Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Master Subscription Agreement with Zuora

On July 31, 2014, the Company entered into a limited license agreement (the “Master Subscription Agreement”) with Zuora, Inc. (“Zuora”) that provided the Company with a non-exclusive, non-transferable worldwide limited license to use Zuora’s online integrated subscription management, billing, and data analysis services. The initial order form covered the implementation and development period ending October 31, 2014. In addition, the Company agreed to an initial 36-month service term, subsequent to implementation.

On October 12, 2016, the Company received a notice of default from Zuora confirming that the Company was in default under the Master Subscription Agreement with Zuora as a result of the Company’s failure to pay Zuora past due balances for the services they provided under the Master Subscription Agreement.

On July 31, 2017, the Company and Zuora signed a new order form (“New Order Form”) under the Master Subscription Agreement, providing for the full settlement and release of the parties from all obligations under the old order form, dated July 31, 2014, in consideration for entering into the New Order Form. In accordance with the terms of the New Order Form, the Company paid Zuora $150,000 for the first year of the three-year agreement for Zuora to provide subscription services to the Company. Subsequent payments of $150,000 per year will be due under the New Order Form for the balance remaining term. The Company’s requests to Holdings for funds to pay the $150,000 payment due to Zuora as of July 31, 2018, have not yet been approved.

Distribution Agreement with MediaNet

On November 10, 2014, the Company entered into a Distribution Agreement (the “MediaNet Agreement”) with MediaNet Digital, Inc. (“MediaNet”) which provided the Company with a catalog of sound recordings and metadata that enabled and provided for the delivery of sound recordings to end users of CÜR Music. The MediaNet Agreement remains in effect for a period of three years following the effective date of November 7, 2014. The MediaNet Agreement automatically renews for successive one-year terms unless terminated by MediaNet or the Company.

Pursuant to the MediaNet Agreement, the Company was required to pay a set-up fee. In addition, the Company was required to pay a monthly technology licensing fee during the initial term, a monthly usage fee and pay for any additional professional services and technical assistance or customization.

As of June 30, 2018, the Company has not made any payments to MediaNet, however, the Company has accrued for balances due of $258,586. While the Company has agreed in principle with MediaNet to an amended Distribution Agreement and settlement for balances due under the MediaNet Agreement, the Company’s requests to Holdings for funds to pay any settlement amount have not yet been approved. The Company continues to work with Holdings for approval to finalize and amended agreement with MediaNet and for the advance of the necessary funding to execute. To date, the Company has not received a notice of default from MediaNet and the MediaNet Agreement has not been terminated.

Stock Option Grant

Included in employment offers to three members of the Company’s management team, the Company committed to grant a total of 1,100,000 non-qualified stock options at a future date, to be determined based upon the availability under an approved equity incentive plan. Currently neither 2014 nor 2015 equity incentive plans have adequate shares available for issuance to meet these obligations. No stock compensation expense related to this commitment has been recorded or accrued by the Company as of June 30, 2018.

Content Licenses

Prior to the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), and as a condition thereto, Holdings renegotiated new content licensing agreements (“New Music Label Agreements”) with the three major music labels (the “Music Labels”). Upon consummation of the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), Holdings paid the required advances due to the Music Labels under the New Music Label Agreements (the “Label Advances”) in the aggregate amount of $2,500,000. The Company joined one of the New Music Label Agreements, while the other New Music Label Agreements provide Holdings with the right to sublicense its rights under such agreements to the Company. The New Music Label Agreements enable the Company to digitally distribute sound recordings and related materials owned or controlled by the Music Labels in connection with the Company’s Internet music service, CÜR Music. The New Music Label Agreements released the Company of prior obligations under the original agreements the Company had with the Music Labels. At the current time, the Company does not have a contract with Holdings that requires payment for sublicenses and access to the sound recordings and related materials.

The Company and Holdings are required to pay certain minimum content fees over the term of the New Music Label Agreements in the aggregate of: $15,100,000 in the first year of the agreements, $24,500,000 in the second year of the agreements, and $18,400,000 in the third year of the agreements.

Minimum payments related to the previously described contracts is summarized as follows:

Six Months Ended June 30,	Total

2018	$	3,650,000	*

2019		4,650,000	*

2020		8,400,000	*

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*	Additional contract terms include per subscriber, stream or percentage of revenue charges.

CUR MEDIA, INC. 10-Q