rapidly changing. Commercial success is difficult to predict and the marketing efforts of the portfolio companies may not be successful.

The Company is subject to risks created by its regulated environment

The Company is regulated by the SEC. Changes in the laws or regulations that govern BDCs could significantly affect the Company’s business. Regulations and laws may be changed periodically, and the interpretations of the relevant regulations and laws are also subject to change. Any change in the regulations and laws governing the Company’s business could have a material impact on its financial condition or its results of operations.

The Company is dependent upon key management personnel for future success

The Company is dependent on the diligence and skill of its senior officers for the selection, structuring, closing and monitoring of its investments. The future success of the Company depends to a significant extent on the continued service and coordination of its senior management. The departure of any of its executive officers could adversely affect the Company’s ability to implement its business strategy. The Company does not maintain key man life insurance on any of its officers or employees.
 
 
 
Page 14 of 62

 

The Company operates in a competitive market for investment opportunities

The Company faces competition in its investing activities from many entities including SBICs, private venture capital funds, investment affiliates of large companies, wealthy individuals and other domestic or foreign investors. The competition is not limited to entities that operate in the same geographical area as the Company. As a regulated BDC, the Company is required to disclose quarterly and annually the name and business description of portfolio companies and the value of its portfolio securities. Most of its competitors are not subject to this disclosure requirement. The Company’s obligation to disclose this information could hinder its ability to invest in certain portfolio companies. Additionally, other regulations, current and future, may make the Company less attractive as a potential investor to a given portfolio company than a private venture capital fund.

We may be negatively affected by adverse changes in the general economic conditions of the domestic and global markets.

The continued economic crisis and related turmoil in the global financial markets has had and may continue to have an impact on the Company’s portfolio companies and the overall financial condition of the Company. If the current market conditions deteriorate, the Company may suffer losses on its investment portfolio, which could have a material adverse effect on net asset value.

We may experience fluctuations of quarterly and annual operating results

The Company’s quarterly and annual operating results could fluctuate significantly as a result of a number of factors. These factors include, among others, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which portfolio companies encounter competition in their markets, and general economic conditions. As a result of these factors, results for any one quarter should not be relied upon as being indicative of performance in future quarters.


ITEM 2:      PROPERTIES

Our principal headquarters are located at 135 and 137 Bay Street in Santa Monica, California.  The Company’s executive team and several of our portfolio companies have offices at the two building campuses by the beach.  We pay $7,500 a month for our California campus, which is allocated to our portfolio companies.  We believe these facilities, which are in good physical condition, are adequate for our needs for the next 12 months.

Our corporate headquarters are located at 3651 Lindell Road, Suites D #145-146, Las Vegas, Nevada 89103.  We pay $200 a month for two executive offices and administrative support.


ITEM 3:      LEGAL PROCEEDINGS

We are not currently subject to any legal proceedings, nor, to our knowledge, is any legal proceeding threatened against us.
 
 
 
Page 15 of 62

 

ITEM 4:      [REMOVED AND RESERVED]

N/A.


PART II

ITEM 5:      MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET

Our Common Stock trades on the Over the Counter Bulletin Board ("OTCBB") under the symbol: LAST.OB.

HISTORICAL MARKET PRICE DATA

These prices represent prices between broker-dealers and do not include retail markups and markdowns or any commission to broker-dealers.  In addition, these prices may not reflect prices in actual transactions.

Shares of BDCs may trade at a market price that is more or less than the value of the net assets attributable to those shares. The possibility that our shares of common stock will trade at a discount from net asset value or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value will decrease. At times, our shares of common stock have traded at a premium to net asset value and at times our shares of common stock have traded at a discount to the net assets attributable to those shares.
 
The following table sets forth the range of high and low closing sales prices for our Common Stock for the periods indicated and has been adjusted for the 1 for 50 reverse stock split of the Company's common stock which was effective August 31, 2010:
 
    High     Low  
             
Fiscal Year Ending December 31, 2010
           
             
First Quarter    $ 27.50     $ 5.00  
Second Quarter    $ 35.00     $ 5.00  
Third Quarter    $ 5.00     $ 1.00  
Fourth Quarter    $ 2.50     $ 1.00  
                 
                 
Fiscal Year Ending December 31, 2009
               
                 
First Quarter    $ 37.50     $ 7.50  
Second Quarter    $ 42.50     $ 5.00  
Third Quarter    $ 37.50     $ 15.00  
Fourth Quarter    $ 25.00     $ 5.00  
 
 
 
Page 16 of 62

 

 
NUMBER OF SHAREHOLDERS AND TOTAL OUTSTANDING SHARES

As of December 31, 2010, there were approximately 839 holders of record of our common stock and we had 11,889,399 common shares issued and outstanding.

DIVIDENDS

The Company has not historically paid cash dividends.  The Company does not anticipate paying any cash dividends in the foreseeable future.

OPTIONS

As of December 31, 2010, there are 434 common shares reserved for the exercise of options held by a former management team at an exercise price of $200.00 per share.  The options were granted from the 1997 Plan, which has now been cancelled, and the options expire in 2011.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

On November 25, 2008, the board of directors terminated the 1997 Stock Option Plan, the 2004 Stock Option Plan, and the Shared Savings Plan and a Profit Sharing Plan enacted in 2006, each of which is no longer used by the Company and none of which have any outstanding obligations.

On November 25, 2008, the board of directors adopted the Small Cap Strategies, Inc. 2008 Stock Option Plan which designated 9,000 shares of the Company’s common stock to be available for issuance to officers, directors, employees and consultants.  In January 2009, 8,741 shares were issued to consultants pursuant to consulting agreements, leaving a balance of 259 shares available.  No options are outstanding as of December 31, 2010.

The following table summarizes certain information as of December 31, 2010, with respect to compensation plans (including individual compensation arrangements) under which our common stock is authorized for issuance:
 
   
Number of securities to be
             
    issued upon exercise of     Weighted average exercise      Number of securities  
    outstanding options,     price of outstanding      remaining available for  
Plan category   warrants and rights     options, warrants and rights     future issuance  
                   
Equity compensation plans approved
                 
  by security holders
                 
          1997 Plan
    434     $ 200.00       -  
Equity compensation plans not
                       
  approved by security holders
    -       -       -  
                         
Total
    434     $ 200.00       -  

In the 1st Quarter of 2010, 6,541 of the shares issued to consultants in January 2009 were turned in and cancelled because of non-performance of duties.
In the 1st Quarter of 2010, the Company cancelled the 2008 Stock Option Plan.
In the 1st Quarter of 2010, the Company established a non-equity incentive Profit Sharing Plan for its executive officers in accordance with Section 57(n) of the Investment Company Act of 1940 (the “1940 Act”). The profit sharing plan provides for incentive compensation to the named executive officers based on a stated percentage of net realized capital gains and after reduction for realized and unrealized losses on the investment portfolio. Any profit sharing paid cannot exceed 20% of the Company’s net income, as defined. There have been no accruals for, or contributions to, the Profit Sharing Plan since its inception in 2010.
 
 
 
Page 17 of 62

 

RECENT SALES OF UNREGISTERED SECURITIES

All shares issued during the first three quarters of 2010 were reported in our Form 10-Qs for those periods.  We had no shares issued in the fourth quarter.

RE-PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

We did not re-purchase any shares during 2010.


ITEM 6:      SELECTED FINANCIAL DATA

The following table sets forth selected financial data as of and for each of the five fiscal years ended December 31, 2010, 2009, 2008, 2007 and 2006 and is derived from our audited financial statements.  The data set forth below should be read in conjunction with "Item 8: Financial Statements" and related Notes to Financial Statements appearing elsewhere herein and "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations."
 
