Discotech Inc develops and distributes the mobile application, Discotech. Discotech is a free to download application on iOS and Android platforms that allows users to browse events, reserve tables, purchase tickets, and sign up for VIP guest lists at nightlife venues in different cities. Discotech is currently partnered with over 130 nightlife venues in Los Angeles, Las Vegas, Miami, San Diego, Orange County, San Francisco, and New York. We make it more efficient and transparent for our customers to make plans and enjoy a night out.

Our company generates revenue from commissions we earn on table reservations, ticket sales, and guest list traffic that are sourced or transacted on our mobile application. In 2016, commissions from table reservations has comprised 76% of our company's net revenue. Guest list and ticket sales comprise 19% and 5% of our total net revenue respectively. In 2016 to date, we have generated approximately $153,000+ in net revenue off $1,350,000+ in gross merchandise volume.

Our table reservation feature generates between a 10% and 20% commission on the gross spend of our end customers depending on the nightlife venue that we are partnered with. When a customer reserves a table on Discotech, we book the table on behalf of our customer with the nightlife venue, and then we follow up by providing confirmation and instructions to the customer. The customer ultimately checks in at the venue under their name, and pays for the table at the venue. (You can think of this service as "OpenTable for Nightlife") For payment, Discotech receives commission from our venue partners based on a percentage of our customer's gross spend. For ticket sales, Discotech handles the transaction directly on the platform. We sell tickets at face value + service fee to our end customers, who receive a digital ticket and QR code which they can use at the door to gain admission to the event. Discotech returns the face value portion of the ticket back to our club partners, and keeps the service fee as our commission for the transaction. Our ticket prices are always less than or equal to the price of tickets that are available directly on a nightlife venue's own website. Lastly, for guest list admission, we allow customers to add their names to a club or lounge's VIP guest list. At the venue, our customers can check in with their first and last name to receive free or discounted admission to the event. For generating this foot traffic, our venue partners pay us between a $3-$5 commission for every guest that checks in via our guest list.

Our team originally founded Discotech in March of 2013 to disrupt the bottle service reservation process. We launched our product on iOS in December or 2013 and started to acquire users and generate revenue shortly thereafter. Despite having some initial traction, we were unsatisfied with our rate of growth in 2014, and so we "pivoted" to add VIP guest list sign ups in the Fall of 2014, and then we added pre-sale ticketing in March of 2015. After we launched these 2 new features, we started to see our organic growth and overall traffic pick up in a meaningful way. The last few months in 2016 have all had very exciting milestones for us:

• March 2016 - Financial breakeven month
• April 2016 - Discotech surpassed 50K total registered users
• May 2016 - First month where we surpassed over $300K in monthly GMV (Over $30K in net revenue)
• June 2016 - First time we had over 5,000 new user sign ups in a single month

Overall, we are seeing strong momentum and growth in 2016. All of our key performance metrics have been trending consistently upwards, and as mentioned, we hit a major milestone when we reached breakeven in March of 2016. Below are some of the key trends that we are tracking:

• Monthly Gross Merchandise Volume (GMV) grew 190% from December 2015 to June 2016. ($119K to $286K in 12/15 and 6/16 respectively)
• Monthly net revenue grew 184% from $11K in December 2015 to $31.5K in June 2016
• Our EBIT went from negative to positive this year. (Grew from -$2.2K in January 2016 to +$17.5K in June 2016)
• New User Registrations per month grew 138% YoY from December 2015 to June 2016. (2.1K vs. 5.0K)
• Monthly active users grew 95% from December 2015 to June 2016 (8.2K vs. 15.9K)
• Total registered users are up 57% between December 2015 to June 2016 (38.8K vs. 61.0K)
• Unique monthly website visitors up 170% from December 2016 to June 2016. (13.2K vs 35.8K)

In the immediate future, we expect to see continued growth through the summer season. We expect to see our performance slow in the Winter of 2017, before expanding significantly in the Spring of 2017. (We have seen this pattern in the previous two years we have been in business) In addition to the strong organic growth that has been gaining momentum month over month, we believe that a future catalyst to our growth will be the launch of our web app product. Currently, our website is purely a lead generation platform to our Discotech mobile app. Visitors to our website are unable to create accounts, reserve tables, or make transactions on the website. To date, we are seeing over 2x as many unique visitors to our website compared to our mobile app. We believe the launch of our web app will result in a step function increase to all of our key performance metrics. Through the next 2-4 years, the management team forecasts continued YoY growth as we expand our app to new cities domestically and internationally. We also believe that new feature releases will be a source of continued growth and monetization. While the team is relentlessly focused on growing the business, our ultimate goal is to sell the company to a strategic buyer when the timing and opportunity are right.