   
2010
   
2009
   
2008
   
2007
   
2006
 
                               
Revenues
  $ 45,000     $ -     $ 5,614     $ 231,954     $ 562,146  
Administrative expenses
    145,631       359,783       154,574       186,244       246,694  
Net earnings (loss) from operations
    (100,631 )     (359,783 )     (148,960 )     45,710       315,452  
Other income (expense)
                            11,564       -  
Earnings (loss) before income taxes
                                 
  and realized and unrealized gains
                                       
  and (losses)
    (100,631 )     (359,783 )     (158,960 )     57,274       315,452  
Net earnings (loss) from operations
                                 
  available to common stockholders
    (100,631 )     (343,896 )     (148,960 )     95,213       315,452  
Net realized and unrealized gains
                                       
  (losses)
    8,464,766       (2,045 )     (72,680 )     (452,532 )     183,835  
Net increase (decrease) in net
                                       
   assets from operations
  $ 8,364,135     $ (345,941 )   $ (221,640 )   $ (357,319 )   $ 499,287  
Earnings (loss) per share
                                       
   basic and diluted
  $ 2.69     $ (0.28 )   $ (0.30 )   $ (0.63 )   $ 1.11  
                                         
Balance sheet data:
                                       
   Investments at fair value
  $ 8,710,548     $ 723     $ 5,024     $ 137,020     $ 504,564  
  Cash
    374       15,808       928       3,653       326  
  Total assets
    8,728,361       22,782       7,415       180,447       504,890  
  Total liabilities
    313,891       199,897       61,462       18,854       89,375  
  Net assets (liabilities)
    8,414,470       (177,115 )     (54,047 )     161,593       415,515  
  Common stock outstanding at
                                       
     year end
    11,889,363       25,703       16,963       14,963       8,963  


The Company began operating as a BDC on December 15, 2005 and continued operating in this manner until filing Form N-54C with the SEC to withdraw its previous election to be regulated as a BDC under the 1940 Act on November 24, 2008.  We filed this election to withdraw to pursue the acquisition of Xtreme Oil & Gas, Inc.  In November 2009, we determined that the acquisition of Xtreme would not occur and our board of directors authorized the Company's officers to make the necessary filings to again be regulated as a BDC.
 
 
 
Page 18 of 62

 

ITEM 7:      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

FORWARD LOOKING STATEMENTS

Certain statements contained in this report that are not historical fact are "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. The words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "believes," "estimates," "projects" or similar expressions are intended to identify these forward-looking statements. These statements are subject to risks and uncertainties beyond our reasonable control that could cause our actual business and results of operations to differ materially from those reflected in our forward-looking statements. The safe harbor provisions provided in the Securities Litigation Reform Act do not apply to forward-looking statements we make in this report. Forward-looking statements are not guarantees of future performance. Factors that may cause actual results to differ materially from those contemplated by our forward-looking statements include the following:

·  
our limited operating history;

·  
our ability to successfully compete with other venture capital companies in obtaining attractive portfolio companies;

·  
general economic or business conditions may be worse than expected

·  
the performance of our portfolio companies may not achieve projected levels;

·  
legislative or regulatory changes may adversely affect our business;

·  
our operating costs may be greater than expected;

·  
we could lose key personnel, or spend a greater amount of resources attracting, retaining and motivating them than we have projected; and

·  
our inability to raise additional capital if needed.
 
 
We based our forward-looking statements on our current expectations about future events. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee you that these expectations actually will be achieved. We are under no duty to update any of the forward-looking statements after the date of this filing to conform those statements to actual results. In evaluating these statements, you should consider various factors, including the Risk Factors.
 
 
 
Page 19 of 62

 

MANAGEMENT’S ANALYSIS OF BUSINESS
 
Los Angeles Syndicate of Technology, Inc. (“last.vc”) builds technology companies focused on social media, web-based software, and mobile applications. Our goal is to develop businesses that generate capital appreciation and realized gains, and we currently have seven companies in our portfolio. We believe that by developing technology internally and partnering with entrepreneurs at inception, we can generate the highest return and add the most value.

The increasing adoption of social media and the proliferation of smart phones continue to make people more connected, resulting in faster information sharing and the creation of some of the world’s fastest growing companies. Social media companies have exhibited unprecedented growth in the last twelve months – at rates rivaled only by the projections for the industry in the coming years. We focus on developing businesses that exploit these secular shifts.

Our process begins with the sourcing of compelling concepts, which are developed internally or brought to us by entrepreneurs seeking support from the last.vc network. We provide our portfolio companies with the capital to cultivate their product as well as comprehensive support services to reduce costs and accelerate their time to market. Such services include office space and administrative support, marketing and branding, product development and design, legal, finance and accounting, corporate formation and structure, and exposure to additional financing rounds. By offering these services, we enable our network of entrepreneurs to focus on developing their products. This parallel process is vital in the rapidly evolving web-technology industry and results in efficiencies in how companies are built and brought to market.

last.vc operates as an internally-managed, non-diversified, closed-end investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940.  The application of the BDC structure to early-stage technology venture capital is a unique model that promotes innovation and provides retail investors with access to markets previously unavailable to them. We believe last.vc is the only such company in the market.

LIQUIDITY AND CAPITAL RESOURCES AND CAPITAL EXPENDITURES

At December 31, 2010 and 2009, the Company had current assets of $374 and $15,808; current liabilities of $313,891 and $199,897; a working capital deficit of $313,517 and $184,089 at December 31, 2010 and 2009, respectively.  The Company incurred a loss from operations of $100,631 during the year ended December 31, 2010.  The Company’s only source of cash flow has been from loans from its CEO, management fees, and investments in the Company’s common stock.

The Company is in process of raising funds through private placements of common stock.

The financial statements do not include any adjustments that may result from the outcome of these uncertainties.


RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008

REVENUES

During the years ended December 31, 2010, 2009 and 2008, we had revenues as follows.
 
 
 
Page 20 of 62

 

   
2010
   
2009
   
2008
 
                   
Management income
  $ 45,000     $ -     $ -  
Interest income from cash investments
    -       -       5,614  
    $ 45,000     $ -     $ 5,614  
 
 
 
Revenues are expected to primarily include management fees from our portfolio companies in the future.  Revenue in 2010 includes management fees from one of the Company's three principal portfolio companies.

EXPENSES

Our general and administrative expenses have ranged from $154,574 in 2008 to $136,910 in 2009 and to $145,631 in 2010 and are summarized as follows.
 
   
2010
   
2009
   
2008
 
                   
Legal, audit and consulting fees
  $ 26,130     $ 37,493     $ 36,277  
Compensation and benefits
    60,000       60,000       60,000  
Director fees
    2,000       -       -  
Transfer agent fees
    8,752       3,834       4,306  
Rent
    30,113       26,327       31,749  
Other general and administrative expense
    18,636       9,256       22,242  
    $ 145,631     $ 136,910     $ 154,574  


Legal, audit and consulting fees declined in 2010 from the two earlier years, primarily due to reduced consulting and audit costs.  Audit costs are expected to increase as the Company expands.

Other costs have remained relatively stable during these periods.

The Company’s goal in 2008 and early 2009 had been to acquire an operating oil and gas production and development company.  The Company issued 8,741 shares of its common stock in January 2009 to consultants as a part of its analysis of the acquisition of Xtreme, which were valued at $222,873, based on the trading price of the Company's common stock on that date.


NET REALIZED AND UNREALIZED GAIN (LOSS)

Net realized and unrealized gain (loss) for the years ended December 31, 2010, 2009 and 2008 is as follows:
 
 
 
Page 21 of 62

 
 
   
2010
   
2009
   
2008
 
                   
 Realized gains (losses)
  $ (100 )   $ (8,994 )   $ (324,806 )
 Unrealized gains (losses)
    8,464,866       6,949       252,126  
    $ 8,464,766     $ (2,045 )   $ (72,680 )

Realized and unrealized gains and losses are a function of the value of investments, either at the end of the year if still held, or when sold.  The net unrealized gain in 2009 and 2008 is primarily from the reversal of previous unrealized losses on securities sold in 2009 and 2008, respectively.  The unrealized gain in 2010 is from unrealized appreciation on three portfolio company investments discussed in Note 4 to the financial statements.

RECENT ACCOUNTING PRONOUNCEMENTS

There are several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  Management does not believe any of these accounting pronouncements has had or will have a material impact on the Company’s financial position or operating results.  See Note 2 to the financial statements.


CRITICAL ACCOUNTING POLICIES
 
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and revenues and expenses during the period reported. On an ongoing basis, our management evaluates its estimates and assumptions, which are based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in our estimates and assumptions could materially impact our results of operations and financial condition.

The SEC issued Financial Reporting Release No. 60, “Cautionary Advice Regarding Disclosure about Critical Accounting Policies” (“FRR 60”), suggesting companies provide additional disclosure and commentary on their most critical accounting policies.  In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.  Based on this definition our most critical accounting policy is the valuation of our investments.  The methods, estimates and judgments we use in applying this accounting policy has a significant impact on the results we report in our financial statements.

As a BDC, we are regulated by the 1940 Act. Section 2(a)(41) defines Value as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is determined in good faith by the Board of Directors (“BOD”). We expect that few, if any, of our portfolio companies will have market quotations, and as such, we expect to rely on market transactions involving our portfolio companies and the fair value determined in good faith by our BOD for the valuation of our portfolio companies. Prior to this conversion, only marketable debt and equity securities and certain derivative securities were required to be carried at market value.
 
 
 
Page 22 of 62

 

Portfolio assets for which market prices are available are valued at those prices. Securities that are traded in the over-the-counter market or on a stock exchange generally will be valued at the prevailing bid price on the valuation date.  However, most of the Company’s current investments were acquired in privately negotiated transactions and may have no readily determinable market values. These securities are carried at fair value as determined by the BOD and outside professionals as necessary under the Company’s valuation policy. Currently, the valuation policy provides for management’s review of the management teams, financial conditions, and products and services of the portfolio companies. In situations that warrant such an evaluation, an independent business valuation may be obtained.

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

Not applicable.

ITEM 7A:      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices.  We are primarily exposed to equity price risk.  The following is a discussion of our equity price risk.

Equity price risk arises from exposure to securities that represent an ownership interest in our portfolio companies.  The value of our equity securities and our other investments are based on our Board of Directors' good faith determination of their fair value (which is primarily based on our valuation methods discussed in Critical Accounting Policies above).  Market prices of common equity securities, in general, are subject to fluctuations, which could cause the amount to be realized upon sale or exercise of the instruments to differ significantly from the current reported value.  The fluctuations may result from perceived changes in the underlying economic characteristics of our portfolio companies, the relative price of alternative investments, general market conditions and supply and demand imbalances for a particular security.
 
 
 
Page 23 of 62

 


ITEM 8:     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA SCHEDULES OF FINANCIAL RATIOS

LOS ANGELES SYNDICATE OF TECHNOLOGY, INC.

FINANCIAL STATEMENTS

TABLE OF CONTENTS



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
25-26
   
STATEMENTS OF NET ASSETS (LIABILITIES)
27
   
STATEMENTS OF OPERATIONS
28
   
STATEMENTS OF CASH FLOWS
29
   
STATEMENTS OF CHANGES IN NET ASSETS (LIABILITIES)
30
   
SCHEDULES OF INVESTMENTS
31-32
   
NOTES TO FINANCIAL STATEMENTS
33-48
   
SCHEDULES OF FINANCIAL RATIOS
49

 
 
 
 
Page 24 of 62

 
 
Report of Independent Registered Public Accounting Firm


Board of Directors
Los Angeles Syndicate of Technology, Inc.
Las Vegas, Nevada


We have audited the accompanying Statements of Net Assets of Los Angeles Syndicate of Technology, Inc. (the “Company”) at December 31, 2010, including the schedule of investments as of December 31, 2010, and the related statements of operations, cash flows, changes in net assets (liabilities) and financial highlights for the year ended December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Los Angeles Syndicate of Technology, Inc. as of December 31, 2010, and the results of its operations, its cash flows and changes in Net Assets and its financial highlights for the above referenced period in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Los Angeles Syndicate of Technology, Inc. will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company will need to raise capital through sales of Company stock to provide sufficient cash flow to fund the Company’s operations.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans regarding these matters are also described in Note 1.  The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

  /s/ Paritz & Company, P.A.

Paritz & Company, P.A.
Hackensack, New Jersey
April 7, 2011
 
 
 
Page 25 of 62

 
 
Report of Independent Registered Public Accounting Firm


Board of Directors
Small Cap Strategies, Inc.
Las Vegas, Nevada


We have audited the accompanying statement of net liabilities of Small Cap Strategies, Inc. (name changed to Los Angeles Syndicate of Technology, Inc. on September 24, 2010) (the “Company”) at December 31, 2009, including the schedule of investments as of December 31, 2009, and the related statements of operations, cash flows, changes in net assets (liabilities) and financial highlights for the years ended December 31, 2009 and 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Los Angeles Syndicate of Technology, Inc., (formerly Small Cap Strategies, Inc.) as of December 31, 2009, and the results of its operations, its cash flows and changes in net assets (liabilities) and its financial highlights for the above referenced periods in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 2 and 3 to the financial statements, management has determined that the Company is a business development company (BDC) and has returned to the accounting and reporting requirements of the Investment Company Act of 1940. Therefore, the financial statements for 2008 have been restated to conform to the BDC format.

The accompanying financial statements have been prepared assuming that Los Angeles Syndicate of Technology, Inc. (formerly Small Cap Strategies, Inc.) will continue as a going concern.  As discussed in Note 1 to the financial statements, the Company had plans to acquire Xtreme Oil & Gas, Inc. and utilize funds from its operations to fund the Company’s financial commitments.  The Company has abandoned attempts to complete the acquisition and has determined to become a Business Development Company to provide sufficient cash flow to fund the Company’s operations.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  Management’s plans regarding these matters are also described in Note 1.  The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

  /s/ Turner, Stone & Company, LLP
Turner, Stone & Company, LLP

Certified Public Accountants
Dallas, Texas
April 12, 2010


 
 
Page 26 of 62

 

Los Angeles Syndicate of Technology, Inc.
 
Statements of Net Assets (Liabilities)
 
As of December 31, 2010 and  2009
 
             
   
2010
   
2009
 
             
ASSETS
           
Investments in portfolio companies:
           
  Controlled (cost $244,959 at December 31, 2010)
  $ 8,709,974     $ -  
  Non-controlled (cost $393 at December 31, 2010 and 2009)
    574       723  
          Total investments
    8,710,548       723  
Cash and cash equivalents
    374       15,808  
Office equipment, net
    12,839       6,251  
Deposit
    4,600       -  
  TOTAL ASSETS
    8,728,361       22,782  
                 
LIABILITIES
               
  Accounts payable
    2,029       -  
  Amounts due related parties
    311,862       199,897  
  TOTAL LIABILITIES
    313,891       199,897  
NET ASSETS (LIABILITIES)
  $ 8,414,470     $ (177,115 )
                 
Commitments and contingencies (Note 9)
               
                 
COMPOSITION OF NET ASSETS (LIABILITIES)
               
  Common stock, $.001 par value, 100,000,000 shares authorized;
               
    11,889,363 and 25,703 shares issued and outstanding at
               
     December 31, 2010 and 2009, respectively
  $ 11,888     $ 26  
  Additional paid in capital
    3,080,263       2,849,925  
  Stock subscription receivable
    (14,750 )     -  
  Accumulated deficit:
               
    Accumulated net operating loss
    (2,784,275 )     (2,683,644 )
    Net realized loss on investments
    (343,852 )     (343,752 )
    Net unrealized appreciation (depreciation) of investments
    8,465,196       330  
NET ASSETS (LIABILITIES)
  $ 8,414,470     $ (177,115 )
NET ASSET (LIABILITY) VALUE PER SHARE
  $ 0.71     $ (0.14 )
                 
See accompanying notes to financial statements.
               

 
Page 27 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Statements of Operations
 
Three Years Ended December 31, 2010, 2009 and 2008
 
                   
                   
                   
   
2010
   
2009
   
2008
 
                   
Management income
  $ 45,000     $ -     $ -  
Interest income from cash investments
    -       -       5,614  
          Total income
    45,000       -       5,614  
Costs and Expenses:
                       
  Legal, audit and consulting fees
    26,130       37,493       36,277  
  Compensation and benefits
    60,000       60,000       60,000  
  Non-cash compensation
    -       222,873       -  
  Director fees
    2,000       -       -  
  Transfer agent fees
    8,752       3,834       4,306  
  Rent
    30,113       26,327       31,749  
  Other general and administrative expenses
    18,636       9,256       22,242  
      145,631       359,783       154,574  
Earnings (loss) before income taxes
    (100,631 )     (359,783 )     (148,960 )
Income tax benefits
    -       (15,887 )     -  
Net earnings (loss) from operations
    (100,631 )     (343,896 )     (148,960 )
Net realized and unrealized gain (loss):
                       
  Net realized loss on investments, net of
                       
    income tax benefit of $0 for 2010,
                       
    2009 and 2008, respectively
    (100 )     (8,994 )     (324,806 )
  Change in unrealized appreciation (deprec-
                       
     iation) of investments, net of deferred
                       
     tax expense of $0 in 2010,
                       
     2009 and 2008, respectively
    8,464,866       6,949       252,126  
Net increase (decrease) in net assets
                       
     from operations
  $ 8,364,135     $ (345,941 )   $ (221,640 )
                         
Net increase (decrease) in net assets
                       
  from operations per share:
                       
     Basic and diluted
  $ 2.69     $ (13.53 )   $ (13.88 )
Weighted average shares outstanding:
                       
     Basic and diluted
    3,114,113       25,559       15,968  
                         
See accompanying notes to financial statements.
                       