The following trends or uncertainties could affect our financial condition, including the liquidity, cash flow and capital resources described below:

• Economic downturn - Discotech, along with the nightlife industry, are susceptible to changes in discretionary spending and broader macro-economic shifts.
• Competition - Although the industry does not currently have any strong technological players, we could see this shift over time. Additionally, it is possible that a larger player from an adjacent market (such as OpenTable or Priceline) may enter into our space. While we think that these players are more likely to acquire players, there exists a non-zero chance that they decide to enter the space organically.
• Legislative Changes - Any legal changes surrounding alcohol consumption or nightlife regulation has the potential to negatively impact our business.
• Talent/HR - any significant changes to our management team or developer team would have a significant impact on the productivity of our business.

Discotech currently has $172K in cash, $21K in accounts receivables, and $2K in current liabilities. The Company's networking capital is $191K. We are not currently burning cash on a monthly basis as our gross profit surpasses our expenses. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve capital and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in demand deposit accounts, certificates of deposit and money market funds that are currently providing only a minimal return.

We anticipate using our available cash and the proceeds of this offering to expand our team and to invest in user-acquisition. Our most pressing hiring needs are for software developers and full time customer service/business development employees. Additional cash in the war chest will be used to acquire additional users via digital marketing, promotions, and SEO improvements. Discotech has a very disciplined and bottom-line focused management team, and we do not anticipate running our business with a burn rate which would put our company at risk of running out of cash. Although the proceeds of this offering are not necessary to the viability of our business (we are already profitable), it will be integral for: 1) Developing a functional web app, 2) Developing new features to our mobile application, and 3) Expanding to new geographies. We believe that building a new product line, improving our existing technology, and expanding to new cities will result in significant growth to all of our key metrics. Ultimately, we believe that this investment will have a positive ROI in the form of greater positive cash flows, and a boost to our multiplier when we exit the business.

Our cash held as of July 25, 2016 is 84% greater than cash held as of the same date in 2015. This increase resulted primarily from new investments (new convertible notes and SAFE notes issued) and improvements to our business operations in 2016. We saw our cash position decline between July 2015 through February of 2016 since we had not yet achieved cash flow break even.

Cash flow from the Company's operating activities are derived from net income/losses and changes to our accounts receivables.

Net cash provided by operating activities was -$133,433 for the year ended 2015, which was driven by a net operating loss of -$104,910 and a $28,523 increase in accounts receivable.

Net cash provided by operating activities was -$121,096 for the year ended 2014, which was driven by a net operating loss of -$117,623 and a $3,473 increase in accounts receivable.

We have financed our operations over the past few years through convertible notes that we issued in 2013 and 2014 to the sum of $405,000. In March of 2016, our business operations became profitable, so we are also funding Discotech now through the cash flow that is being generated by our core business. Discotech does not currently use, and has never used a revolving loan facility or bank loan - we do not have any long term debt.

Operationally, our total net revenue increased by $81K, or 227%, from 2014 to $117K in the year ended 2015. This increase was primarily driven by an increased customer install base, which increased by 160% from the prior year (14,892 at year end 2014 to 38,780 at year end in 2015). We have enjoyed our fastest growth in 2016. We have generated over $60K in net revenue in the months of May and June combined, and we are expecting to drive $40K in the month of July.

Our overall direct costs of revenue increased by $9K, or 114% from the prior year to $16K in the year ended 2015. This was largely driven by an increase in ticket revenues, which grew 137% from $8.2K in 2014 to $19.6K in 2016. Ticket sales are the only revenue stream that have a direct cost of revenue associated with it. (Table revenue and guest list revenue are purely commission based, so no direct costs are associated with these transactions)

We expect these trends to continue in the current fiscal year and in the coming few fiscal years. The key driver to our growth stems from the number of new users that we are able to onboard onto Discotech. In 2016, we have seen our new downloads skyrocket through word of mouth and other organic channels. As our user base continues to grow, the virality of our product grows alongside it as there are now more people to share the app with new potential customers. Furthermore, Discotech is constantly investing in our product and developing new features that will improve our customer experience. We believe that this will result in greater virality of our product, higher engagement rates, and greater monetization over time. As mentioned before, we believe that the launch of our web app product will be a significant boost to our business as it will allow us to target customers who are not looking to download a new app to book a night out. Over the past few years, we have demonstrated that there is a clear need for our product in the nightlife industry, that our customers love Discotech and are actively sharing it with their friends, and that we can generate revenue in a profitable manner. I believe that our team will drive consistent growth into the future, and additional capital will allow us to make smart investments that will supercharge our business.