 

 
Page 28 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Statements of Cash Flows
 
Three Years Ended December 31, 2010, 2009 and 2008
 
                   
   
2010
   
2009
   
2008
 
Cash flows from operating activities:
                 
Net increase (decrease) in net assets from operations
                 
  applicable to common stock
  $ 8,364,135     $ (345,941 )   $ (221,640 )
Adjustments to reconcile net increase (decrease) in
                       
  net assets from operations to net cash used in
                       
  operating activities:
                       
     Change in unrealized (appreciation) depreciation
                       
        of investments in portfolio companies
    (8,464,866 )     (6,949 )     (252,126 )
     Net realized loss on investments in portfolio companies
    100       8,994       324,806  
     Depreciation
    2,430       755       372  
     Common stock issued for services
    -       222,873       -  
     Increase in income tax refund receivable
    -       -       37,939  
     (Increase) in deposits
    (4,600 )                
     IRS refund paid to related party
    -       (15,887 )     -  
     Increase (decrease) in accounts payable
    2,029       -       (4,813 )
     Increase in amounts due related parties
    171,477       154,322       53,421  
          Net cash provided by (used) in operating activities
    70,705       18,167       (62,041 )
Cash flows from investing activities:
                       
Cash payments made for investment acquisitions
    (97,571 )     -       -  
Proceeds from sale of investments in portfolio companies
    -       2,256       59,316  
Purchase of office equipment
    (9,018 )     (5,543 )     -  
          Net cash provided by (used) in investing activities
    (106,589 )     (3,287 )     59,316  
Cash flows from financing activities:
                       
Proceeds from sale of common stock
    20,450       -       -  
          Net cash provided by financing activities
    20,450       -       -  
Net increase (decrease) in cash and cash equivalents
    (15,434 )     14,880       (2,725 )
Cash and cash equivalents, beginning of period
    15,808       928       3,653  
Cash and cash equivalents, end of period
  $ 374     $ 15,808     $ 928  
                         
Supplemental cash flow information
                       
                         
Cash paid for interest and income taxes:
                       
     Interest
  $ -     $ -     $ -  
     Income taxes
    -       -       -  
                         
Non-cash investing and financing activities:
                       
     Common stock issued for:
                       
          Amounts due CEO
    77,000       -       6,000  
          Investments in portfolio companies
    130,000       -       -  
     Convertible note payable issued to CEO for amounts
                       
          due him
    -       133,807       -  
                         
See accompanying notes to financial statements.
                       
 
 
 
Page 29 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Statements of Changes in Net Assets (Liabilities)
 
Three Years Ended December 31, 2010, 2009 and 2008
 
                   
                   
   
2010
   
2009
   
2008
 
Changes in net assets from operations:
                 
  Net earnings (loss) from operations
                 
     available to common stock
  $ (100,631 )   $ (343,896 )   $ (148,960 )
  Net realized loss on sale of investments, net
    (100 )     (8,994 )     (324,806 )
  Change in net unrealized appreciation (depreciation)
                       
     of investments, net
    8,464,866       6,949       252,126  
    Net increase (decrease) in net assets from operations
    8,364,135       (345,941 )     (221,640 )
                         
Capital stock transactions:
                       
  Common stock issued for:
    -       -       -  
     Cash
    20,450       -       -  
     Investments in portfolio companies
    130,000       -       -  
     Amounts due to CEO
    77,000       -       6,000  
     Services
    -       222,873       -  
    Net increase (decrease) in net assets from stock transactions
    227,450       222,873       6,000  
Net increase (decrease) in net assets
    8,591,585       (123,068 )     (215,640 )
Net assets (liabilities), beginning of period
    (177,115 )     (54,047 )     161,593  
Net assets (liabilities), end of period
  $ 8,414,470     $ (177,115 )   $ (54,047 )
                         
                         
See accompanying notes to financial statements.
                       
 
 
 
Page 30 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Schedule of Investments
 
December 31, 2010
 
                       
Percent/
                     
shares
   
Date of
     
Historical
   
Fair
 
owned
   
acquisition
     
cost
   
value
 
                       
Investments in controlled portfolio companies:
           
  100.00 %     3Q 2010  
Clowd, Inc.
    65,000       65,000  
  62.62 %     3Q 2010  
Stockr, Inc.
    52,458       2,661,455  
  63.99 %     3Q 2010  
Virurl, Inc.
    19,477       2,887,440  
  49.69 %     3Q 2010  
Sanguine Biosciences, Inc.
    20,450       20,450  
  50.00 %     3Q 2010  
Stocktown Productions, Inc.
    10,504       10,504  
  97.80 %     3Q 2010  
LottoPals, Inc.
    11,945       3,000,000  
  100.00 %     3Q 2010  
Bay Street Advisors, Inc.
    65,125       65,125  
                    244,959       8,709,974  
                               
Investments in non-controlled portfolio companies-miscellaneous
    393       574  
             
     Total investments
  $ 245,352       8,710,548  
             
          Cash and other assets, less liabilities
            (296,078 )
             
Net asset value at December 31, 2010
          $ 8,414,470  
                               
See accompanying notes to financial statements.
               
 
 
 
Page 31 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Schedule of Investments
 
December 31, 2009
 
                   
Percent/
                 
shares
 
Date of
   
Historical
   
Fair
 
owned
 
acquisition
   
cost
   
value
 
                   
Investments in non-controlled portfolio companies:
           
  100  
Jan-06
Chanticleer Holdings, Inc. (CCLR.OB); a holding
           
       
company providing management services, insurance
           
       
and specialty financial products, and ownership of
           
       
Hooters restaurants in South Africa
  $ -     $ 400  
  2,485  
Dec-04
DC Brands International, Inc. (DCBR.PK);
               
       
presently specializes in and manufactures health
               
       
products.
    -       323  
     
Various
Other
    393       -  
       
     Total investments
  $ 393       723  
       
          Cash and other assets, less liabilities
            (177,838 )
       
Net liabilities at December 31, 2009
          $ (177,115 )
                         
See accompanying notes to financial statements.
               
 
 
 
 
Page 32 of 62

 

LOS ANGELES SYNDICATE OF TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS


NOTE 1:     GENERAL ORGANIZATION AND BUSINESS

Los Angeles Syndicate of Technology, Inc. (“last.vc”) builds technology companies focused on social media, web-based software, and mobile applications. Our goal is to develop businesses that generate capital appreciation and realized gains, and we currently have seven companies in our portfolio. We believe that by developing technology internally and partnering with entrepreneurs at inception, we can generate the highest return and add the most value.

The increasing adoption of social media and the proliferation of smart phones continue to make people more connected, resulting in faster information sharing and the creation of some of the world’s fastest growing companies. Social media companies have exhibited unprecedented growth in the last twelve months – at rates rivaled only by the projections for the industry in the coming years. We focus on developing businesses that exploit these secular shifts.

Our process begins with the sourcing of compelling concepts, which are developed internally or brought to us by entrepreneurs seeking support from the last.vc network. We provide our portfolio companies with the capital to cultivate their product as well as comprehensive support services to reduce costs and accelerate their time to market. Such services include office space, managerial assistance, marketing and branding, product development and design, legal, finance and accounting, corporate formation and structure, and exposure to additional financing rounds. By offering these services, we enable our network of entrepreneurs to focus on developing their products. This parallel process is vital in the rapidly evolving web-technology industry and results in efficiencies in how companies are built and brought to market.

last.vc operates as an internally-managed, non-diversified, closed-end investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940 (the "1940 Act").  The application of the BDC structure to early-stage technology venture capital is a unique model that promotes innovation and provides retail investors with access to markets previously unavailable to them. We believe last.vc is the only such company in the market.

Our stock is publicly listed on the OTCBB and OTCQB markets under the symbol “LAST”.
 
 
 
Page 33 of 62

 


Market Opportunity

The web and mobile technology industry is a rapidly growing sector of the U.S. economy, and companies building social media applications have grown their user bases and revenues at unprecedented rates over the last 24 months. Companies that didn’t exist two years ago now command valuations in the tens of billions of dollars, and more established businesses have seen their valuations swell by multiples of what they were only twelve months ago. We believe that an attractive opportunity exists for a public investment company focused on building a portfolio of early-stage technology companies, and key elements of our opportunity include:

·  
Global adoption of Internet infrastructure and the proliferation of mobile technology. The cost of Internet access continues to decline, facilitating an increasing number of Internet users and driving up time spent online. This trend is magnified by the proliferation of smartphones and mobile technology, resulting in users with perpetual access to the Internet. As the Internet becomes more accessible, more data is being transmitted online, requiring evolving applications and businesses to manage this flow of information.

·  
Dramatic shifts in the way people share and consume information. The growing usage and availability of the Internet results in an increasing number of human connections. As more people are connected, an increasing volume of information is being shared. The benefits of this information flow manifest themselves in more ways than simply interacting with friends, and the Internet is becoming an increasingly important tool in businesses’ marketing programs. Connectivity among humans, when harnessed by businesses, can drive marketing costs down to virtually zero. We believe that as more consumption occurs on the Internet, more mediums of efficiently disseminating information are required. This secular shift creates vast opportunities for companies creating and investing in these technologies.

·  
Declining costs to build web- and mobile-based technology. The cost of starting and operating an Internet-based business has dramatically declined over the last decade as a result of dropping hardware costs and maturing open-source software. This decline has resulted in a shift in the capabilities web technology founders look for in a partner. Increasingly, entrepreneurs are valuing business support, brand connections, marketing and product support over the level of funding available from a partner. This adaptation creates a large and growing opportunity for web-technology incubators providing comprehensive support services to entrepreneurs.

·  
Increasing focus on web-based technology companies by the capital market. The explosive growth of social media companies has attracted significant capital from investors. Approximately 50 technology companies founded in the last seven years have raised over $100 million of funding, and in aggregate, ten of the most popular web companies have raised close to $6 billion. These investments, coupled with recent and impending IPOs, demonstrate the growing appetite for investments in web-based technology companies. As builders of technology businesses, we benefit from this heightened desire for social media investments through greater subsequent financing and sale opportunities for our portfolio companies.



 
Page 34 of 62

 

Our Business Strategy

Our goal is to build and invest in web and mobile technology companies that will generate capital appreciation and realized gains. We invest up to $500,000 per portfolio company, and believe that by developing technology internally and partnering with entrepreneurs at inception, we can generate the highest return and add the most value. The following are key elements of our strategy:

·  
Guide our portfolio companies through the challenges of early development.  We provide portfolio companies with the capital to cultivate their product and grow into profitability. Beyond capital support, last.vc reduces costs and time to market through managerial assistance, marketing resources, and technological collaboration. As the companies mature, we prepare them for subsequent financing rounds or other liquidity events by providing strategic guidance, legal and accounting resources, and access to the capital markets

·  
Apply a structured investment process to our deployment of capital. Web-based technology is becoming increasingly capital-efficient, and our model is optimized to leverage this trend. By investing in the earliest stages of our companies’ lifecycle we are able to generate significant returns with minimal capital investment. Capital is deployed based on pre-determined development milestones, with a maximum investment of $500,000 per portfolio company. The last.vc diligence process includes both qualitative and quantitative analyses, and input from our network constituents to determine the value proposition, viability and defensibility of each business.

·  
Create a network of entrepreneurs who are incentivized to collaborate.  Once part of the last.vc syndicate, entrepreneurs with whom we’ve partnered are offered equity interests in last.vc. As a result, each network constituent has a financial interest in the success of both their company and of last.vc as a whole. This shared ownership structure incentivizes every member of our network to collaborate. As more members are connected, an increasing amount of information is shared, and the value of the network grows. New concepts are developed at a more rapid pace, potential investments can be vetted by a larger audience, technical challenges can be solved by a wider support base, and increased productivity will reduce costs and drive efficiencies in how our companies are built.

·  
Build a diverse portfolio of innovative and dynamic technology companies. The low capital investment requirements of our target industries, coupled with the short development timeline of technology companies, enable us to spread our capital base across a wide spectrum of investments. Some companies will achieve positive cash flow, some will require further capital, and some will fail. Through the construction of a diverse portfolio we believe we will mitigate risk and enhance the value of our network


History

The Company, formerly Bay Street Capital (“BSC”), Small Cap Strategies (“SCS”), and Photonics Corporation (“Photonics”), was re-domiciled in Nevada through a reverse merger effective on September 30, 2006 where Photonics, a California corporation, merged into Small Cap Strategies, Inc., a Nevada corporation, with SCS being the surviving entity.  The effect of this corporate action was to change the Company’s state of incorporation from the State of California to the State of Nevada.

 
 
Page 35 of 62

 
 
On March 7, 2006 the Company filed a notification under Form N54a with the SEC indicating our election to be regulated as a BDC under the 1940 Act.

On November 24, 2008, the Company filed Form N-54C with the Securities and Exchange Commission (“SEC”) to notify the SEC of the withdrawal of our previous election to be regulated as a BDC under the 1940 Act.  This action was taken to best facilitate a planned business model of developing and producing oil and natural gas.  The Company entered into a letter of intent to acquire all the major oil and gas properties of Xtreme Oil & Gas, Inc. (XTOG.PK), which was a major shareholder of the Company.  After several attempts to reach a deal to purchase the properties of Xtreme, it became evident that a deal could not be reached by the 4th Quarter of 2009.

The Board of Directors resolved on November 15, 2009 that the Company would again pursue the business model of an investment and management company. On April 12, 2010, we filed Form N-54a with the SEC to elect to be treated as a BDC governed under the Investment Act of 1940.

On July 20, 2010, the Company’s Board of Directors unanimously approved and a majority of shareholders consented to a name change to Bay Street Capital, Inc. and authorized the Company in enact a 1 for 50 reverse stock split of the Company’s outstanding Common Stock.  Both corporate actions were effective with FINRA on August 31, 2010.

On September 24, 2010 the Company’s Board of Directors unanimously approved and a majority of shareholders consented to a name change to Los Angeles Syndicate of Technology, Inc.  The name change was effective with FINRA on October 14, 2010.

The Company currently operates as an internally managed closed-end non-diversified BDC.

Pursuant to Regulation S-X, Rule 6, the Company operates on a non-consolidated basis.  Operations of portfolio companies are reported at the portfolio company level and only the appreciation or impairment of these investments is included in the Company’s financial statements.  Pursuant to FASB Topic 250, the Company had a change in accounting principle when it re-elected to BDC status.  Topic 250 requires retroactive restatement of the company’s financial statements to conform to the current presentation for all periods presented.

GOING CONCERN

At December 31, 2010 and 2009, the Company had current assets of $374 and $15,808; current liabilities of $313,891 and $199,897; a working capital deficit of $313,517 and $184,089 at December 31, 2010 and 2009, respectively.  The Company incurred a loss from operations of $100,631 during the year ended December 31, 2010.  The Company’s only sources of cash flow has been from loans from its CEO, management fees, and proceeds from sales of common stock

The Company is in process of raising funds through private placements of common stock.

The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

NOTE 2:   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 
 
Page 36 of 62

 

Basis of Presentation
As noted above, when the Company filed its election to be regulated pursuant to the 1940 Act, it resulted in a change in accounting principle.  Accordingly, the financial statements have been restated as if the Company was operating as a BDC for all periods presented.  Pursuant to Regulation S-X, Rule 6, the Company will operate on a non-consolidated basis.

Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. None of the Company’s cash is restricted.

Net Increase (Decrease) in Net Assets (Liabilities) from Operations Per Share (Earnings (Loss) per Share)
The Company is required to report both basic earnings per share, which is based on the weighted-average number of common shares outstanding, and diluted earnings per share, which is based on the weighted-average number of common shares outstanding plus all potentially dilutive shares outstanding.  At December 31, 2010, 2009 and 2008, there are no potentially dilutive common stock equivalents.  Accordingly, no common stock equivalents are included in the earnings (loss) per share calculations and basic and diluted earnings per share are the same for all periods presented.

Valuation of Investments (as an Investment Company)
As a BDC, we are regulated by the 1940 Act. Section 2(a)(41) defines Value as (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is determined in good faith by the Board of Directors (“BOD”). We expect that few, if any, of our portfolio companies will have market quotations, and as such, we expect to rely on market transactions involving our portfolio companies and the fair value determined in good faith by our BOD for the valuation of our portfolio companies. Prior to this conversion, only marketable debt and equity securities and certain derivative securities were required to be carried at market value.

Portfolio assets for which market prices are available are valued at those prices. Securities that are traded in the over-the-counter market or on a stock exchange generally will be valued at the prevailing bid price on the valuation date.  However, some of the Company’s current investments were acquired in privately negotiated transactions and may have no readily determinable market values. These securities are carried at fair value as determined by the BOD and outside professionals as necessary under the Company’s valuation policy. Currently, the valuation policy provides for management’s review of the management team, financial conditions, and products and services of the portfolio company. In situations that warrant such an evaluation, an independent business valuation may be obtained.
 
 
 
Page 37 of 62

 

Income Taxes
The Company has not elected to be a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, the Company will be subject to U.S. federal income taxes on sales of investments for which the sales prices are in excess of their tax basis.

Income taxes are accounted for using an asset and liability approach for financial reporting. The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities and net operating loss and tax credit carry forwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

As of December 31, 2010 and 2009, the Company had no accrued interest or penalties relating to any tax obligations.  The Company currently has no federal or state examinations in progress, nor has it had any federal or state tax examinations since its inception.  The last three years of the Company's tax returns are subject to federal and state tax examination.

Comprehensive Income
All items required to be recognized under accounting standards as components of comprehensive income are required to be reported in a financial statement that is displayed with the same prominence as other financial statements. Standards require that an enterprise (a) classify items of other comprehensive income by their nature in financial statements and (b) display the accumulated balance of other comprehensive income separately in the equity section of the balance sheet for all periods presented. The Company’s comprehensive income (loss) does not differ from its reported net income (loss).

As an investment company, the Company must report changes in the fair value of its investments outside of its operating income on its statement of operations and reflect the accumulated appreciation or depreciation in the fair value of its investments as a separate component of its stockholders’ deficit. This treatment is similar to the treatment discussed above.

Fair Value of Financial Instruments
 
Disclosure of fair value information about financial instruments is required when it is practicable to estimate that value.  The carrying amounts of the Company’s cash, marketable equity securities, accounts receivable and accounts payable approximate their estimated fair value due to the short-term maturities of these financial instruments and because related interest rates offered to the Company approximate current rates.

Fixed Assets
 
Fixed assets are stated at cost, less accumulated depreciation.  Depreciation is recorded using the straight-line method over the estimated useful lives of the respective assets (generally five and seven years).  The carrying amount of all long-lived assets is evaluated periodically to determine if adjustment to the depreciation and amortization period or the unamortized balance is warranted.  Based upon its most recent analysis, the Company believes that no impairment of property and equipment exists at December 31, 2010 and 2009.  Maintenance and repairs are charged to operations when incurred.  Betterments and renewals are capitalized.  When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations.
 
 
 
Page 38 of 62

 

Stock Based Compensation

The compensation cost relating to share-based payment transactions (including the cost of all employee stock options) is required to be recognized in the financial statements.  That cost will be measured based on the estimated fair value of the equity or liability instruments issued. The Company’s financial statements reflect an expense for all share-based compensation arrangements granted on or after January 1, 2006 and for any such arrangements that are modified, cancelled or repurchased after that date, based on the grant-date estimated fair value.

As of December 31, 2010, 2009 and 2008, there were options outstanding for 434 shares from the 1997 Plan.  These options expire in 2011.

Concentration of Credit Risk

Cash is maintained at financial institutions.  The Federal Deposit Insurance Corporation (“FDIC”) insures accounts at each institution for up to $250,000.  At times, cash balances may exceed the FDIC insurance limit of $250,000.

Recent Accounting Pronouncements

There are several new accounting pronouncements issued by the Financial Accounting Standards Board ("FASB") which are not yet effective.  Each of these pronouncements, as applicable, has been or will be adopted by the Company.  At March 31, 2011, none of these pronouncements is expected to have a material effect on the financial position, results of operations or cash flows of the Company.
 
NOTE 3:     CHANGE IN ACCOUNTING PRINCIPLE

From December 15, 2005 until November 24, 2008, the Company operated as a BDC under the 1940 Act.  As such, the Company was subject to different reporting requirements and methods of accounting for its investments.  With the change to being an operating company, the Company was no longer subject to the requirements of a BDC and the Company was required to retroactively modify its financial statements as if it were not subject to the requirements of a BDC during all periods presented at the end of 2008.  With the re-election to be regulated as a BDC, the Company is required to again recast its prior financial statements as a BDC.

During 2008, the Company originally filed its financial statements as an operating company.  Following is a reconciliation from the net loss originally reported to net increase (decrease) in net assets from operations as reported herein.
 
 
 
Page 39 of 62

 

Net loss originally reported
  $ (222,314 )
Adjustments:
       
  Unrealized appreciation (depreciation) of investments
    674  
    $ (221,640 )
         
Net decrease in net assets from operations per share,
       
  basic and diluted
       
     Originally reported
  $ (13.92 )
     As adjusted
  $ (13.88 )
 
NOTE 4:     INVESTMENTS AND VALUATION

The Company’s investment securities are summarized as follows at December 31, 2010 and 2009, the valuation of which are primarily based on Level 2 inputs:

   
2010
   
2009
 
             
Cost
  $ 245,352     $ 393  
Unrealized appreciation
    8,465,196       330  
    $ 8,710,548     $ 723  

We follow Accounting Standards Codification (‘‘ASC’’) Topic 820 — Fair Value Measurements and Disclosures (“Topic 820”) for measuring the fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve a degree of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

Our fair value analysis includes an analysis of recent capital transactions with unrelated investors, the future cash flow projections of our investments, value of intellectual property and other proprietary assets. Financial investments recorded at fair value in the Company’s financial statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows:

Level 1:                 Inputs are unadjusted, quoted prices in active markets for identical financial instruments at the measurement date.
 
Level 2:                 Inputs include quoted prices for similar financial instruments in active markets and inputs that are observable for the financial instruments, either directly or indirectly. Level 2 inputs also include inputs, other than quoted prices, that are observable for the asset or liability being valued, either directly or indirectly.
 
 
 
Page 40 of 62

 
 
Level 3:                 Inputs include unobservable inputs for the asset or liability. The inputs into the determination of fair value are based upon the best information available and require management judgment.
 
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and we consider factors specific to the investment.

Assets and liabilities measured at fair value on a recurring basis are summarized in the following tables according to FASB ASC 820 pricing levels.
 
   
Fair Value Measurement Using
             
         
Quoted prices
       
         
in active
   
Significant
       
         
markets of
   
other
   
Significant
 
         
identical
   
observable
   
Unobservable
 
   
Recorded
   
assets
   
inputs
   
Inputs
 
   
value
   
(Level 1)
   
(Level 2)
   
(Level 3)
 
                         
December 31, 2010
                       
  Assets:
                       
     Portfolio company securities
  $ 8,710,548     $ 574     $ 8,709,974     $ -  
                                 
December 31, 2009
                               
  Assets:
                               
     Portfolio company securities
  $ 723     $ 723     $ -     $ -  
The following section describes the types of inputs we use for levels 2 and 3 within the fair value hierarchy in which the investment is categorized, and the valuation techniques we use to measure the fair value of our investments.

Level 2 inputs we use include the terms of recent capital transactions with unrelated investors, financial statement metrics of comparable companies, and nonfinancial-statement metrics of comparable companies.
 
Level 3 inputs we use include the projected cash flows of our investments, applicable discount rates, the value of developed intellectual property, the value of the domain name and other proprietary assets.
 
The FASB provides guidance on the determination of fair value. Accounting Standards Codification Topic 820 establishes a framework for measuring fair value that includes three distinct valuation techniques, (i) the Market Approach, (ii) the Income Approach and (iii) the Cost Approach. There is no single standard for determining fair value in good faith under any of these approaches, and as a result, determining fair value requires judgment be applied to the facts and circumstances of each of our portfolio investments. Topic 820 notes that in some cases the use of multiple valuation techniques will be appropriate. Under such circumstances, Topic 820 recommends that the results of the various techniques be evaluated and weighted appropriately. For investments where multiple valuation techniques are used to measure fair value, management evaluates and weights the results, considering the reasonableness of the range indicated by those results.
 
 
 
Page 41 of 62

 

Following are descriptions of each technique and how we apply them to our portfolio companies.
 
·  
Market Approach.  The market approach uses prices and other relevant information generated by market transactions involving our portfolio companies, or identical or comparable assets or liabilities. Common applications of this approach include our use of the valuation implied by market transactions in our portfolio companies by unrelated investors and market multiples derived from a set of comparable companies. When determining fair value under the Market Approach, we often draw from the terms of recent capital transactions with unrelated investors.

·  
Income Approach. The income approach incorporates estimates of future cash flows or earnings and discounts them to a single present value based on current market expectations. Under the Income Approach we apply two discounted cash flow (“DCF”) methods to derive estimates of fair value.

·  
Asset Approach. The asset approach is based on the replacement cost of an asset. When applying this approach, we consider the cost to a market participant to acquire or construct a substitute asset of comparable utility, adjusted for obsolescence.

As an investment company, the Company will invest in illiquid securities including equity securities of private companies. The structure of each equity security is specifically negotiated to enable the Company to protect its investment and maximize its returns. The Company’s investments are generally subject to some restrictions on resale and generally have no established trading market.
 
We expect that the majority of our investments will continue to be recorded at fair value based on Level 2 and Level 3 inputs and values determined in good faith by our Board of Directors utilizing the input of our management and advisory board. With respect to investments for which market quotations are not readily available, we undertake a disciplined valuation process on a quarterly basis, which is detailed below.

1.  
Management considers which fair value techniques are applicable based on the type of investment being valued. If applying the asset approach, our management team aggregates the costs spent to develop the business and estimates the current cost to replicate such technology by another party. Under the market approach, our management team considers all transactions involving the portfolio company, as well as examine the current valuation levels of comparable investments. When applying the income approach, our management team develops cash flow forecasts and utilizes various discounted cash flow valuation techniques to approximate fair value. Management evaluates and weights the resulting valuations, considering the reasonableness of the range indicated by those results.

2.  
Preliminary valuation conclusions are discussed with the BOD and subsequently discussed with members of our advisory board.

3.  
The BOD considers the proposed valuations and determines the value of our portfolio companies in good faith based on the input of our management team and our advisory board.
 
 
 
Page 42 of 62

 
 
We will record unrealized depreciation on investments when we believe that an investment has decreased in value or if the collection of a loan is doubtful. Conversely, we will record unrealized appreciation if we believe that the underlying portfolio company has appreciated in value and, therefore, our investment has also appreciated in value, where appropriate.
 
At December 31, 2010, approximately 99% of our assets represented investments in portfolio companies recorded at fair value, as determined by our BOD. Due to the inherent uncertainty in determining the fair value of investments that do not have a readily available market value, the fair value of our investments determined in good faith by our Board of Directors may differ significantly from the value that would have been used had a ready market existed for such investments, and the differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently assigned.

Our Portfolio of Investments

The following table is the schedule of our controlled investments as of December 31, 2010.

Company
Industry
Sub-Industry
 
% Owned
   
Market Value
 
Virurl, Inc.
Web-based tech
Advertising
    63.99 %   $ 2,887,440  
Stockr, Inc.
Web-based tech
Financial Services
    62.62 %   $ 2,661,455  
LottoPals, Inc.
Web-based tech
Social Gaming
    97.80 %   $ 3,000,000  
Clowd, Inc.
Web-based tech
Location-based Communication
    100.00 %   $ 65,000  
Sanguine Biosciences, Inc.
Biotechnology
Life Science
    49.69 %   $ 20,450  
StockTown Productions, Inc.
Creative Arts
Productions
    50.00 %   $ 10,504  
Bay Street Advisors, Inc.
Services
Consulting
    100.00 %   $ 65,125  
                $ 8,709,974  

The following are descriptions of our portfolio companies.

1)  
Virurl, Inc – virurl.com (beta)

Virurl, Inc. (“Virurl”), is an online advertising platform that allows advertisers to pay people to share links with their friends.

The current infrastructure of online advertising is designed for an Internet where websites are the primary brokers of online traffic. But the web has changed. People, not websites, now dictate which links are followed.  Each day, millions of people share interesting links with their friends via email, Facebook and Twitter. By creating a forum where users are paid for sharing links, the VIRURL platform empowers content creators and advertisers to tap the organic social networks of the web to drive traffic to their sites. This type of social recommendation is the most explosive method for driving traffic to websites, but content publishers currently have no way to harness this power. VIRURL solves this problem. Virurl is a “human-powered” advertising engine, enabling users to monetize what they are already doing - sharing links with their friends.
 
 
 
Page 43 of 62

 


2)  
Clowd, Inc. – clowd.com (stealth)

Clowd, Inc. (“Clowd”) is a communication platform that connects users based on location, not on who they know or follow. Clowd enables users to engage with those nearby from their phone to see the conversations happening at that moment. From nearby conversations among conference attendees to mobilized groups in distant countries, Clowd helps you connect with similar people in unfamiliar environments.

Clowd uses location as context to suggest that you may have something in common with people around you, facilitating new friendships and enabling users to create, find and follow the action. By leveraging the proliferation of GPS-enabled smartphones, users are provided a window into anywhere in the world.

Clowd is a new platform, where online communication meets ones physical reality


3)  
Stockr, Inc. – stockr.com (stealth)

Stockr, Inc. (“Stockr”) is a social platform for the stock market.  Stockr connects to every major brokerage firm in the United States, enabling users to see and discuss which stocks other users are trading in real-time. Users are empowered to exchange trading ideas, track the trades of those within their network, and gauge their investment performance relative to the Stockr community. Stockr embraces the social element of investing, and brings identity and transparency to an otherwise anonymous environment, unveiling a new layer of market information.

Investing is more social than scientific.  For most people, investment ideas come from close friends and trusted advisors, not complex charts and granular reports.  Existing platforms fail to address this, focusing on the statistics behind the trades, not the people.  By connecting people directly to each other, technology companies have been decentralizing information and disrupting a myriad of established industries. Stockr is doing this for the investment community.


4)  
LottoPals, Inc. – lottopals.com (stealth)

LottoPals, Inc. (“LottoPals”) is developing web and mobile applications to allow people to play state lotteries with their friends online. Every week, millions of people play the lottery, both individually and by forming pools with friends, family and coworkers. LottoPals is bringing the lottery online, making the experience more convenient and fun.

The United States has a $60 billion lottery industry, almost entirely ignored by web and mobile technology. By connecting to Facebook, LottoPals makes it easy to pool with friends, increasing the chances of winning while reducing the cost to play. LottoPals eliminates the effort of purchasing, storing and monitoring physical lottery tickets, making it more convenient to play. It also makes playing the lottery more engaging.  If one friend wins, everybody wins, motivating users to invite more friends and play more often.
 
 
 
Page 44 of 62

 


5)  
Sanguine Biosciences, Inc. – sanguinebio.com (live)

Sanguine BioSciences provides highly viable primary human cells and tissues to the academic and industrial life science research community. The product offering spans customers’ needs mainly in the In Vitro Research & Development stage of Drug Development. The organization hold proprietary cryopreservation technology that allows for >90% post-thaw viability of primary human cells and tissues. Sanguine’s vision is to develop into the global leader in high quality cells and tissues for life science research and development.

6)  
Stocktown Productions, Inc. – stocktownproductions.com (live)

Stocktown Productions is a creative production company based in Santa Monica, California, specializing in video, animation and visual effects. In addition to video production, we provide webdesign, photography and graphic design work- bringing an original style and cutting-edge concept to each of our projects.

7)  
Bay Street Advisors, Inc.
Bay Street Advisors is a strategic advisory firm based in Santa Monica, California that provides consulting and business development services to emerging web technology companies.  last.vc acquired 100% ownership of Bay Street Advisors on September 7, 2010 in exchange for shares of last.vc common stock valued at $65,000.


NOTE 5:      COMPOSITION OF NET ASSETS (LIABILITIES) - STOCKHOLDERS’ EQUITY (DEFICIT)
 
The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.001.  Each share has one voting right.  There are 11,889,399 and 25,703 common shares issued and outstanding at December 31, 2010 and 2009, respectively.

Effective August 31, 2010, pursuant to shareholder consent, the Company completed a 1 for 50 reverse stock split.  All share transactions disclosed in the financial statements have been restated to give effect to the change.

NOTE 6:     RELATED PARTY TRANSACTIONS

The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities as they become available. The officer and directors may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of such conflicts.
 
 
 
Page 45 of 62

 

On September 27th, 2010 the Company entered into restricted share purchase agreements to offer restricted shares of the Company’s common stock for $.02 per share.  The Company issued 11,510,000 shares to the CEO and 21 other individuals that had been engaged to join last.vc as executive officers, advisors, and consultants.  The share purchase agreements contain a one year lock on the transfer of the shares and a 36 month vesting and repurchase provision that allows the Company to repurchase unvested shares at cost should an individual break the terms of their engagement agreement.

On September 28th, 2010 the Company issued 350,000 shares of Company common stock to Brad Curry pursuant to a debt to equity conversion agreement.  Under the agreement, Mr. Curry agreed to convert $3,500 remaining debt to common stock at $.01 per share and forgive $3,000 of debt owed by the Company.

On November 24, 2008, the Company amended its Letter of Intent dated October 1, 2008, in which the Company agreed to acquire working interests in certain oil and gas properties and two operating companies from a shareholder, Xtreme Oil & Gas, Inc.  The parties agreed to extend the closing date until March 30, 2009, in exchange for issuance of 50,000 shares of the Company’s common stock to Xtreme as an extension fee.  The total purchase price was to be reduced by the extension fee.  The shares were originally valued at $1,275,000, the amount at which the stock was trading on the date of the amendment and the total was initially expensed as an extension fee.  On April 6, 2009, the Company and Xtreme agreed to rescind the extension agreement and the 50,000 shares were returned to the Company and cancelled.  The LOI expired under its original terms on December 31, 2008, therefore the extension fee is not reflected in the financial statements.  Xtreme owned 32.66% of the Company's common stock as of December 31, 2009.  On May 10, 2010, Xtreme entered into a stock purchase agreement with the Company's CEO and the Company's CEO acquired the 8,000 shares previously owned by Xtreme.

At December 31, 2010 and December 31, 2009, the Company owed its CEO $311,862 and $159,897, respectively, for loans, accrued compensation and expense reimbursements, which is included in due to related parties.  The amount owed at December 31, 2010 and December 31, 2009 includes a non-interest bearing convertible note in the amount of $133,807 which is convertible at $0.50 per share or NAV per share, whichever is greater (188,460 shares at December 31, 2010).  NAV at December 31, 2010 is $0.71 per share.

Officer’s compensation and director’s fees related to the services provided by Bryce Knight, President and Director of the Company, are paid directly to Knight, Inc. (formerly Knight Enterprises, Inc.), a Nevada corporation 100% owned by Bryce Knight.

At December 31, 2009, the Company had received advances from Xtreme and owed $40,000, which was included in due to related parties.  As a part of the transaction discussed above, the Company's CEO acquired the obligation owed to Xtreme.

On May 10, 2010, Knight, Inc., pursuant to an Asset Purchase Agreement, sold $40,000 of receivables due to Knight by the Company to an unaffiliated third party for $40,000 in cash and other mutually agreed upon consideration.  This transaction was later cancelled in the 3rd Quarter of 2010.

As a result of the Xtreme merger not being completed and effective July 1, 2010, officers and employees of Xtreme returned 5,800 shares of the Company's common stock to be cancelled.  Mr. Knight also returned 541 shares to be cancelled.  The 6,341 shares were cancelled by the transfer agent on July 19, 2010.  The cancellation of the shares was recorded as a contribution to capital by the shareholders on July 1, 2010.
 
 
 
Page 46 of 62

 

Effective July 11, 2010, Knight, Inc., wholly owned by Bryce Knight, Chief Executive Officer of the Company, acquired 10,000 newly issued shares of the Company's common stock in exchange for $5,000 in cash previously paid to the Company.  On September 27, 2010, Knight, Inc. acquired 3,250,000 shares pursuant to a share purchase agreement in exchange for $65,000 owed to Knight, Inc.


NOTE 7:     PROVISION FOR INCOME TAXES

A reconciliation of income tax expense at the statutory federal rate of 34% to income tax expense at the Company’s effective tax rate for the years ended December 31, 2010, 2009 and 2008 is as follows.
 
   
2010
   
2009
   
2008
 
                   
Tax expense (benefit) computed at statutory rate
  $ 2,843,800     $ (123,000 )   $ (75,400 )
Effect of permanent differences
    (9,200 )     9,913       (800 )
Increase in valuation allowance
    (2,834,600 )     97,200       76,200  
                         
Income tax benefit
  $ -     $ (15,887 )   $ -  

As of December 31, 2010, the Company has approximately $70,000 of capital loss available to offset future capital gains, which expire through the year 2014.  At December 31, 2010, the Company had approximately $783,000 of net operating loss available to offset future taxable income for years through 2030.  The Company filed a net operating loss carryback with $81,284 of its 2008 tax loss to 2006 and received a refund of $15,887, which was included in the 2009 statement of operations when received.  The book basis of investments exceeds the tax basis by $8,465,196.
 
At December 31, 2010 and 2009, significant components of the Company’s deferred tax assets are summarized below.
 
   
2010
   
2009
 
             
Deferred tax assets (liabilities):
           
Net capital loss carryforward
  $ 24,000     $ 26,800  
Net operating loss carryforward
    266,300       258,200  
Investments
    (2,878,000 )     100  
Accrued expenses
    40,800       -  
Fixed assets
    (2,600 )     -  
     Net deferred tax assets (liabilities)
    (2,549,500 )     285,100  
Less valuation allowance
    2,549,500       (285,100 )
          Total deferred tax assets
    -       -  


NOTE 8:     STOCK OPTION AND EMPLOYEE BENEFIT PLANS

STOCK OPTION PLANS
 
 
 
Page 47 of 62

 
 
On November 25, 2008, the Company established the 2008 Stock Option Plan (the “Plan”).  The Plan registered via an S8 registration statement up to 9,000 shares of common stock to be issued to qualified recipients.  Eligible participants in the Plan were key employees, non-employee directors, and consultants of the Company and its subsidiaries, whether or not members of the Board, as the Committee, in its sole discretion, may designate from time to time.  The Committee considered such factors as it deemed pertinent in selecting participants and in determining the types and amounts of their respective awards.  In January 2009, 8,741 shares were issued pursuant to compensation agreements, primarily with consultants.  The Board of Directors terminated the 2008 Plan on November 16, 2009.
 
In connection with the Company's acquisition of The Sarasota Group, Inc., a former subsidiary, in 2001, the Company renegotiated the stock options previously granted to former members of management.  These options for 434 shares are fully vested, expire in 2011 and are exercisable at $200.00 per share, the adjusted closing bid price of the Company's common stock on the date of grant.  These options were granted under the 1997 Stock Option Plan which was terminated by the Board of Directors on November 16,2009.

EXECUTIVE COMPENSATION PLAN

Effective July 20, 2010, pursuant to a majority consent of shareholders and the unanimous consent of the board of directors, the executive compensation plan which provides executive compensation in the range of $5,000 to $20,000 per month for the chief executive officer, chief financial officer, chief investment officer, chief technology officer and chief operations officer and provides for an executive profit sharing plan of 20% of the Company's net income after taxes was approved.
 
 
NOTE 9:     COMMITMENTS AND CONTINGENCIES
 
Leases
 
The Company currently maintains its corporate office at 3651 Lindell Road, Suite D#146, Las Vegas, Nevada 89103 on a month-to-month basis.  Our chief executive officer is providing the space at minimal cost.  In addition, we have maintained an operations office on a month-to-month basis in Santa Monica, California at a cost of $30,113 and $26,327 in 2010 and 2009, respectively.

The Company maintains an office on a month-to-month basis for its portfolio companies at 137 Bay Street, Santa Monica, California.  The cost is all charged to the portfolio companies.
 
 
 
Page 48 of 62

 
 
Los Angeles Syndicate of Technology, Inc.
 
Financial Highlights
 
Four Years Ended December 31, 2010, 2009, 2008, and 2007
 
                         
                         
   
2010
   
2009
   
2008
   
2007
 
Per share information:
                       
Net asset (liability) value, beginning of period
  $ (0.14 )   $ (0.07 )   $ 0.24     $ 1.07  
Net increase (decrease) from operations
    (0.03 )     (0.28 )     (0.20 )     0.17  
Net change in realized and unrealized appreciation
                               
     (depreciation) on investments
    2.72       (0.00 )     (0.10 )     (0.79 )
Net increase (decrease) from stock transactions (1)
    (1.83 )     0.21       (0.00 )     (0.21 )
Net asset (liability) value, end of period
  $ 0.71     $ (0.14 )   $ (0.07 )   $ 0.24  
                                 
Per share market value:
                               
  Beginning of period
  $ 5.00     $ 22.00     $ 8.50     $ 80.00  
  End of period
    2.50       5.00       22.00       8.50  
Investment return, based on market price at
                               
  beginning of period
    -50 %     -77 %     159 %     -89 %
                                 
Ratios/supplemental data:
                               
Net assets (liabilities) end of period
  $ 8,414,470     $ (177,115 )   $ (54,047 )   $ 161,593  
Average net assets (liabilities)
    2,363,049       (117,244 )     (41,665 )     268,674  
                                 
Ratio of expenses to average net assets (liabilities)
    6.2 %     -306.9 %     -371.0 %     65.0 %
Ratio of increase (decrease) in net assets (liabilities) from
                               
     operations to average net assets (liabilities)
    -4.3 %     295.1 %     532.0 %     -133.0 %
                                 
Weighted average number of shares outstanding: