CUR MEDIA, INC. - FORM 10-Q

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EX-32.1 - CERTIFICATION - CUR MEDIA, INC.	curm_ex321.htm
EX-31.1 - CERTIFICATION - CUR MEDIA, INC.	curm_ex311.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: June 30, 2018

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

For the transition period from ________________ to _______________

Commission file number: 000-55346

CÜR MEDIA, INC.

(Exact name of registrant as specified in its charter)

Delaware		99-0375741
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

136 New London Turnpike

Glastonbury, CT 06033

(Address of principal executive offices)

(860) 633-5565

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)		Emerging Growth Company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ¨

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

As of August 20, 2018, there were 2,526,663 shares of the registrant’s common stock, par value $0.0001 per share (“Common Stock”), outstanding, 20,174 of which had not yet been issued.

CÜR MEDIA, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018

TABLE OF CONTENTS

		PAGE

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	4

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40

Item 4.	Controls and Procedures	40

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42

Item 3.	Defaults Upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	44

SIGNATURES		45

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

	·	Our reliance on another company, CUR Holdings, for funding of our operations and strategy implementation related to the product design, marketing and launch of the product

	·	Our ability to attract and retain management with experience in digital media including digital music streaming, and similar emerging technologies;

	·	Our ability to negotiate and maintain economically feasible agreements with the major and independent music labels, publishers and publisher rights organizations;

	·	Our expectations regarding market acceptance of our products in general, and our ability to penetrate the digital music streaming market in particular;

	·	Our ability to raise capital when needed and on acceptable terms and conditions;

	·	The scope, validity and enforceability of our third-party intellectual property rights;

	·	Our ability to comply with governmental regulation; and

	·	The intensity of competition in the digital music streaming industry.

A description of these and other risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which we filed with the Securities and Exchange Commission (“SEC”) on May 7, 2018 (“Annual Report”). The risks and uncertainties described under “Risk Factors” are not exhaustive.

Given these uncertainties, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

All references in this Quarterly Report to the “Company”, “CÜR Media”, “we”, “us”, or “our”, are to CÜR Media, Inc., and its consolidated subsidiary, CÜR Media, LLC.

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report, as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

CÜR MEDIA, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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		Page

Condensed Consolidated Financial Statements (unaudited)		4

Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017		5

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017		6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017		7

Notes to Condensed Consolidated Financial Statements		8

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CÜR MEDIA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	June 30, 2018			December 31, 2017

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	36,510		$	153,979
Prepaid expenses		1,000,000			1,000,000
TOTAL CURRENT ASSETS		1,036,510			1,153,979

Security deposit		25,500			-
Property and equipment, net		17,724			2,502

TOTAL ASSETS	$	1,079,734		$	1,156,481

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY

CURRENT LIABILITES
Accounts payable	$	2,478,359		$	2,399,723
Accrued liabilities and other current liabilities		2,908,552			2,621,322
Line of credit – related party		3,466,543			1,847,670
Note payable		33,550			33,550
Note payable – related party		685,000			685,000
Secured convertible promissory notes, net – related party		2,514,880			2,514,880
Derivative liabilities		1,435,427			1,542,304
TOTAL CURRENT LIABILITIES		13,522,311			11,644,449

Note payable - vendor		300,000			300,000
Unsecured Convertible promissory notes, net		1,098,536			895,132
TOTAL LONG-TERM LIABILITIES		1,398,536			1,195,132

TOTAL LIABILITIES		14,920,847			12,839,581

STOCKHOLDERS’ DEFICIENCY
Preferred Stock (.0001 par value, 10,000,000 shares authorized, none issued or outstanding as of June 30, 2018 or December 31, 2017)		-			-
Common Stock (.0001 par value, 300,000,000 shares authorized, 2,526,663 issued at June 30, 2018 and December 31, 2017, and 2,550,998 outstanding at June 30, 2018 and December 31, 2017, respectively)		253			253
Additional Paid-In-Capital		11,935,233			11,935,233
Accumulated Deficit		(25,776,599	)		(23,618,586	)

TOTAL STOCKHOLDERS’ DEFICIENCY		(13,841,113	)		(11,683,100	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	1,079,734		$	1,156,481

See accompanying notes to unaudited condensed consolidated financial statements

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CÜR MEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017

REVENUES	$	-		$	-		$	-		$	292

OPERATING EXPENSES
Research and development		538,091			38,444			1,272,779			80,656
General and administrative		283,094			127,914			479,043			237,081
Stock based compensation		-			-			-			-
Depreciation and amortization		3,007			1,063			4,034			2,865

TOTAL OPERATING EXPENSES		824,192			167,421			1,755,856			320,602
				`
OTHER INCOME (EXPENSE)
Interest expense		(261,172	)		(263,719	)		(520,592	)		(522,889	)
Interest income		46			-			80			-
Gain on debt relief		2,128			35			11,478			2,776
Change in fair value of derivative liabilities		41,830			(1,518,438	)		106,877			(1,744,667	)

TOTAL OTHER INCOME (EXPENSE)		(217,168	)		(1,782,122	)		(402,157	)		(2,264,780	)

NET LOSS	$	(1,041,380	)	$	(1,949,543	)	$	(2,158,013	)	$	(2,585,090	)

Basic and diluted net loss per share	$	(0.41	)	$	(0.76	)	$	(0.85	)	$	(1.01	)

Weighted average number of shares outstanding basic and diluted		2,550,998			2,550,998			2,550,998			2,550,998

See accompanying notes to unaudited condensed consolidated financial statements

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CÜR MEDIA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(2,158,013	)	$	(2,585,090	)
Adjustments to reconcile net loss to net cash used in operating activities
Gain on debt relief		(11,478	)		(2,776	)
Depreciation and amortization		4,034			2,865
Non-cash interest expense		203,404			203,404
Share based consulting services		-			12,945
Change in fair value of derivative liabilities		(106,877	)		1,744,667
Changes in assets and liabilities
Prepaid expenses		-			-
Other current assets		-			-
Accounts payable		90,114			293,881
Accrued liabilities and other current liabilities		287,230			332,276
Net (cash used) provided by in operating activities		(1,691,586	)		2,172

CASH FLOWS FROM INVESTING ACTIVITIES
Security deposit		(25,500	)		-
Purchases of property and equipment		(19,256	)		-
Net cash used in investing activities		(44,756	)		-

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit – related party		1,618,873			-
Net cash provided by financing activities		1,618,873			-

NET (DECREASE) INCREASE IN CASH		(117,469	)		2,172

CASH, BEGINNING OF PERIOD		153,979			1,508

CASH, END OF THE PERIOD	$	36,510		$	3,681

See accompanying notes to unaudited condensed consolidated financial statements

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

Note 1 – Summary of Business and Basis of Presentation

Organization and Business

CÜR Media, Inc. (the “Company”) was formed in the State of Delaware as Duane Street Corp. on November 17, 2011. CÜR Media, LLC (formerly known as Raditaz, LLC) (“Raditaz”) was formed in Connecticut on February 15, 2008. On January 28, 2014, the members of Raditaz contributed their Raditaz membership interests (the “Contribution”) to the Company in exchange for approximately 769,231 shares of the Company’s common stock, $0.0001 par value per share (“Common Stock”), which resulted in Raditaz being a wholly owned subsidiary of the Company. Each membership interest of Raditaz was automatically converted into shares of the Company’s Common Stock, with the result that the 39,249,885 membership interests outstanding immediately prior to the Contribution were converted into approximately 769,231 shares of the Company’s Common Stock outstanding immediately thereafter.

As a result of the Contribution, the Company changed its business focus to the business of Raditaz, which is to develop and commercialize a streaming music experience for listening on the web and mobile devices (the “Music Streaming Business”). The Company is currently developing CÜR Music, a hybrid internet radio and on-demand music streaming service (“CÜR Music”).

CUR Holdings, LLC, was formed in New York on July 6, 2017, for the purpose of making strategic investments of up to $1,000,000. On July 6, 2017, CÜR Holdings, LLC made available to the Company up to $685,000, in exchange for which it received a Line of Credit Promissory Note from the Company in the principal amount of $685,000 (“Line of Credit Note”). As of November 16, 2017, CUR Holdings, LLC had loaned the Company the full $685,000. In connection with the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), the Line of Credit Note was assigned and transferred to CUR Holdings, Inc., a Delaware corporation (“Holdings”), in exchange for 194,175 Unit Shares (as defined in Note 9) of Holdings and Unit Warrants (as defined in Note 9) to purchase 1,263,827 shares of common stock of Holdings issued to CUR Holdings, LLC. As a result, Holdings became the payee under the Line of Credit Note. Upon completion of the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), the Company became obligated to pay Holdings the amounts due under the Line of Credit Note.

The Company and Holdings currently have no common members on their boards of directors and they are two separate and distinct entities with two completely different sets of officers running their day-to-day affairs, separate corporate offices where their books and records are separately kept, and very different shareholder bases. Further, while Holdings has agreed to extend the Post-Closing Line of Credit to the Company for up to the full amount of the aggregate net proceeds from the Holdings Offerings, drawdowns against the line of credit must be requested by the Company and approved by Holdings. Requests may be approved or rejected by Holdings on a case-by-case basis.

Holdings was formed in the State of Delaware on August 14, 2017, for the purpose of raising capital to effectuate a transaction with the Company, or another company in the music streaming space. On September 11, 2017, the Company entered into a non-binding term sheet (the “Term Sheet”) with Holdings, pursuant to which the Company and Holdings agreed to consummate either a Merger (as defined below) or an Asset Transfer (as defined below), under certain circumstances. Pursuant to the Term Sheet, in the event the Company receives notification from the SEC that it will not institute the proposed Administrative Proceedings (as defined in Note 3), or, if instituted, will discontinue such proceedings (“SEC Clearance”), Holdings will, subject to any required shareholder approval, merge with and into the Company, with the Company continuing as the surviving entity (the “Merger”); provided, however, that the board of directors of the Company and Holdings may mutually agree to proceed with the Merger prior to receipt of SEC Clearance. If, however, the SEC commences the proposed Administrative Proceedings (as defined in Note 9) against the Company, and such proceedings result in the revocation of the registration of the Company’s Common Stock under the Exchange Act (“SEC Revocation”), the Company and Holdings will, subject to any required shareholder approval, enter into a fair value asset purchase and sale transaction, pursuant to which Holdings will acquire all of the intellectual property and other assets and liabilities constituting the Company’s Music Streaming Business (the “Asset Transfer” and, together with the Merger, a “Combination Transaction”); provided, however, that the board of directors of the Company and Holdings may mutually agree to proceed with the Asset Transfer any time commencing on the ninety-first (91st) day after the effective date of the Term Sheet.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

On June 5, 2018, the SEC gave the Company notification that it had concluded its investigation and advised the Company that it did not intend to recommend any Administrative Proceedings by the SEC against the Company (see Note 3). However, although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations (see Note 2).

On November 16, 2017, Holdings simultaneously consummated (a) the Initial Closing (as defined in Note 9) of its Preferred Stock Unit Offering (as defined in Note 9) and (b) the closing of the $2.5 Million Note Offering (collectively, the “Holdings Offerings”). The net proceeds from the Holdings Offerings, in the aggregate amount of $6,932,288 (after deducting fees and expenses related to the Holdings Offerings in the aggregate amount of $722,074 including placement agent fees, legal fees and expenses and fees payable to the escrow agent) are to be used to pay the required Label Advances (as defined in Note 6 below) to the Music Labels (as defined in Note 6 below) sufficient to allow Holdings and/or the Company to proceed with soliciting subscriptions for CÜR Music, and to extend a line of credit to the Company (the “Post-Closing Line of Credit”) for up to the full amount of the aggregate net proceeds from the Holdings Offerings (1) to enable the Company to pay outstanding accounts payable, employee deferred compensation, and monthly payments due by the Company under the New Note (as defined in Note 9 below), and (2) for working capital and general corporate purposes. While there is a process for requesting and approving drawdowns, it is not formally documented, approval is on a case-by-case basis, and the terms and associated interest on the Post-Closing Line of Credit are to be determined and will be reflected in the definitive documentation for the transaction.

On May 15, 2018, Holdings consummated a second closing (the “Second Closing”) of the Preferred Stock Unit Offering, for gross proceeds to Holdings of $1,246,300. The net proceeds from the Second Closing, in the aggregate amount of $1,086,131 (after deducting fees and expenses related to the Second Closing in the aggregate amount of $160,169 including placement agent fees, legal fees and expenses and fees payable to the escrow agent), are to be used in the same manner as the net proceeds of the Initial Closing of the Preferred Stock Unit Offering.

As of December 31, 2017 and June 30, 2018, the Company’s borrowings from the Post-Closing Line of Credit were $1,847,670 and $3,466,543, respectively. Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations, as it currently does not have sufficient cash to meet its operating needs. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely (see Note 2).

Basis of Presentation

The accompanying condensed consolidated financial statements include the activities of the Company, CÜR Media, Inc., and its wholly owned subsidiary, CÜR Media, LLC. All intercompany transactions have been eliminated in these consolidated financial statements.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of the Company’s management, the financial statements include all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position for the periods presented.

Certain information in footnote disclosures normally included in the financial statements prepared in conformity with accounting principles generally accepted in the United States of America and have been condensed or omitted pursuant to such principles and the financial results for the periods presented may not be indicative of the full year’s results. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which the Company filed with the Securities and Exchange Commission (“SEC”) on May 7, 2018 (“Annual Report”), as updated in subsequent filings the Company has made with the SEC.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, estimates related to accruals, stock-based compensation expense, warrants to purchase securities, and reported amounts of revenues and expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies to those previously disclosed in the Company’s Annual Report as filed with the SEC on May 7, 2018. Please refer to the Company’s Annual Report for in depth review of accounting policies in place. Certain select accounting policies are as follows:

Earnings Per Share

Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of Common Stock outstanding during the period. Diluted EPS is computed based on the weighted average number of shares of Common Stock, plus the effect of dilutive potential common shares from outstanding stock options during the period using the treasury stock method. At June 30, 2018 and 2017, the number of shares underlying options and warrants that were anti-dilutive was approximately 5,109,733 shares and 4,517,150 shares, respectively.

Derivative Liabilities

The Company does not use derivative instruments to hedge exposure to cash flow, market, or foreign currency risks; however, the Company has warrants and convertible promissory notes that contain freestanding and embedded derivatives. The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreements. Warrants that allow for cash settlement or provide for certain modifications of the warrant exercise price are accounted for as derivative liabilities. The Company evaluates embedded conversion features and bifurcates the embedded conversion feature if it is not clearly and closely related to the host agreement.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The estimated fair values of the derivative liabilities were determined using a Black-Scholes option pricing model, which takes into account the probabilities of certain events occurring over the life of the instruments. The derivative liabilities are adjusted to their estimated fair values at each reporting period, with any decrease or increase in the estimated fair value being recorded in other income (expense).

Note 2 - Going Concern Uncertainty

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of the liabilities in the normal course of business and does not include any adjustments that might result from uncertainty about the Company’s ability to continue as a going concern.

The Company has incurred net losses since inception, including a net loss of $2,158,013 for the six months ending June 30, 2018. The Company has developed CÜR Music, a hybrid internet radio and on-demand music streaming service and has not generated significant revenue from operations and anticipates needing additional capital prior to launching CÜR Music to execute the current operating plan and make required payments to third-parties providing content for use on CÜR Music. As of June 30, 2018, the Company had a working capital deficit of $12,485,801. As of December 31, 2017, the Company had a working capital deficit of $10,490,470. The increase of $1,995,331, or approximately 19%, in working capital deficit was attributable to an increase in accounts payable of $90,114 (excluding decreases in accounts payable from debt relief), accrued and other current liabilities of $287,230, and an increase in the related party line of credit of $1,618,873. In addition, the Company has defaulted on certain debt obligations currently due and supply agreements (see Notes 4, 6, 9,and 10). These factors raise substantial doubt about the ability of the Company to continue as a going concern.

Refer to Notes 1 and 11 pertaining to the formation of Holdings in connection with raising capital for the purpose of extending funds to the Company, as well as assuming various obligations and contracts on behalf of the Company. The Company has cash on hand as of August 20, 2018 of $61,975. Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all.

The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations. Financing discussions have started; however, no specific terms have been set. While the Company expects to launch its CÜR Music streaming product once additional debt or equity financing is obtained, Holdings has delayed launch through the date of this report to evaluate and undertake extensive modifications to the user interface and user experience. Without funding from Holdings to conduct marketing and other launch activities, the Company has been and will continue to be unable to launch the product. Accordingly, the timing and distribution strategy is uncertain, and the Company may not be able to launch the product at all.

No assurances can be provided that any funds the Company obtains will be sufficient to effectively launch CÜR Music or to sustain the Company’s operating cash requirements until cash flow from operations are achieved, if ever. In addition, there are no assurances that the Company will secure additional financing or achieve and sustain a profitable level of operations. To the extent that the Company is unsuccessful in its plans, there could be a material adverse effect on the Company, which may include ceasing operations entirely.

Note 3 – Other Risks and Uncertainties

The Company operates in an industry that is subject to rapid technological change and intense competition. The Company’s operations are subject to significant risk and uncertainties including financial, operational, technological, content licensing, regulatory and other risks including the potential for business failure.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

On September 11, 2017, the Company entered into a non-binding term sheet with Holdings, pursuant to which the Company and Holdings agreed to consummate a Merger, under certain circumstances including notification from the SEC that it will not institute the proposed Administrative Proceedings, or, if instituted, will discontinue such proceedings. On June 5, 2018 the Company received notification from the SEC that it had concluded its investigation and advised the Company that it did not intend to recommend any Administrative Proceedings by the SEC against the Company. However, although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by them and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

The net proceeds from the Holdings Offerings, in the aggregate amount of $6,932,288 are to be used to pay the required Label Advances to the Music Labels sufficient to allow Holdings and/or the Company to proceed with soliciting subscriptions for CÜR Music, and to extend a line of credit to the Company for up to the full amount of the aggregate net proceeds from the Holdings Offerings (1) to enable the Company to pay outstanding accounts payable, employee deferred compensation, and monthly payments due by the Company under the New Note and (2) for working capital and general corporate purposes. While there is a process for requesting and approving drawdowns, it is not formally documented, approval is on a case-by-case basis, and the terms and associated interest on the Post-Closing Line of Credit is to be determined and will be reflected in the definitive documentation for the transaction. Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations, as it currently does not have sufficient cash to meet its operating needs. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely (see Note 2).

While the Company expects to launch its CÜR Music streaming product once additional debt or equity financing is obtained, Holdings has delayed launch through the date of this report to evaluate and undertake extensive modifications to the user interface and user experience. Without funding from Holdings to conduct marketing and other launch activities, the Company has been and will continue to be unable to launch the product. Accordingly, the timing and distribution strategy is uncertain, and the Company may not be able to launch the product at all.

Note 4 - Debt Instruments

Notes Payable

On June 19, 2012, the Company entered into a promissory note (“State of CT Note”) with State of Connecticut Department of Economic and Community Development (“CT DECD”) for up to $100,000. The State of CT Note bears interest at 2.5% per annum. Principal and interest were payable in forty-eight (48) equal, consecutive monthly installments. The full principal and all accrued interest were due and payable on June 19, 2017. The Company and CT DECD also entered into a security agreement whereby the State of CT Note is secured by all properties, assets and rights of the Company. As of each of June 30, 2018 and December 31, 2017, the balance due totaled $33,550. The DECD has not commenced any collection proceedings against the Company.

On July 6, 2017, the Company entered into the Line of Credit Note with CÜR Holdings, LLC. The Line of Credit Note has a principal balance of $685,000, and a stated maturity date of December 6, 2017. The principal on the Note does not bear interest. The Note is not convertible. The Note ranks junior to the Company’s existing Secured Notes (as defined below). In connection with the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), the Line of Credit Note was assigned and transferred to CUR Holdings, Inc. on November 16, 2017 in exchange for 194,175 Unit Shares (as defined in Note 9) of Holdings and Unit Warrants (as defined in Note 9 below) to purchase 1,263,827 shares of common stock of Holdings issued to CUR Holdings, LLC. As a result, Holdings became the payee under the Line of Credit Note. Upon completion of the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), the Company became obligated to pay CUR Holdings, Inc. the amounts due under the Line of Credit Note. The assignment did not alter the obligation of the Company under the original Line of Credit Note. As of December 6, 2017, the Company was in default of its obligations to repay amounts due under the Line of Credit Note. The Company remained in default as of June 30, 2018. Pursuant to the terms of the Line of Credit Note, the Company is required to pay the holder’s costs and expenses for collection, including reasonable attorneys’ fees.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The Company defaulted under its Agreement with Digitas, as a result of the Company’s failure to pay Digitas past due balances for the services Digitas provided. Digitas filed a claim against the Company for damages in the aggregate amount of $650,000 (the “Claimed Amount”), together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees. On November 15, 2017, the Company entered into a Settlement Agreement and Mutual Release (the “Digitas Settlement Agreement”) with Digitas, pursuant to which the Company agreed to pay Digitas an aggregate of $400,000, in full settlement of any and all claims arising from or relating to amounts due under the Master Multiple Services Agreement (the “Claims”). Digitas agreed to release the Company from any further Claims, subject only to the Company meeting its payment obligations under the Digitas Settlement Agreement and the Digitas Note (as defined below). Simultaneously with the execution of the Digitas Settlement Agreement, the Company issued a Promissory Note to Digitas (the “Digitas Note”) in the principal amount of $400,000. Pursuant to the Digitas Note, the Company (a) paid Digitas $100,000 on November 16, 2017 (the “First Payment”), (b) was required to pay Digitas ($100,000 on the eight (8) month anniversary of the date of the First Payment (the “Second Payment’), and (c) is required to pay Digitas and additional $200,000.00 on the one (1) year anniversary of the date of the First Payment. If the Company defaults on its payment obligations under the Digitas Note, after notice and failure to cure, Digitas may file a Consent Judgment for the full Claimed Amount, less payments already made, if any, together with post-judgment interest and reasonable attorneys’ fees and costs incurred by Digitas for purposes of collection. As disclosed in Note 7, on July 26, 2018, the Company received a notice of default from Digitas resulting from the Company’s failure to pay Digitas the Second Payment due under the Digitas Settlement Agreement on July 16, 2018. In an attempt to prevent Digitas from moving forward with obtaining a Consent Judgment, the Company is currently negotiating with Digitas with respect to the Second Payment. The Company’s requests to Holdings for funds to pay the Second Payment to Digitas have not yet been approved.

Unsecured Convertible Promissory Notes, net

On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016, the Company closed on Securities Purchase Agreements (the “Unsecured Note Purchase Agreements”) with certain “accredited investors” (the “Unsecured Note Buyers”), pursuant to which the Unsecured Note Buyers purchased 12% Unsecured Convertible Promissory Notes of the Company (the “Unsecured Notes”) in the aggregate principal amount of $2,113,500 (the “Unsecured Convertible Note Offering”). The aggregate gross proceeds to the Company from the Unsecured Convertible Note Offering were $2,113,500 (before deducting expenses related to the purchase and sale of the Unsecured Notes of $45,000), of which $586,000 of the proceeds were from members of the Company’s board of directors.

The Unsecured Notes have an aggregate principal balance of $2,113,500 and a stated maturity date of 5 years from the date of issuance. The principal on the Unsecured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. On April 12, 2016, with the closing of the Secured Convertible Note Offering (as defined below), certain terms of the Unsecured Notes were amended. Under the new terms of the Unsecured Notes, upon the closing of $15,000,000 in equity securities (“Equity Financing Securities”) by the Company (in this case, a “Qualified Offering”) all of the outstanding principal amount of the Unsecured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Unsecured Note Conversion Units”) at a conversion price per Unsecured Note Conversion Unit equal to the lesser of (i) $5.60 or (ii) a 20% discount to the price per share of the Equity Financing Securities. Each Unsecured Note Conversion Unit will consist of one share (the “Unsecured Note Conversion Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Unsecured Note Conversion Unit Warrants”) to purchase one additional share (the “Unsecured Note Conversion Unit Warrant Shares”) of the Company’s Common Stock at an exercise price of 125% of the Qualified Offering unit price. The terms of the amendment were in exchange for the Unsecured Note Buyers’ subordination to the Secured Note Buyers (as defined below).

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The embedded conversion feature in the Unsecured Notes was bifurcated to a derivative liability as it was not considered to be clearly and closely related to the host agreement. The Company recorded a derivative liability and debt discount of $2,034,037 upon issuance. The debt discount is being amortized to interest expense over the term of the loan. Refer to Note 5 for discussion of the derivative liability related to the Unsecured Notes. The unamortized debt discount was $1,015,085 at June 30, 2018, and the fair value of the derivative liability was $250,398 at June 30, 2018.

The Unsecured Note Conversion Unit Warrants, to be received upon conversion of the Unsecured Notes, provide for the purchase of shares of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering. The Unsecured Note Conversion Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Unsecured Note Conversion Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

The Company agreed to use its commercially reasonable efforts to file a registration statement (in this case, a “Registration Statement”) to register the Unsecured Note Conversion Unit Shares and Unsecured Note Conversion Unit Warrant Shares no later than (i) the date that is ninety (90) calendar days after the final closing under the Qualified Offering, or (ii) the date which is ninety (90) calendar days after the first optional conversion of the Unsecured Notes. The Company agreed to use its commercially reasonable efforts to have the Registration Statement declared effective no later than one hundred and eighty (180) calendar days after the Registration Statement is first filed with the SEC.

Convertible Secured Promissory Notes, net

On April 12, 2016, April 15, 2016, May 26, 2016, June 7, 2016 and July 20, 2016, the Company entered into Secured Note Purchase Agreements (the “Secured Note Purchase Agreements”) with certain “accredited investors” (the “Secured Note Buyers”), pursuant to which the Secured Note Buyers purchased 12% Secured Convertible Promissory Notes of the Company (the “Secured Notes”) in the aggregate principal amount of $2,515,000 (the “Secured Convertible Note Offering”). The aggregate gross proceeds to the Company from the Secured Convertible Note Offering were $2,515,000 (before deducting placement agent fees and expenses of $282,454), of which $255,060 were from members of the Company’s board of directors.

The Secured Notes are secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (“Security Agreement”) among the Company and the Secured Note Buyers. The security interest in and liens on all assets and property of the Company is a first priority security interest.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The Secured Notes have an aggregate principal balance of $2,515,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Secured Notes rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Secured Notes. Upon the closing of a qualified offering by the Company during the term of the Secured Notes involving the sale of at least $15,000,000 (in this case, a “Qualified Offering”) in Equity Financing Securities, all of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Secured Note Conversion Units”) at a conversion price per Secured Note Conversion Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Secured Notes may convert all or part of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, into Second Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Secured Note Conversion Unit will consist of one share (the “Secured Note Conversion Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Secured Note Conversion Unit Warrants”) to purchase one additional share (the “Secured Note Conversion Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Secured Notes, the entire unpaid principal balance of the Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of a Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Secured Note. The conversion price and number of Secured Note Conversion Units issuable upon conversion of the Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

The Company was unable to repay the noteholders upon maturity of the Secured Notes. Pursuant to the terms of the Secured Notes, the Company’s failure to pay any principal or interest within 5 days of the date such payment is due constitutes an event of default. Following the occurrence of an event of default, among other things, the interest rate on the Secured Notes increased to 15%.

On November 16, 2017, simultaneous with the Initial Closing (as defined in Note 9), the holders of all of the Company’s existing Secured Notes (the “Secured Noteholders”), in the aggregate principal amount of $2,515,000, with accrued and unpaid interest in the aggregate of $561,203, assigned, conveyed, transferred to Holdings all of the Secured Noteholders’ right, title, interest and obligations in, to and under the Secured Notes, and all claims, suits, causes of action and any other rights thereunder, in exchange for units of securities of Holdings, at an exchange rate of $2.00 of principal and interest due under the Secured Notes per unit. Upon completion of the transaction, the Company is now required to pay Holdings all amounts due under the Secured Notes, which is classified as due to related party on the consolidated balance sheet. The Company remains in default with respect to its obligations to repay amounts due under the Secured Notes but has not received a notice of default or other demand for payment from Holdings.

Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Secured Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Secured Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $251,500. In addition, the Placement Agent, and its designees, received warrants to purchase a number of shares of the Company’s Common Stock equal to 10% of the number of Secured Note Conversion Unit Shares into which Secured Notes sold in the Secured Convertible Note Offering to Secured Note Buyers introduced to the Secured Convertible Note Offering by the Placement Agent, and 8% of the number of Secured Note Conversion Unit Shares into which Secured Notes sold in the Secured Convertible Note Offering to Secured Note Buyers introduced to the Secured Convertible Note Offering by the Company or its representatives.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The Placement Agent’s warrants have a term of 5 years and an exercise price per share equal to the exercise price of the Secured Note Conversion Unit Warrant Shares issued to Secured Buyers introduced to the Secured Convertible Note Offering by the Placement Agent upon conversion (“Placement Agent Warrants”).

The embedded conversion feature in the Secured Notes was bifurcated to a derivative liability as it was not considered to be clearly and closely related to the host agreement. The Company recorded a derivative liability and debt discount of $2,091,053 upon issuance. The debt discount was being amortized to interest expense over the term of the loan. Refer to Note 5 for discussion of the derivative liability related to the Secured Notes. The debt discount was fully amortized at June 30, 2018 and the derivative liability was $1,185,029 at June 30, 2018.

The Secured Note Conversion Unit Warrants, to be received upon conversion of the Secured Notes, provide for the purchase of shares of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Secured Note Conversion Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Secured Note Conversion Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

The Company granted registration rights to each Secured Buyer with respect to the Secured Note Conversion Unit Shares and Secured Note Conversion Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

Note 5 – Derivative Liabilities

The PPO Warrants, 2014 Broker Warrants and Warrant Agent Warrants (discussed below) qualified for derivative classification upon issuance due to the price protection provisions on the exercise price. The initial fair value of these liabilities was recorded as an increase to derivative liabilities and a decrease in additional paid in capital as the warrants were issued in connection with the closings of private placement offerings. The embedded conversion feature of the Unsecured Notes and the Secured Notes described in Note 4 also qualify for derivative classification. The initial fair value of these liabilities was recorded as an increase to derivative liabilities with a corresponding debt discount. The fair value of these liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments included in other income or expenses.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the period ended June 30, 2018.

	Six Months Ended June 30, 2018

Balance at the beginning of period	$	1,542,304

Change in fair value of the conversion features on unsecured convertible notes		(26,927	)

Change in fair value of the conversion features on secured convertible notes		(79,950	)

Balance at the end of the period	$	1,435,427

The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities as their fair values were determined using the Black-Scholes option pricing model based on various assumptions. The model incorporates the price of a share of the Company’s Common Stock, volatility, risk free rate, dividend rate and estimated life.

The weighted average per-share fair value of the derivative liabilities associated with the embedded conversion features on the Unsecured Notes of $0.85 and $0.77 determined at December 31, 2017 and June 30, 2018, respectively, using the Black-Scholes pricing model using the following weighted average assumptions:

	Expected Volatility			Risk-free Interest Rate			Expected Dividend Yield			Expected Life (in years)

December 31, 2017		181.17	%		2.20	%		0	%		2.89
June 30, 2018		189.71	%		2.73	%		0	%		2.39

The weighted average per-share fair value of the derivative liabilities associated with the embedded conversion features on the Secured Notes of $1.01 and $0.94 determined at December 31, 2017 and June 30, 2018, respectively using the Black-Scholes pricing model using the following weighted average assumptions:

	Expected Volatility			Risk-free Interest Rate			Expected Dividend Yield			Expected Life (in years)


December 31, 2017		181.17	%		2.20	%		0	%		3.31
June 30, 2018		189.71	%		2.73	%		0	%		2.82

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

Note 6 - Commitments and Contingencies

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.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

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	*

______________

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

Note 7 – Legal Proceedings

The Company defaulted under the Digitas Agreement, as a result of the Company’s failure to pay Digitas past due balances for the services Digitas provided under the Digitas Agreement. Digitas filed a claim against the Company for damages in the aggregate amount of $650,000, together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees. As discussed in Notes 4 and 11, the Digitas Settlement Agreement was entered into on November 15, 2017. On July 26, 2018, the Company received notice of default resulting from the failure to pay the Second Payment due under the terms of the Digitas Settlement Agreement on July 16, 2018. In an attempt to prevent Digitas from moving forward with obtaining a Consent Judgment, the Company is currently negotiating with Digitas with respect to the Second Payment. The Company’s requests to Holdings for funds to pay the Second Payment to Digitas have not yet been approved (see Note 10).

Certain of the Company’s former employees filed outstanding claims against the Company for payment of unpaid wages totaling $50,000, which are accrued and remain outstanding. The Company has agreed to settlements on other employee claims totaling $127,843, which also are accrued and remain outstanding. The Company’s requests to Holdings for funds to pay these amounts have not yet been approved.

Cybercoders, Inc. (“Cybercoders”), a recruiter used in connection with certain employee placements, has filed a claim against the Company for failure to pay Cybercoders past due balances for the services they provided. The Company and Cybercoders agreed to a settlement amount of $5,000, which has not yet been paid. The Company’s requests to Holdings for funds to pay this amount have not yet been approved.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

24G, LLC (“24G”), a consultant that provided the Company with marketing services, has filed a claim against the Company for failure to pay 24G past due balances in the amount of $71,898 for the services they provided. The Company and 24G agreed to a settlement amount of $5,000. Following the Initial Closing (as defined in Note 9) of the Preferred Stock Unit Offering (as defined in Note 9), the settlement with 24G was paid.

A consultant that provided the Company with software development services, has filed a claim against the Company for failure to pay past due balances for services provided. A judgement was entered and recorded in the Circuit Court for Montgomery County, Maryland for $60,000. Following the closing of the Preferred Stock Unit Offering (as defined in Note 9), $10,000 was paid by the Company. The balance of $50,000 was paid by the Company in April 2018.

An attorney for iTexico LLC (“iTexico”), a software developer the Company used contacted the Company in an effort to collect $53,750 of past due balances iTexico claims it is owed for the services they provided. The Company reached a settlement of $9,000 with iTexico and paid that amount in November 2017.

We are currently not aware of any other pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.

Note 8 – Related Parties

The Company and Holdings are considered to be related parties based due to several factors. Please reference Notes 1, 4, 9 and 10 for details the nature of the relationship and transactions between the companies.

Note 9 – CUR Holdings, Inc.

Transactions and Proposed Additional Transactions with Holdings

On November 16, 2017, Holdings consummated an initial closing (the “Initial Closing”) of its private placement offering (the “Preferred Stock Unit Offering”), to certain “accredited investors” (each, a “Unit Purchaser” and, collectively, the “Unit Purchasers”), of a minimum of $6,000,000 (the “Minimum Amount”) of units of securities of Holdings (each, a “Preferred Stock Unit” and, collectively, the “Preferred Stock Units”), at a purchase price of $5.15 per Preferred Stock Unit (other than with respect to the assignment and transfer to Holdings of the Line of Credit Note, as further described above), with each Preferred Stock Unit consisting of (a) one (1) share of Series A convertible preferred stock of Holdings (each, a “Unit Share” and collectively, the “Unit Shares”), and (b) a 5-year warrant (each, a “Unit Warrant” and collectively, the “Unit Warrants”) to purchase 6.5087 shares of common stock of Holdings, at an exercise price of $1.00 per each full share. Holdings issued 1,195,033 Preferred Stock Units to the Unit Purchasers, consisting of 1,195,033 Unit Shares and 7,778,119 Unit Warrants, in consideration for (a) gross proceeds of $6,154,361 from the Initial Closing of the Preferred Stock Unit Offering.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

The net proceeds from the Preferred Stock Unit Offering and $2.5 Million Note Offering (as defined below) (together, the “Holdings Offerings”), in the aggregate amount of $6,932,288 (after deducting fees and expenses related to the Holdings Offerings in the aggregate amount of $722,074 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent)) are to be used to pay the required Label Advances to the Music Labels sufficient to allow Holdings and/or the Company to proceed with soliciting subscriptions for CÜR Music, the Company’s Internet music service, and to extend the Post-Closing Line of Credit to the Company, for up to the full amount of the aggregate net proceeds from the Holdings Offerings (1) to enable the Company to pay outstanding accounts payable, employee deferred compensation, and monthly payments due by the Company under the New Note (as defined below), and (2) for working capital and general corporate purposes. For the six-month period ended June 30, 2018, $1,618,873 was drawn down from the Post-Closing Line of Credit. Subsequent to June 30, 2018, and through the date of the report, an additional $385,790 has been drawn from the Post-Closing Line of Credit.

While there is a process for requesting and approving drawdowns, it is not formally documented. Approval is on a case by case basis and the terms and associated interest on the Post-Closing Line of Credit is to be determined and will be reflected in the definitive documentation for the transaction. Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations, as it currently does not have sufficient cash to meet its operating needs. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

Simultaneously with the closing of the Preferred Stock Unit Offering, Holdings consummated a private placement offering (the “$2.5 Million Note Offering”), to one “accredited investor” (the “New Note Purchaser”), intended to be exempt from registration under the Securities Act, pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D promulgated thereunder, of (a) a 12% senior secured promissory note of Holdings, in the principal amount of $2,500,000 (the “New Note”), with a term of twelve (12) months, at a purchase price of 100% of the face value amount of the New Note, and (b) 10-year warrants (the “New Note Warrants”) to purchase 1,000,000 shares of common stock of Holdings, at an exercise price per share of $0.0001.

In addition, simultaneously with the Initial Closing of the Preferred Stock Unit Offering, the Secured Noteholders of all of the Company’s existing Secured Notes in the aggregate principal amount of $2,515,000, with accrued and unpaid interest in the aggregate of $561,203, assigned, conveyed, transferred to Holdings all of the Secured Noteholders’ right, title, interest and obligations in, to and under the Secured Notes, and all claims, suits, causes of action and any other rights thereunder, in exchange for units (each, a “Secured Note Conversion Unit” and, collectively, the “Secured Note Conversion Units”) of securities of Holdings, at an exchange rate of $2.00 of principal and interest due under the Secured Notes per unit, in an transaction intended to be exempt from registration under the Securities Act, pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D promulgated thereunder (the “Secured Note Assignment Transaction”). Each Secured Note Conversion Unit consisted of (a) one (1) share of common stock of Holdings (each, a “Secured Note Conversion Share” and, collectively, the “Secured Note Conversion Shares”), and (b) a 5-year warrant (each, a “Secured Note Conversion Warrant” and, collectively, the “Secured Note Conversion Warrants”) to purchase one (1) share of common stock of Holdings for every share of common stock of Holdings received upon exchange, at an exercise price per share equal to $1.00. Upon completion of the transaction, the Company is required to pay Holdings amount due under the Secured Notes. In connection with the Secured Note Assignment Transaction, (a) Holdings issued 1,538,102 Secured Note Conversion Units, consisting of 1,538,102 Secured Note Conversion Shares, and 1,538,102 Secured Note Conversion Warrants, and (b) Holdings became the sole payee under the Secured Notes. The Secured Note Assignment Transaction did not alter the obligation of the Company under the original Secured Notes. Upon completion of the transaction, the Company is now required to pay Holdings all amounts due under the Secured Notes, which is classified as due to related party on the consolidated balance sheet. The Company remains in default with respect to its obligations to repay amounts due under the Secured Notes but has not received a notice of default or other demand for payment from Holdings.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

Immediately prior to the Initial Closing of the Preferred Stock Unit Offering, and as a condition thereto, Holdings entered directly into the New Music Label Agreements with the Music Labels. Upon consummation of the Initial Closing of the Preferred Stock Unit Offering, Holdings paid Label Advances due to the Music Labels pursuant to the New Music Label Agreements in the aggregate amount of $2,500,000. In addition, Holdings issued the Music Labels warrants to purchase an aggregate of 1,750,000 shares of common stock of Holdings, at an exercise price of $1.00 per share.

The Company joined one of the New Music Label Agreements, while the other two 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.

On November 16, 2017, the board of directors of Holdings increased the number of members constituting the board of directors from one (1) to three (3). The board of directors of Holdings then appointed Thomas Brophy, the Company’s President, Chief Executive Officer, Interim Chief Financial Officer and Treasurer, and a member of the Company’s board of directors, and Edward P. Swyer, a member of the board of directors of the Company, as members of the board of directors of Holdings, to fill the two vacancies resulting from the increase to the number of seats on the board of directors, to serve until their successors shall be duly appointed, unless they resign, are removed from office, or are otherwise disqualified from serving as directors for Holdings. On July 9, 2018 and July 10, 2018, Mr. Swyer and Mr. Brophy resigned as members of the board of directors of Holdings, respectively.

Immediately following the Initial Closing of the Preferred Stock Unit Offering, Holdings issued one (1) share of its Series B voting preferred stock (“Series B Preferred Stock”) to William F. Duker, the President and Treasurer of Holdings, and a member of the board of directors of Holdings. Pursuant to the Certificate of Designation of Series B Voting Preferred Stock of Holdings (the “Series B Certificate of Designation”), the holder of the Series B Preferred Stock has the right (a) to elect the number of directors on the board of directors of Holdings constituting the majority, and (b) to approve any merger (including the Merger), asset sale (including the Asset Transfer), or other fundamental transaction to be effected by Holdings.

The Company and Holdings currently have no common board members and are two separate and distinct entities with two completely different sets of officers running their day-to-day affairs, separate corporate offices where their books and records are separately kept, and very different shareholder bases. Further, while Holdings has agreed to extend the Post-Closing Line of Credit to the Company for up to the full amount of the aggregate net proceeds from the Holdings Offerings, drawdowns against the line of credit must be requested by the Company and approved by Holdings. Requests may be approved or rejected by Holdings on a case-by-case basis. Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations, as it currently does not have sufficient cash to meet its operating needs. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

In accordance with the Term Sheet, if the Company receives SEC Clearance (or, at the discretion of the boards of directors of the Company and Holdings, as described above), Holdings will consummate the Merger. The Company and Holdings anticipate that the Merger, if consummated, will qualify as a tax-free reorganization under the U.S. Internal Revenue Code. If there is an SEC Revocation of the Company’s Common Stock under the Exchange Act (or, at the discretion of the boards of directors of the Company and Holdings, as described above), the Company and Holdings will consummate the Asset Transfer. The Company received SEC Clearance on June 5, 2018, however, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations (see Note 10).

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

Simultaneously with the closing of the Holdings Offerings, shareholders representing at least fifty-one percent (51%) of the voting capital stock of each of the Company and Holdings, and of the Unit Purchasers in the Preferred Stock Unit Offering and Secured Noteholders in the Secured Note Assignment Transaction, entered into voting agreements, pursuant to which they agreed to vote in favor of the Combination Transaction, as applicable. Although shareholder consent has been obtained, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

On May 15, 2018, Holdings consummated a Second Closing of the Preferred Stock Unit Offering, for gross proceeds to Holdings of $1,246,300. The net proceeds from the Second Closing, in the aggregate amount of $1,086,131 (after deducting fees and expenses related to the Second Closing in the aggregate amount of $160,169 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent), are to be used in the same manner as the net proceeds of the Initial Closing of the Preferred Stock Unit Offering.

In the event the Merger is consummated, the Company agreed that promptly, but no later than 120 calendar days from the consummation of the Merger, the Company will file a registration statement (on Form S-1, or similar form) with the SEC (in this case, the “Registration Statement”) covering (a) the shares of common stock underlying the Unit Shares and Unit Warrants issued in connection with the Preferred Stock Unit Offering, (b) the shares of common stock underlying New Note Warrants issued in connection with the $2.5 Million Note Offering, (c) the shares of common stock underlying the Placement Agent Warrants and the Additional Placement Agent Warrants, and (d) the Secured Note Conversion Shares and the shares of common stock underlying the Secured Note Conversion Warrants issued in connection with the Secured Note Assignment Transaction (the “Registrable Securities”). The Company will use its commercially reasonable efforts to ensure that the Registration Statement is declared effective by the SEC within 210 days of filing with the SEC. Any cutback resulting from the removal of any of the Registrable Securities from the Registration Statement in response to a comment from the Staff of the SEC limiting the number of shares of common stock which may be included in the Registration Statement, shall be allocated on a pro rata basis, based on the total number of such shares held by or issuable to each holder. The Company will keep the Registration Statement “evergreen” for at least one (1) year from the date it is declared effective by the SEC, or for such shorter period ending on the sale of all Registrable Shares thereunder.

Note 10 – Subsequent Events

On July 9, 2018, Edward P. Swyer resigned as a member of the Board of Directors of the Company thereby reducing the Company’s Board to two members. Mr. Swyer’s resignation was for personal reasons and was not the result of a disagreement with the Company on any matter relating to its operations, policies, or practices.

On July 24, 2018, Thomas Brophy resigned as the Company’s President and Chief Executive Officer. As a result of his resignation he relinquished his role as the Company’s “Principal Executive Officer” for SEC reporting purposes. Mr. Brophy will continue to serve as a member of the Company’s board of directors. In connection with his resignation, on July 24, 2018, Mr. Brophy provided the Company’s Board with a Notice of Termination for “Good Reason” (the “Notice of Termination”) pursuant to Section 5.4 of his Employment Agreement with the Company, dated January 28, 2014 (the “Employment Agreement”). In the Notice of Termination, Mr. Brophy indicated that the termination was due to the Company’s failure to pay him the compensation for his services that he was entitled to receive under the Employment Agreement. The Company was not able to pay Mr. Brophy because its requests to Holdings for funds to pay Mr. Brophy were not approved. Under Section 5.4 of the Employment Agreement, if the Company does not substantially cure within 30 days of receipt of the Notice of Termination, the Employment Agreement will terminate as of such 30th day.

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CÜR MEDIA, INC.

Notes to Condensed Consolidated Financial Statements

For the Six Months Ended June 30, 2018 and 2017

(Unaudited)

As discussed in Note 7, the Company defaulted under the Digitas Agreement with Digitas, as a result of the Company’s failure to pay Digitas past due balances for the services Digitas provided under the Digitas Agreement. Digitas filed a claim against the Company for damages in the aggregate amount of $650,000, together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees. As discussed in Notes 4 and 11, the Digitas Settlement Agreement was entered into on November 15, 2017. On July 26, 2018, the Company received notice of default resulting from the failure to pay the Second Payment due under the Digitas Settlement Agreement on July 16, 2018. Due to the Company’s failure to make the Second Payment, Digitas is entitled to obtain a Consent Judgment in the amount of $650,000, together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees after three (3) business days’ notice of default to the Company. As of the date of this writing Digitas has not requested consent judgment. In an attempt to prevent Digitas from moving forward with obtaining the Consent Judgment, the Company is currently negotiating with Digitas with respect to the Second Payment. The Company’s requests to Holdings for funds to pay the Second Payment to Digitas have not yet been approved.

Holdings has only partially funded the Company’s requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements. In addition, as of August 15, 2018, we were forced to lay off the entire workforce, leaving only John Egazarian, the Company’s Head of Product and Chief Operations Officer, Michael Betts, the Company’s Chief Technology Officer, and Kelly Sardo, the Company’s Chief Financial Officer, Secretary and Treasurer, as employees of the Company. No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings have been actively seeking sources of equity or debt financing to support the Company’s operations. To date, the Company’s efforts to identify alternate sources of equity or debt financing have not been successful, and the Company currently does not have sufficient cash to meet its operating needs. If Holdings does not provide the Company with additional funding through the Post-Closing Line of Credit, or if adequate alternative funding is not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

Although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. Going forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business transaction that presents an opportunity for our securityholders. No specific transaction has been definitively identified, and there is no certainty that any such transaction will be identified or consummated. If a business transaction is not consummated, we may need to cease operations.

On August 16, 2018, the Company’s board of directors appointed Kelly Sardo, the Company’s Chief Financial Officer, Secretary and Treasurer, as the Company’s Interim President, to serve until her successor shall be duly appointed. In addition, for SEC reporting purposes, Ms. Sardo was designated as the Company’s “Principal Executive Officer.”

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our Annual Report, as updated in subsequent filings we have made with the SEC that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Basis of Presentation

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

As a result of the Contribution (as defined below), and the related change in our business and operations, a discussion of our past financial results is not pertinent, and under applicable accounting principles the historical financial results of CÜR Media, LLC (formerly Raditaz, LLC), the accounting acquirer, prior to the Contribution, are considered the historical financial results of the Company.

The audited financial statements for our fiscal year ended December 31, 2017, contained in our Annual Report, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.

References in this section to “CÜR Media,” “we,” “us,” “our,” “the Company” and “our Company” refer to CÜR Media, Inc., and its consolidated subsidiary, CÜR Media, LLC.

General Overview

We were incorporated in the State of Delaware as Duane Street Corp. on November 17, 2011. On January 28, 2014, we consummated a contribution transaction with CÜR Media, LLC, a limited liability company organized in the State of Connecticut on February 15, 2008 (the “Contribution”), pursuant to a Contribution Agreement by and among the Company, CÜR Media, LLC, and the holders of a majority of CÜR Media, LLC’s limited liability company membership interests (the “Contribution Agreement”). In connection with the Contribution, and in accordance with the terms and conditions of the Contribution Agreement, all outstanding securities of CÜR Media, LLC were exchanged for securities of ours.

Prior to the Contribution, CÜR Media, LLC’s activities since inception had been devoted primarily to the development and commercialization of Raditaz, a DMCA compliant internet radio product. Raditaz was launched in early 2012 and the platform was continually developed and improved through November 2013 when its iOS, Android and web products were removed from the market, to allow us to focus on the further development of our CÜR Music product.

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The Raditaz music streaming platform and products were under development since 2010 and, prior to the 2014 PPO (as defined below), were financed primarily from angel investments in the aggregate amount of approximately $4,858,000, $150,000 of financing from a promissory note from CT Innovations, Incorporated, and a $100,000 promissory note and a $100,000 grant from the State of Connecticut Department of Economic Development.

As a result of the Contribution, CÜR Media, LLC became our wholly owned subsidiary, and we adopted the business of CÜR Media, LLC, which is to develop and commercialize a streaming music experience for listening on the web and mobile devices, as our sole line of business (the “Music Streaming Business”).

On January 31, 2014, we changed our name to CÜR Media, Inc., a name that more accurately represents our new business focus. In connection with the name change, we changed our OTC trading symbol to “CURM.”

In addition, on January 31, 2014, we increased our number of authorized shares to 310,000,000 shares, consisting of (i) 300,000,000 shares of common stock, par value $0.0001 per share (“Common Stock”), and (ii) 10,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

Further, on January 31, 2014, our board of directors authorized a 1.26953123-for-1 forward split of our Common Stock, in the form of a dividend, pursuant to which each shareholder of our Common Stock as of the record date received 1.19260815 additional shares of Common Stock for each one share owned.

In a private placement financing we conducted with respect to which closings occurred on January 28, 2014, March 14, 2014 and March 28, 2014 (the “2014 PPO”), we sold an aggregate of 744,756 shares of our Common Stock, and warrants to purchase an aggregate of 744,756 shares of our Common Stock at an exercise price of $26.00 per share for a term of five (5) years (“PPO Warrants”), for gross proceeds of approximately $9,680,000 (before deducting placement agent fees and expenses of the 2014 PPO estimated at approximately $1,529,000).

On April 6, 2015, we consummated an offer to amend and exercise the PPO Warrants (the “Offer to Amend and Exercise Warrants”). The PPO Warrants of holders who elected to participate in the Offer to Amend and Exercise Warrants were amended to, among other things, remove the price-based anti-dilution provisions contained therein and reduce the exercise price from $26.00 to $6.50 per share of Common Stock. Pursuant to the Offer to Amend and Exercise Warrants, an aggregate of 497,548 PPO Warrants were amended and exercised by their holders, for gross proceeds of approximately $3,234,000 (before deducting warrant agent fees and expenses of the Offer to Amend and Exercise estimated at approximately $417,000).

Effective on or prior to April 6, 2015, the Company and the holders of (a) 113,469 PPO Warrants, that chose not to participate in the Offer to Amend and Exercise Warrants (“Non-Participating Original Warrants”), and (b) all 74,483 Broker Warrants, approved an amendment to remove the price-based anti-dilution provisions in their warrants. As a result, the price-based anti-dilution provisions contained in these Non-Participating Original Warrants and Broker Warrants have been removed and are of no further force or effect as of April 6, 2015.

The warrant agent for the offer to Amend and Exercise Warrants was paid an aggregate commission of approximately $323,350 and was issued warrants to purchase an aggregate of 49,752 shares of our Common Stock at an exercise price of $6.50 per share for a term of five (5) years (“Warrant Agent Warrants”).

Certain securities we issued in the 2014 PPO had price-based anti-dilution protection (“Anti-Dilution Rights”), if, within twenty-four (24) months after the final closing of the 2014 PPO, we issue additional shares of Common Stock or Common Stock equivalents (subject to customary exceptions) for a consideration per share less than $13.00. Of the 744,756 PPO Warrants, 133,739 still remained with these priced-based anti-dilution rights. With the consummation of the exercise and amendment of the PPO Warrants and the issuance of the Warrant Agent Warrants to the Warrant Agent, the anti-dilution provisions were triggered and the non-participating warrant holders received (i) an aggregate of 17,180 additional shares of Common Stock (ii) a reduction in the price of their PPO Warrants from $26.00 per share to $23.01 per share, and (iii) an aggregate of 17,180 additional warrants to purchase shares of Common Stock of the company at an exercise price of $23.01 per share.

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On October 20, 2015, October 26, 2015, November 13, 2015, November 24, 2015, November 30, 2015, December 30, 2015 and January 14, 2016 we entered into Securities Purchase Agreements (in this case, the “Purchase Agreements”) with certain “accredited investors (the “Unsecured Buyers”), pursuant to which the Unsecured Buyers purchased 12% Unsecured Convertible Promissory Notes of the Company (the “Unsecured Notes”) in the aggregate principal amount of $2,113,500 (the “First Convertible Note Offering”). The aggregate gross proceeds to the Company were $2,113,500 (before deducting expenses related to the purchase and sale of the Unsecured Notes of approximately $45,000), of which $586,000 in proceeds were from members of our board of directors.

The Unsecured Notes have an aggregate principal balance of $2,113,500 and a stated maturity date of 5 years from the date of issuance. The principal on the Unsecured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. On April 12, 2016, with the closing of the Secured Convertible Notes Offering (as defined below), certain terms of the Unsecured Notes were amended. Under the new terms of the Unsecured Notes, upon the closing of $15,000,000 in equity securities (“Equity Financing Securities”) by the Company (in this case, a “Qualified Offering”) all of the outstanding principal amount of the Unsecured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of our securities (the “Unsecured Note Conversion Units”) at a conversion price per Unsecured Note Conversion Unit equal to the lesser of (i) $5.60 or (ii) a 20% discount to the price per share of the Equity Financing Securities. Each Unsecured Note Conversion Unit will consist of one share (the “Unsecured Note Conversion Unit Shares”) of our Common Stock, and one five-year warrant (the “Unsecured Note Conversion Unit Warrants”) to purchase one additional share (the “Unsecured Note Conversion Unit Warrant Shares”) of our Common Stock at an exercise price of 125% of the Qualified Offering unit price. The terms of the amendment were in exchange for the Unsecured Note holders’ subordination to the Secured Note holders.

The Unsecured Note Conversion Unit Warrants, to be received upon conversion of the Unsecured Notes, provide for the purchase of shares of our Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering. The Unsecured Note Conversion Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Unsecured Note Conversion Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

The Company agreed to use its commercially reasonable efforts to file a registration statement (“Registration Statement”) to register the Unsecured Note Conversion Unit Shares and Unsecured Note Conversion Unit Warrant Shares no later than (i) the date that is ninety (90) calendar days after the final closing under the Qualified Offering, or (ii) the date which is ninety (90) calendar days after the first optional conversion of the Unsecured Notes. The Company agreed to use its commercially reasonable efforts to have the Registration Statement declared effective no later than one hundred and eighty (180) calendar days after the Registration Statement is first filed with the SEC.

With the issuance of Unsecured Notes, the Anti-Dilution Rights were triggered and the holders of the Non-Participating Original Warrants received, or are entitled to receive (i) an aggregate of 18,674 additional shares of Common Stock, (ii) a reduction in the price of their PPO Warrants from $23.01 per share to $20.50 per share, and (iii) an aggregate of 18,674 additional warrants to purchase shares of Common Stock of the Company at an exercise price of $20.50 per share.

In early 2016, the Company entered into agreements (“Music Label Agreements”) with certain music labels (“Music Labels”), pursuant to which the Company was provided limited, non-exclusive licenses to digitally distribute certain sound recordings and related materials owned or controlled by the Music Labels in connection with CÜR Music, the music streaming product we are developing (“CÜR Music”), within the United States and its territories, commonwealths, and possessions. The Company had also entered into agreements (“Publishing Agreements”) with certain music publishing companies (“Music Publishers”) either directly or through a third party, pursuant to which the Company had been provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the Music Publishers in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions. The Music Label Agreements and Publishing Agreements may be collectively referred to herein as the “Content Agreements,” and the Music Labels and Music Publishers may be collectively referred to herein as the “Content Providers.”

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However, we defaulted on the Music Label Agreements as a result of our failure to pay advances due to the Music Labels pursuant to such agreements, and the Music Label Agreements were subsequently terminated. The Company also defaulted on its Music Label Agreement with Warner Music, Inc. (“WMG”) as a result of the Company’s failure to pay WMG the advance due pursuant to such agreement. WMG did not initiate termination of their agreement.

On February 16, 2016, we effected a 1-for-13 reverse stock split (the “Reverse Stock Split”). Upon effectiveness of the Reverse Stock Split, every thirteen (13) outstanding shares of our Common Stock (“Old Common Stock”) were, without any further action by us, or any holder thereof, combined into and automatically became one share of our Common Stock. Any fractional shares have been rounded up to one whole common share. All shares of Common Stock eliminated as a result of the Reverse Stock Split have been cancelled such that they were returned to our authorized and unissued capital stock, and our capital has been reduced by an amount equal to the par value of the Old Common Stock so retired.

On April 12, 2016, April 15, 2016, May 26, 2016, June 7, 2016 and July 20, 2016 the Company entered into Securities Purchase Agreements (in this case, the “Purchase Agreements”) with certain “accredited investors” (the “Secured Buyers”), pursuant to which the Secured Buyers purchased 12% Senior Secured Convertible Promissory Notes of the Company (the “Secured Notes”) in the aggregate principal amount of $2,515,000 (before deducting placement agent fees and expenses of $282,454) (the “Second Convertible Note Offering”). The Company used the net proceeds from the Second Convertible Note Offering for certain payments to content owners and working capital and general corporate purposes.

The Secured Notes are secured by a security interest in and lien on all now owned or hereafter acquired assets and property, real and personal, of the Company and its subsidiaries, including the Company’s intellectual and technology property pursuant to the terms of a security agreement (in this case, the “Security Agreement”) among the Company and the Secured Buyers. The security interest in and liens on all assets and property of the Company will be a first priority security interest.

The Secured Notes have an aggregate principal balance of $2,515,000, and a stated maturity date of 6 months from the date of issuance. The principal on the Secured Notes bears interest at a rate of 12% per annum, which is also payable on maturity. The Secured Notes rank senior to all existing indebtedness of the Company, except as otherwise set forth in the Secured Notes. Upon the closing of a financing (in this case, a “Qualified Offering”) by the Company during the term of the Secured Notes involving the sale of at least $15,000,000 in Equity Financing Securities, all of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, will automatically convert (in this case, a “Mandatory Conversion”) into units of the Company’s securities (the “Second Units”) at a conversion price per Second Unit equal to the lesser of (a) 80% of the price per share of the Equity Financing Securities sold in the Qualified Offering, or (b) $2.00. At any time prior to a Mandatory Conversion, the holders of the Secured Notes may convert all or part of the outstanding principal amount of the Secured Notes, together with accrued and unpaid interest due thereon, into Second Units at a conversion price of $2.00 per Unit (in this case, an “Optional Conversion”). Each Second Unit will consists of one share (the “Second Unit Shares”) of the Company’s Common Stock, and one five-year warrant (the “Second Unit Warrants”) to purchase one additional share (the “Second Unit Warrant Shares”) of the Company’s Common Stock at an exercise price equal to (a) 125% of the price at which the Company’s equity securities (or securities convertible into or exercisable for equity securities) are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. Upon failure by the Company to pay any principal amount or interest due under the Secured Notes within 5 days of the date such payment is due, or the occurrence of other event of default under the terms of the Secured Notes, the entire unpaid principal balance of the Secured Notes, together with any accrued and unpaid interest thereon, will become due and payable, without presentment, demand, protest or notice of any kind. In the event of any liquidation, dissolution or winding up of the Company, each holder of a Secured Note will be entitled to receive, pari passu with the other holders of the Secured Notes, and in preference to the holders of the Company’s other outstanding securities, an amount equal to two times the principal amount of, and any accrued and unpaid interest on, such holder’s Secured Note. The conversion price and number of Second Units issuable upon conversion of the Secured Notes will be subject to adjustment from time to time for subdivision or consolidation of shares and other standard dilutive events.

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Pursuant to the terms of a Placement Agency Agreement (in this case, the “Placement Agency Agreement”) between the Company and the placement agent for the Second Convertible Note Offering (in this case, the “Placement Agent”), in connection with the closing of the Second Convertible Note Offering, the Placement Agent was paid a commission of an aggregate of $236,500. In addition, the Placement Agent, or its designees, received warrants to purchase a number of shares of Common Stock equal to 10% of the number of Second Unit Shares into which Secured Notes sold in the Second Convertible Note Offering to Secured Buyers introduced to the Second Convertible Note Offering by the Placement Agent, and 8% of the number of Second Unit Shares into which Secured Notes sold in the Second Convertible Note Offering to Secured Buyers introduced to the Second Convertible Note Offering by the Company or its representatives, are converted upon a Mandatory Conversion, with a term of 5 years and an exercise price per share equal to the exercise price of the Second Unit Warrant Shares issued to Secured Buyers introduced to the Second Convertible Note Offering by the Placement Agent upon a Mandatory Conversion (“Placement Agent Warrants”).

The Second Unit Warrants, to be received upon conversion of the Secured Notes, provide for the purchase of shares of the Company’s Common Stock an exercise price equal to (a) 125% of the price at which the Company’s Equity Financing Securities are sold in a Qualified Offering in the event of a Mandatory Conversion, or (b) 125% of $2.00 in the event of an Optional Conversion. The Second Unit Warrants are exercisable for cash only, for a term of 5 years from the date of issuance. The number of shares of Common Stock to be deliverable upon exercise of the Second Unit Warrants is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events.

The Company granted registration rights to each Secured Buyer with respect to the Second Unit Shares and Second Unit Warrant Shares, and to the Placement Agent, with respect to the Common Stock issuable upon exercise of the Placement Agent Warrants, in each case on a pari passu basis with, and upon substantially the same terms as the registration rights granted to, the investors in a Qualified Offering.

As of August 2016, we had laid off all of our employees and ceased significant operations, other than capital raising activities intended to continue our Music Streaming Business. These capital-raising activities were led by our Founder and then-sole director, Thomas Brophy.

On September 11, 2017, we entered into a non-binding term sheet (the “Term Sheet”) with CUR Holdings, Inc., a related Delaware corporation, formed on August 14, 2017, for the purpose of raising capital to effectuate a transaction with the Company, or another company in the music streaming space (“Holdings”), pursuant to which the Company and Holdings agreed to consummate either a Merger (as defined below) or an Asset Transfer (as defined below), under certain circumstances. Pursuant to the Term Sheet, in the event the Company receives notification from the SEC that it will not institute the proposed Administrative Proceedings, or, if instituted, will discontinue such proceedings (“SEC Clearance”), Holdings will, subject to any required shareholder approval, merge with and into the Company, with the Company continuing as the surviving entity (the “Merger”); provided, however, that the boards of directors of the Company and Holdings may mutually agree to proceed with the Merger prior to receipt of SEC Clearance. If, however, the SEC commences the proposed Administrative Proceedings against the Company, and such proceedings result in the revocation of the registration of our Common Stock under the Exchange Act (“SEC Revocation”), the Company and Holdings will, subject to any required shareholder approval, enter into a fair value asset purchase and sale transaction, pursuant to which Holdings will acquire all of the intellectual property and other assets and liabilities constituting our Music Streaming Business (the “Asset Transfer” and, together with the Merger, a “Combination Transaction”); provided, however, that the boards of directors of the Company and Holdings may mutually agree to proceed with the Asset Transfer any time commencing on the ninety-first (91st) day after the effective date of the Term Sheet. On June 5, 2018 the Company received clearance from the SEC that it had concluded its investigation and advised the Company that it did not intend to recommend any Administrative Proceedings by the SEC against the Company. However, although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

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The net proceeds from the Holdings Offerings, in the aggregate amount of $6,932,288 are to be used to pay the required Label Advances to the Music Labels sufficient to allow Holdings and/or the Company to proceed with soliciting subscriptions for CÜR Music, and to extend a line of credit to the Company for up to the full amount of the aggregate net proceeds from the Holdings Offerings (1) to enable the Company to pay outstanding accounts payable, employee deferred compensation, and monthly payments due by the Company under the New Note and (2) for working capital and general corporate purposes. While there is a process for requesting and approving drawdowns, it is not formally documented, approval is on a case-by-case basis, and the terms and associated interest on the Post-Closing Line of Credit is to be determined and will be reflected in the definitive documentation for the transaction. Through the date of this reporting, advance requests have not been fully funded resulting in default of certain vendor agreements and lay off of the entire workforce. There has been no assurance from Holdings that they will continue to fund further disbursement requests.

As of June 30, 2018, we have devoted substantially all of our efforts to product development, raising capital and building our technology infrastructure. As of that date, we did not receive any material revenues from our planned principal operations.

Our Strategy

Our CÜR Music product is a new streaming music experience that combines the listening experience of free internet radio products with an on-demand listening experience for listening on web and mobile devices, beginning at $1.99 per month. The Company expects to launch its CÜR Music streaming product once additional debt or equity financing is obtained. However, Holdings has delayed launch through the date of this report to evaluate and undertake extensive modifications to the user interface and user experience. Without funding from Holdings to conduct marketing and other launch activities, the Company has been and will continue to be unable to launch the product. Accordingly, the timing and distribution strategy is uncertain, and we may not be able to launch our product at all.

We will face competition from larger and more established media service providers, which include traditional offline music distribution competitors and larger media companies like Apple, Google, Spotify, Amazon and others, and from other online digital music services. We will compete on the basis of a number of factors, including quality of experience, relevance, acceptance and diversity of content, ease of use, price, accessibility, perceptions of ad load, brand awareness and reputation. CÜR Music will target consumers who are seeking a more comprehensive music streaming service than current free, ad-supported music streaming products. We believe that the CÜR Music product will include a hybrid model that includes many features that free, ad-supported internet radio products provide, without interruptive advertising, with a limited on-demand offering, and will include a social toolset that enables consumers to curate certain aspects their playlists at a price point that is unmatched in the industry.

In addition to revenue from subscriptions, our business plan includes a second revenue stream of personalized advertising, which will not interrupt a stream, but will target a user’s listening habits. The advertising may be in the form of display ads, email and text messages. Our business plan further includes a third revenue stream from the sale of music, concert tickets and merchandise through our music streaming service, to be tailored to each listeners taste based on prior listening trends. We plan to sell advertising, music downloads and concert tickets and merchandise in the future subsequent to launch.

Our current business plan includes distributing our music streaming service through Apple’s iTunes App Store to iOS devices, Google’s Google Play Store to Android devices and the internet, among other distribution channels and platforms. At launch, we plan to have an iOS application, Android application and a CÜR Music website. The CÜR Music application was previously submitted to and approved by the iTunes app store and the Google Play store and we anticipate it will be approved again upon resubmission.

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We plan to source our music from MusicNet, Inc. d/b/a Media Net Digital, Inc. We also plan to use Amazon web services to support certain of the technological needs of the business.

The Company expects to launch its CÜR Music streaming product once additional debt or equity financing is obtained. However, Holdings has delayed launch through the date of this report to evaluate and undertake extensive modifications to the user interface and user experience. Without funding from Holdings to conduct marketing and other launch activities, the Company has been and will continue to be unable to launch the product. Accordingly, the timing and distribution strategy is uncertain.

As of June 30, 2018, we do not have adequate capital to launch CÜR Music, therefore, we continue to pursue sources of equity and/or debt financing to support our operations. We need to raise a substantial amount of capital, to fully implement our business plan, market CÜR Music, meet additional content license cost obligations, and for general working capital. No assurances can be provided that these funds will be sufficient to effectively launch CÜR Music or to sustain the Company’s operating cash requirements until cash flow from operations are achieved, if ever.

Recent Developments

Six-Month Line of Credit Promissory Note

On July 6, 2017, we entered into a Six-Month Line of Credit Promissory Note (the “Line of Credit Note”) with CUR Holdings, LLC, a New York limited liability company. The Line of Credit Note has a principal balance of $685,000, and a stated maturity date of December 6, 2017. The principal on the Line of Credit Note does not bear interest. The Line of Credit Note is not convertible. The Line of Credit Note ranks junior to the Company’s existing Secured Notes.

In connection with the Initial Closing (as defined below) of the Preferred Stock Unit Offering (as defined below), the Line of Credit Note was assigned and transferred to Holdings (as defined below) in exchange for 194,175 Unit Shares (as defined below) of CUR Holdings, Inc. and Unit Warrants (as defined below) to purchase 1,263,827 shares of common stock of CUR Holdings, Inc. issued to CUR Holdings, LLC. As a result, CUR Holdings, Inc. became the payee under the Line of Credit Note. Upon completion of the Initial Closing (as defined below) of the Preferred Stock Unit Offering (as defined below), we are now required to pay Holdings the amounts due under the Line of Credit Note. The assignment did not alter the obligation of the Company under the original Line of Credit Note.

As of December 6, 2017, the Company was in default of its obligations to repay amounts due under the Line of Credit Note. The Company remained in default as of June 30, 2018. Pursuant to the Line of Credit Note, the Company is required to pay the holder’s costs and expenses for collection, including reasonable attorneys’ fees.

Receipt of Wells Notice

On July 19, 2017, we received a “Wells Notice” from the staff (the “Staff”) of the SEC. The Wells Notice provided notification to the Company that the Staff had made a preliminary determination to recommend that the SEC institute administrative proceedings (“Administrative Proceedings”) against the Company pursuant to Sections 12(j) and 12(k) of the Exchange Act, based solely upon our failure to comply with our reporting obligations under Section 13(a) of the Exchange Act. Sections 12(j) grants the SEC the right, after notice and opportunity for a hearing, to revoke the registration of a security. Section 12(k) grants the SEC the right to suspend trading in a security.

As of May 21, 2018, the Company had filed all of the delinquent reports and was current with respect to its filing obligations.

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Transactions and Proposed Additional Transactions with Holdings

On September 11, 2017, we entered into a non-binding term sheet (the “Term Sheet”) with CUR Holdings, Inc., a related Delaware corporation, formed on August 14, 2017, for the purpose of raising capital to effectuate a transaction with the Company, or another company in the music streaming space (“Holdings”), pursuant to which the Company and Holdings agreed to consummate either a Merger (as defined below) or an Asset Transfer (as defined below), under certain circumstances. Pursuant to the Term Sheet, in the event the Company receives notification from the SEC that it will not institute the proposed Administrative Proceedings, or, if instituted, will discontinue such proceedings (“SEC Clearance”), Holdings will, subject to any required shareholder approval, merge with and into the Company, with the Company continuing as the surviving entity (the “Merger”); provided, however, that the board of directors of the Company and Holdings may mutually agree to proceed with the Merger prior to receipt of SEC Clearance. If, however, the SEC commences the proposed Administrative Proceedings against the Company, and such proceedings result in the revocation of the registration of our Common Stock under the Exchange Act (“SEC Revocation”), the Company and Holdings will, subject to any required shareholder approval, enter into a fair value asset purchase and sale transaction, pursuant to which Holdings will acquire all of the intellectual property and other assets and liabilities constituting our Music Streaming Business (the “Asset Transfer” and, together with the Merger, a “Combination Transaction”); provided, however, that the board of directors of the Company and Holdings may mutually agree to proceed with the Asset Transfer any time commencing on the ninety-first (91st) day after the effective date of the Term Sheet. On June 5, 2018, the SEC gave the Company notification that it had concluded its investigation and advised the Company that it did not intend to recommend any Administrative Proceedings by the SEC against the Company. However, although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

On November 16, 2017, Holdings consummated an initial closing (the “Initial Closing”) of its private placement offering (the “Preferred Stock Unit Offering”), to certain “accredited investors” (each, a “Unit Purchaser” and, collectively, the “Unit Purchasers”), intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D and/or Regulation S promulgated thereunder, of a minimum of $6,000,000 (the “Minimum Amount”) of units of securities of Holdings (each, a “Preferred Stock Unit” and, collectively, the “Preferred Stock Units”), at a purchase price of $5.15 per Preferred Stock Unit (other than with respect to the assignment and transfer to Holdings of the Line of Credit Note, as defined below), with each Preferred Stock Unit consisting of (a) one (1) share of Series A convertible preferred stock of Holdings (each, a “Unit Share” and collectively, the “Unit Shares”), and (b) a 5-year warrant (each, a “Unit Warrant” and collectively, the “Unit Warrants”) to purchase 6.5087 shares of common stock of Holdings, at an exercise price of $1.00 per each full share.

In connection with the Initial Closing of the Preferred Stock Unit Offering, Holdings issued 1,195,033 Preferred Stock Units to the Unit Purchasers, consisting of 1,195,033 Unit Shares and 7,778,119 Unit Warrants, in consideration for gross proceeds of $6,154,361 from the Preferred Stock Unit Offering.

In connection with the Initial Closing of the Preferred Stock Unit Offering, a U.S. broker-dealer registered with FINRA, engaged on a non-exclusive basis as placement agent for the Preferred Stock Unit Offering (the “Placement Agent”), received a cash commission of $115,436, and warrants (“Placement Agent Warrants”) to purchase (a) 22,415 shares of Series A Preferred Stock of Holdings, with a term of five (5) years and an exercise price of $5.15 per share, and (b) 145,893 shares of common stock of Holdings, with a term of five (5) years and an exercise price of $1.00 per share.

Simultaneously with the closing of the Preferred Stock Unit Offering, Holdings consummated a private placement offering (the “$2.5 Million Note Offering” and, together with the Preferred Stock Unit Offering, the “Holdings Offerings”), to one “accredited investor” (the “New Note Purchaser”), intended to be exempt from registration under the Securities Act, pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D promulgated thereunder, of (a) a 12% senior secured promissory note of Holdings, in the principal amount of $2,500,000 (the “New Note”), with a term of twelve (12) months, at a purchase price of 100% of the face value amount of the New Note, and (b) 10-year warrants (the “New Note Warrants”) to purchase 1,000,000 shares of common stock of Holdings, at an exercise price per share of $0.0001.

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In connection with the closing of the $2.5 Million Note Offering, the Placement Agent received a cash commission of $250,000, and warrants (“Second Placement Agent Warrants”) to purchase 383,800 shares of common stock of Holdings, with a term of five (5) years and an exercise price of $0.0001 per share.

The net proceeds from the Holdings Offerings, in the aggregate amount of $6,932,288 (after deducting fees and expenses related to the Holdings Offerings in the aggregate amount of $722,074 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent)) are to be used to pay the required Label Advances (as defined below) to the Music Labels (as defined below) sufficient to allow Holdings and/or the Company to proceed with soliciting subscriptions for CÜR Music, and to extend a line of credit to the Company (the “Post-Closing Line of Credit”), for up to the full amount of the aggregate net proceeds from the Holdings Offerings (1) to enable the Company to pay outstanding accounts payable, to be negotiated into structured settlements, employee deferred compensation, and monthly payments due by the Company under the New Note, and (2) for working capital and general corporate purposes. The process for requesting and approving drawdowns on the Post-Closing Line of Credit Note is to be determined and will be reflected in the definitive documentation for the transaction. Holdings has only partially funded requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements and staff layoffs (see Note 10). No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings are actively seeking sources of equity or debt financing in order to support the Company’s operations, as it currently does not have sufficient cash to meet its operating needs. If adequate funds are not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

Immediately following the Initial Closing of the Preferred Stock Unit Offering, Holdings issued one (1) share of its Series B voting preferred stock (“Series B Preferred Stock”) to William F. Duker, the President and Treasurer of Holdings, and a member of the board of directors of Holdings. Pursuant to the Certificate of Designation of Series B Voting Preferred Stock of Holdings (the “Series B Certificate of Designation”), Mr. Duker, the holder of the Series B Preferred Stock, has the right (a) to elect the number of directors on the board of directors of Holdings constituting the majority, and (b) to approve any merger (including the Merger), asset sale (including the Asset Transfer), or other fundamental transaction to be effected by CÜR Holdings.

As mentioned above, pursuant to the Term Sheet, if the Company receives SEC Clearance (or, at the discretion of the board of directors of the Company and Holdings, as described above), the Company and Holdings will consummate the Merger. The Company and Holdings anticipate that the Merger, if consummated, will qualify as a tax-free reorganization under the U.S. Internal Revenue Code. The Company and Holdings also anticipate that, if the Merger is consummated:

	·	the stockholders of Holdings will receive, in exchange for all of their issued and outstanding shares of capital stock of Holdings (including all issued and outstanding shares of preferred stock of Holdings), shares of the Company’s capital stock (including shares of Preferred Stock of the Company), at an exchange rate of 1-for-1, with appropriate adjustments and, otherwise, on their original terms and conditions;

	·	outstanding warrants to purchase shares of common stock of Holdings will be exchanged for warrants to purchase shares of the Company’s Common Stock, at the same ratio at which shares of outstanding capital stock of Holdings are exchanged for shares of the Company’s capital stock, with appropriate adjustments and, otherwise, on their original terms and conditions;

	·	the principal and any accrued and unpaid interest due under the Company’s existing Unsecured Notes will convert into units of the Company’s securities, at a conversion price of $2.00 of principal and interest due under said note per unit, each consisting of (a) one (1) share of the Company’s Common Stock, and (b) a 5-year warrant to purchase one (1) share of the Company’s Common Stock for every share of the Company’s Common Stock received upon conversion, at an exercise price equal to $1.00 per share;

	·	the Line of Credit Note, the Secured Notes, and the Post-Closing Line of Credit Note will be forgiven and canceled by Holdings;

	·	the Company will assume the obligations under the $2,500,000 New Note; and

	·	the Company will assume the New Music Label Agreements with the Music Labels, if possible.

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Simultaneously with the closing of the Holdings Offerings, shareholders representing at least fifty-one percent (51%) of the voting capital stock of each of the Company and Holdings, and of the Unit Purchasers in the Preferred Stock Unit Offering and Secured Noteholders in the Secured Note Assignment transaction, entered into voting agreements, pursuant to which they agreed to vote in favor of the Combination Transaction, as applicable. Although shareholder consent has been obtained, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by Holdings and/or the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

Although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. Going forward, the Company intends to seek, investigate and, if such investigation warrants, engage in a business transaction that presents an opportunity for our securityholders. No specific transaction has been definitively identified, and there is no certainty that any such transaction will be identified or consummated. If a business transaction is not consummated, we may need to cease operations.

On May 15, 2018, Holdings consummated a second closing (the “Second Closing”) of the Preferred Stock Unit Offering, for gross proceeds to Holdings of $1,246,300. The net proceeds from the Second Closing, in the aggregate amount of $1,086,131 (after deducting fees and expenses related to the Second Closing in the aggregate amount of $160,169 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent), are to be used in the same manner as the net proceeds of the Initial Closing of the Preferred Stock Unit Offering.

The placement agent for the Second Closing and its sub-agent were paid an aggregate commission of $124,630 and were issued warrants to purchase an aggregate of 24,200 shares of common stock of holdings at an exercise price of $1.00 per share for a term of five (5) years.

Agreements with Content Providers

As previously reported, the Company had entered into agreements (“Music Label Agreements”) with certain music labels (“Music Labels”), pursuant to which the Company had been provided limited, non-exclusive licenses to digitally distribute certain sound recordings and related materials owned or controlled by the Music Labels in connection with the Company’s CÜR-branded Internet music service, CÜR Music, to be composed of three progressively priced and increasingly functional tiers, within the United States and its territories, commonwealths, and possessions. The Company had also entered into agreements (“Publishing Agreements”) with certain music publishing companies (“Music Publishers”) either directly or through a third party, pursuant to which the Company had been provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the Music Publishers in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions. The Music Label Agreements and Publishing Agreements may be collectively referred to herein as the “Content Agreements,” and the Music Labels and Music Publishers may be collectively referred to herein as the “Content Providers.”

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The Company was not able to make the initial payments under the Music Label Agreements when due on January 31, 2016. As a result, the company’s Music Label Agreements with Sony Music Entertainment (“SME”) and UMG Recordings, Inc. (“UMG”) were terminated as a result of the company’s failure to pay SME and UMG the advances due pursuant to such agreements, respectively. The Company also defaulted on its Music Label Agreement with Warner Music, Inc. (“WMG”) as a result of the Company’s failure to pay WMG the advance due pursuant to such agreement. WMG did not initiate termination of their agreement.

The Company had previously entered into Publishing Agreements with certain music publishing companies Music Publishers, pursuant to which the Company was provided the non-exclusive right and license to use certain musical works owned, controlled and/or administered by the Music Publishers (the “Publisher Materials”) in connection with CÜR Music, within the United States and its territories, commonwealths, and possessions. The Company is currently in default of the Publishing Agreements and intends to enter into new agreements prior to the launch of CÜR Music.

Prior to the Initial Closing of the Preferred Stock Unit Offering, 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 of the Preferred Stock Unit Offering, Holdings paid certain advances due to the Music labels (“Label Advances”) due to the Music Labels pursuant to the New Music Label Agreements 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 agreement 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 Music Label Agreements. At the current time, the Company does not have a contract with Holdings which requires payment for sublicenses and access to the sound recordings and related materials.

The Company is required to pay certain minimum content fees over the term of the New Music Label Agreements with Content Providers as follows: $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.

Default on Secured Notes and Subsequent Assignment to Holdings

At the effective time of the Initial Closing of the Preferred Stock Unit Offering, the holders (the “Secured Noteholders”) of all of the Company’s Secured Notes, with accrued and unpaid interest in the aggregate of $561,203, assigned, conveyed, transferred and set over to Holdings all of the Secured Noteholders’ right, title, interest and obligations in, to and under the Secured Notes, and all claims, suits, causes of action and any other rights thereunder, in exchange for units (each, a “Secured Note Conversion Unit” and, collectively, the “Secured Note Conversion Units”) of securities of Holdings, at an exchange rate of $2.00 of principal and interest due under the Secured Notes per unit, in an transaction intended to be exempt from registration under the Securities Act, pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D promulgated thereunder (the “Secured Note Assignment Transaction”). Each Secured Note Conversion Unit consisted of (a) one (1) share of common stock of Holdings (each, a “Secured Note Conversion Share” and, collectively, the “Secured Note Conversion Shares”), and (b) a 5-year warrant (each, a “Secured Note Conversion Warrant” and, collectively, the “Secured Note Conversion Warrants”) to purchase one (1) share of common stock of Holdings for every share of common stock of Holdings received upon exchange, at an exercise price per share equal to $1.00. Upon completion of the transaction, the Company is now required to pay Holdings any amounts due under the Secured Notes.

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The Assignment Transaction did not alter the obligation of the Company under the original Secured Notes. The Company remains in default with respect to its obligations to repay amounts due under the Secured Notes but has not received a notice of default or other demand for payment from Holdings

In connection with the Secured Note Assignment Transaction, (a) Holdings issued 1,538,102 Secured Note Conversion Units, consisting of 1,538,102 Secured Note Conversion Shares, and 1,538,102 Secured Note Conversion Warrants, and (b) Holdings became the sole payee under the Secured Notes.

In connection with the Secured Note Assignment Transaction, the Placement Agent, received warrants (“Third Placement Agent Warrants”) to purchase (a) 86,377 shares of common stock of Holdings, with a term of five (5) years and an exercise price of $2.00 per share, and (b) 86,377 shares of common stock of Holdings, with a term of five (5) years and an exercise price of $1.00 per share.

Settlement Agreement and Mutual Release

As previously reported, the Company defaulted under its Master Multiple Services Agreement (the “Digitas Agreement”) with Digitas, Inc., a Massachusetts corporation (“Digitas”), as a result of the Company’s failure to pay Digitas past due balances for the services Digitas provided under the Digitas Agreement. Digitas filed a claim against the Company for damages in the aggregate amount of $650,000 (the “Claimed Amount”), together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees. On November 15, 2017, the Company entered into a Settlement Agreement and Mutual Release (the “Digitas Settlement Agreement”) with Digitas, pursuant to which the Company agreed to pay Digitas an aggregate of $400,000, in full settlement of any and all claims arising from or relating to amounts due under the Digitas Agreement (the “Claims”). Digitas agreed to release the Company from any further Claims, subject only to the Company meeting its payment obligations under the Digitas Settlement Agreement and the Digitas Note (as defined below).

Simultaneously with the execution of the Digitas Settlement Agreement, the Company issued a Promissory Note to Digitas (the “Digitas Note”) in the principal amount of $400,000. Pursuant to the Digitas Note, the Company (a) paid Digitas $100,000 on November 16, 2017 (the “First Payment”), (b) was required to pay Digitas $100,000 on the eight (8) month anniversary of the date of the First Payment (the “Second Payment’), and (c) is required to pay Digitas and additional $200,000.00 on the one (1) year anniversary of the date of the First Payment. If the Company defaults on its payment obligations under the Digitas Note, after notice and failure to cure, Digitas may file a Consent Judgment for the full Claimed Amount, less payments already made, if any, together with post-judgment interest and reasonable attorneys’ fees and costs incurred by Digitas for purposes of collection.

On July 26, 2018 the Company received notice of default from Digitas resulting from the failure to pay the Second Payment due under the Digitas Settlement Agreement due on July 16, 2018. In an attempt to prevent Digitas from moving forward with obtaining a Consent Judgment, the Company is currently negotiating with Digitas with respect to the Second Payment. The Company’s requests to Holdings for funds to pay the Second Payment to Digitas have not yet been approved.

Defaults on Vendor Agreements

We are in default under our Distribution Agreement (the “MediaNet Agreement”) with MusicNet, Inc., d/b/a MediaNet Digital, Inc. (“MediaNet”) as a result of our failure to pay MediaNet past due balances for the services they provided under the MediaNet Agreement. To date, we have not received a notice of default from MediaNet. As of June 30, 2018, the Company has not made any payments to MediaNet however, has accrued for balances due of $258,586. While we have agreed in principle with MediaNet to an amended Distribution Agreement and settlement for balances due under the MediaNet Agreement, funding by Holdings to execute the contract have been denied. The Company continues to work with Holdings to secure the amended agreement and 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.

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We are in default under our Sponsorship Agreement (the “Live Nation Sponsorship Agreement”) with Live Nation Marketing, Inc. (“Live Nation”) as a result of the Company’s failure to pay Live Nation past due balances for the services they provided under the Live Nation Sponsorship Agreement. To date, we have not received a notice of default from Live Nation. The Company intends to cure the default once it is adequately funded.

As of this date, other than the above, we are not aware of any other vendor agreements that we are in default which have not been settled or renegotiated into new contracts.

Results of Operations

Three-Month Period Ended June 30, 2018 Compared to Three-Month Period Ended June 30, 2017

Revenues

We have not generated any material revenues for the three months ended June 30, 2018 or 2017.

Operating Expenses

Overview

Total operating expenses for the three-month periods ended June 30, 2018 and 2017 were $824,192 and $167,421, respectively. The increase in total operating expenses of $656,771, or approximately 392%, was primarily related to the restarting of our business in 2018 from dormancy in 2017. In the second quarter of 2018, operating expenses included approximately $437,000 of wages for full time hires to continue the development of the application, and $166,000 for legal, accounting and label consulting fees.

Research and Development Expenses

For the three-month periods ended June 30, 2018 and 2017, research and development expenses were $538,091 and $38,444, respectively. Research and development expenses increased by $499,647, due to an increase in wages of $446,000 for developers re-hired to complete the development of the CÜR Music application, an increase in consultant costs of $32,000 associated with label negotiations and public relations, an increase in professional fees of $166,000 associated with contract developers to complete the application, offset by a decrease of $187,000 in content costs.

General and Administrative Expenses

For the three-month periods ended June 30, 2018 and 2017, general and administrative expenses were $283,094 and $127,914, respectively. General and administrative expenses increased by $155,180, or approximately 121%, primarily due to an increase in wages and related expenses of $102,000, an increase in facilities cost of $15,000 for newly leased office space, and an increase in public relations expense of $32,000.

Stock based Compensation Expenses

For each of the three-month periods ended June 30, 2018 and 2017, stock-based compensation expense was $0 due to the forfeiture of outstanding stock options in the third quarter of 2016 and no new stock options granted for 2017 or 2018.

Other Income (Expense)

For the three-month periods ended June 30, 2018 and 2017, other expense was $217,168 and $1,782,122, respectively. Other expense decreased $1,564,954 due to a change in fair value of derivative liabilities of $(41,830) in 2018 compared to$1,518,438 in 2017, respectively.

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Six-Month Period Ended June 30, 2017 Compared to Six-Month Period Ended June 30, 2016

Revenues

We have not generated any material revenues for the six months ended June 30, 2018 or 2017.

Operating Expenses

Overview

Total operating expenses for the six-month periods ended June 30, 2018 and 2017 were $1,755,856 and $320,602, respectively. The increase in total operating expenses of $1,435,254 was related to an increase in both general and administrative and research and development expenses due to the restarting of the business in 2018 from dormancy in 2017. Salaries and related expenses increased $940,000, professional fees for contract developers, legal and accounting increased $303,000 and other expenses such as facilities, investor/public relations and consultants increased $190,000.

Research and Development Expenses

For the six-month periods ended June 30, 2018 and 2017, research and development expenses were $1,272,779 and $80,656, respectively. Research and development expenses increased by $1,192,123 due to an increase in wages of $810,000 for developers re-hired to complete the development of the CÜR Music application, an increase in consultant costs of $94,000 associated with label negotiations and public relations, an increase in professional fees of $277,000 associated with contract developers to complete the application.

General and Administrative Expenses

For the six-month periods ended June 30, 2018 and 2017, general and administrative expenses were $479,043 and $237,081, respectively. General and administrative expenses increased by $241,962, or approximately 102%, primarily due to an increase in wages and related expenses of $130,000, an increase in professional fees for legal and accounting related services of $26,000, an increase in facilities cost of $15,000 for newly leased office space, and an increase in public relations expense of $53,000.

Stock based Compensation Expenses

For each of the six-month periods ended June 30, 2018 and 2017, stock-based compensation expense was $0 due to the forfeiture of outstanding stock options in the third quarter of 2016 and no new stock options granted for 2017 or 2018.

Other Income (Expense)

For the six-month periods ended June 30, 2018 and 2017, other expense was $402,157 and $2,264,780, respectively. Other expense decreased $1,862,623 due to a change in fair value of derivative liabilities of $(106,877) in 2018 compared to$1,744,667 in 2017, respectively.

Liquidity and Capital Resources

Sources of Liquidity

As of June 30, 2018, cash and cash equivalents were approximately $36,511, as compared to $153,979 at December 31, 2017.

As of June 30, 2018, we had a working capital deficit of $12,485,810. As of December 31, 2017, we had a working capital deficit of $10,490,470. The increase of $1,995,331, or approximately 19%, in working capital deficit was attributable to an increase in accounts payable of $90,114 (excluding decreases in accounts payable from debt relief), accrued and other current liabilities of $287,230, and an increase in the related party line of credit of $1,618,873.

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The net proceeds from the Holdings Offerings, in the aggregate amount of $6,932,288 (after deducting fees and expenses related to the Holdings Offerings in the aggregate amount of $722,074 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent)) and the Second Offering, in the aggregate amount of $1,086,131 (after deducting fees and expenses related to the Second Closing in the aggregate amount of $160,169 (including placement agent fees, legal fees and expenses and fees payable to the escrow agent), are to be used to pay the required Label Advances to the Music Labels and to extend the Post-Closing Line of Credit Note, for up to the full amount of the aggregate net proceeds from the Holdings Offerings to the Company for development and general working capital. The process for requesting and approving drawdowns on the Post-Closing Line of Credit Note is to be determined and is currently done on a case by case basis and will be reflected in the definitive documentation for the transaction. However, Holdings has only partially funded requests for payroll and vendor payables through the date of this report. Funding shortfalls have resulted in defaults on certain vendor agreements. We continue to work through delinquent vendor accounts and disputes with vendors. In addition, as of August 15, 2018, we were forced to lay off our entire workforce, leaving only John Egazarian, the Company’s Head of Product and Chief Operations Officer, Michael Betts, the Company’s Chief Technology Officer, and Kelly Sardo, the Company’s Chief Financial Officer. No assurance has been given to the Company that Holdings will continue to fund requested disbursements on a timely basis, or at all. The Company and Holdings have been actively seeking sources of equity or debt financing to support its operations. To date, the Company’s efforts to identify alternate sources of equity or debt financing have not been successful, and the Company currently does not have sufficient cash to meet its operating needs. If Holdings does not provide the Company with additional funding through the Post-Closing Line of Credit, or if adequate alternative funding is not available on acceptable terms, or at all, the Company will need to curtail operations, or cease operations completely.

Our original agreements with UMG and SME have been terminated and we were in default of our agreement with WMG. At the time of the Initial Closing of the Preferred Stock Unit Offering, Holdings and the Company entered into revised agreements with UMG, SME and WMG. We also plan to enter into content licensing agreements with certain independent music labels, music publishers and publisher rights organizations. The cost of entering into our previous content licensing agreements with major music labels, publisher rights organizations and publishers, including legal and consulting fees was approximately $9,000,000, the majority of which was to be paid through initial prepayments to the content providers. Under the New Music Label Agreements, the initial prepayments to content providers were significantly lower than the previous $9,000,000. If we are able to secure adequate financing, we intend to have a dedicated team of software engineers, led by our Chief Technology Officer and Chief Operating Officer, working on enhancing the technology platform, as well as the iOS and Android applications and the CÜR Music website.

Not including non-cash expenses, we have spent approximately $25,900,000 on research and development, sales and marketing and general and administrative costs to complete the development of the CÜR Music, for the time period since the Contribution in January 2014 through the second quarter of 2018. Of the total $25,900,000, a total of approximately $18,500,000 was related to research and development and approximately $7,400,000 was related to general and administrative costs.

As of June 30, 2018, we do not expect that the net proceeds from the Holdings Offerings will be available to us or will be sufficient to launch CUR Music. We need to raise a substantial amount of capital, to fully implement our business plan, market CÜR Music, for additional content license costs, and for general working capital. There can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. If we are unsuccessful at raising sufficient funds, for whatever reason, to fund our operations, we may be forced to seek a buyer for our business or seek a similar transaction. If all of these alternatives fail, we expect that we will be required to seek protection from creditors under applicable bankruptcy laws.

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Net Cash (Used in) Provided by Operating Activities

Net cash used in operating activities was $1,691,586for the six-month period ended June 30, 2018, as compared to net cash provided of $2,172 for the six-month period ended June 30, 2017. The decrease of $1,693,758, in net cash used in operations was primarily due the change in fair market value of the derivative liabilities in 2017 as compared to 2018. In the first six months of 2017, expense of $1,744,667 was recognized from the mark to market adjustment of the derivatives compared with income of $106,877 in the first six months of 2018.

Net Cash Used in Investing Activities

During the six-month periods ended June 30, 2018 and 2017, net cash used in investing activities was $44,756and $0, respectively. The current year increase was due to the Company’s security deposit required for the newly leased facilities, leasehold improvements and equipment purchases associated with our new office space and hiring of development staff.

Net Cash Provided by Financing Activities

During the six-month period ended June 30, 2018 and 2017, we received $1,618,873 and $0, in financing. In 2018, we received proceeds from the Line of Credit Note (previously discussed).

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financing arrangements and have not formed any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our senior management, currently consisting of Kelly Sardo our Interim President, Chief Financial Officer, Secretary and Treasurer (Principal Executive Officer and Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure.

In connection with the preparation of this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our senior management, currently consisting of Kelly Sardo our Interim President, Chief Financial Officer, Secretary and Treasurer (Principal Executive Officer and Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures existing as of June 30, 2018. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, Kelly Sardo our Interim President, Chief Financial Officer, Secretary and Treasurer (Principal Executive Officer and Principal Financial Officer), concluded that our disclosure controls and procedures were not effective as of such date.

Changes in Internal Control over Financial Reporting

Other than as previously described, there has been no change in our internal control over financial reporting identified in connection with the evaluation we conducted of the effectiveness of our internal control over financial reporting as of June 30, 2018, that occurred during our first quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company defaulted under its Digitas Agreement with Digitas, as a result of the Company’s failure to pay Digitas past due balances for the services Digitas provided under the Digitas Agreement. Digitas filed a claim against the Company for damages in the aggregate amount of $650,000, together with pre-judgment interest, post-judgment interest, costs, and attorneys’ fees. On November 15, 2017, the Company entered into a Settlement Agreement with Digitas, pursuant to which the Company agreed to pay Digitas an aggregate of $400,000, in full settlement of any and all claims arising from or relating to amounts due under the Digitas Agreement. Digitas agreed to release the Company from any further Claims, subject only to the Company meeting its payment obligations under the Settlement Agreement and the Digitas Note. Simultaneously with the execution of the Settlement Agreement, the Company issued a Promissory Note to Digitas in the principal amount of $400,000. Pursuant to the Digitas Note, the Company (a) paid Digitas a First Payment of $100,000 on November 16, 2017, (b) was required to pay Digitas $100,000 on the eight (8) month anniversary of the date of the First Payment (the “Second Payment”), and (c) is required to Digitas $200,000.00 on the one (1) year anniversary of the date of the First Payment. On July 26, 2018 the Company received notice of default resulting from its failure to pay Digitas the Second Payment. After notice and failure to cure, Digitas may file a Consent Judgment for the full Claimed Amount, less payments already made, if any, together with post-judgment interest and reasonable attorneys’ fees and costs incurred by Digitas for purposes of collection. In an attempt to prevent Digitas from moving forward with obtaining a Consent Judgment, the Company is currently negotiating with Digitas with respect to the Second Payment. The Company’s requests to Holdings for funds to pay the Second Payment to Digitas have not yet been approved.

Certain of the Company’s former employees have filed claims against the Company for payment of unpaid wages totaling $50,000, which remain outstanding. In addition, the Company has agreed to settlements on other employee claims totaling $127,843, which also remain outstanding. The Company’s requests to Holdings for funds to pay these amounts have not yet been approved.

Cybercoders, Inc. (“Cybercoders”), a recruiter we used in connection with certain employee placements, has filed a claim against the Company for failure to pay Cybercoders past due balances for the services they provided. The Company and Cybercoders have agreed to a settlement amount of $5,000, which has not yet been paid. The Company’s requests to Holdings for funds to pay this amount have not yet been approved.

24G, LLC (“24G”), a consultant that provided us with marketing services, has filed a claim against the Company for failure to pay 24G past due balances in the amount of $71,898 for the services they provided. The Company and 24G agreed to a settlement amount of $5,000. Following the Initial Closing of the Preferred Stock Unit Offering, the settlement with 24G was paid.

A consultant that provided us with software development services, has filed a claim against the Company for failure to pay past due balances for services provided. A judgement was entered and recorded in the Circuit Court for Montgomery County, Maryland for $60,000. Following the closing of the Preferred Stock Unit Offering, $10,000 of the judgement was paid by the Company. The balance of $50,000 was paid by the Company in April 2018.

An attorney for iTexico LLC (“iTexico”), a software developer we used, has contacted the Company in an effort to collect $53,750 of past due balances iTexico claims it is owed for the services they provided. The Company reached a settlement amount of $9,000 with iTexico and paid that amount in November 2017.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Other than as reported in our Current Reports on Form 8-K, or prior periodic reports, we have not sold any of our equity securities during the period covered by this Quarterly Report, or subsequent period through the date hereof.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Secured Notes

On October 12, 2016, October 15, 2016, November 26, 2016, December 7, 2016, December 20, 2016 and January 20, 2017, the principal and any accrued and unpaid interest on our outstanding Secured Notes in the aggregate principal amount of $2,515,000 became due and payable. We were unable to repay the noteholders at that time. Pursuant to the terms of the Secured Notes, our failure to pay any principal or interest within 5 days of the date such payment is due constituted an event of default. Following the occurrence of an event of default, among other things, the interest rate on the Secured Notes increased to 15%. In addition to other remedies available to the noteholders, our obligation to repay amounts due under the Secured Notes is secured by a first priority security interest in and lien on all of our assets and property. On November 16, 2017, the Secured Noteholders assigned, conveyed, transferred and set over to Holdings all of their right, title, interest and obligations in, to and under the Secured Notes, and all claims, suits, causes of action and any other rights thereunder. As a result, Holdings became the sole payee under the Secured Notes. The Company remains in default with respect to its obligations to repay amounts due under the Secured Notes but has not received a notice of default or other demand for payment from Holdings.

Line of Credit Note

On July 6, 2017, we entered into a Line of Credit Note with CUR Holdings, LLC. The Line of Credit Note has a principal balance of $685,000, and a stated maturity date of December 6, 2017. The principal on the Line of Credit Note does not bear interest. The Line of Credit Note is not convertible. The Line of Credit Note ranks junior to the Company’s existing Secured Notes. In connection with the Initial Closing of the Preferred Stock Unit Offering, the Line of Credit Note was assigned and transferred to Holdings. As a result, Holdings became the payee under the Line of Credit Note. The assignment did not alter the obligation of the Company under the original Line of Credit Note. As of December 6, 2017, the Company was in default of its obligations to repay amounts due under the Line of Credit Note. The Company remained in default as of June 30, 2018. Pursuant to the Line of Credit Note, the Company is required to pay the holder’s costs and expenses for collection, including reasonable attorneys’ fees.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Filing of Delinquent SEC Filings

As of May 9, 2018, the Company had submitted to the SEC all delinquent filings in response to the Wells Notice received from the SEC on July 19, 2017. On June 5, 2018, the SEC gave the Company notification that it had concluded its investigation and advised the Company that it did not intend to recommend any Administrative Proceedings by the SEC against the Company. However, although SEC Clearance has been received, Holdings has not yet agreed to proceed with the Merger at this time. Management of Holdings has indicated that they do not intend to move forward with the Merger until additional financing is obtained by the Company and/or certain other events occur. There can be no assurance that the Merger will be consummated on a timely basis, or at all. If the Merger does not occur, or another a business transaction that presents an opportunity for the Company’s securityholders is not consummated, the Company may need to cease operations.

Appointment of Interim President and “Principal Executive Officer”

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ITEM 6. EXHIBITS

In reviewing the agreements included as exhibits to this Quarterly Report, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

	·	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

	·	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

	·	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

	·	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

The following exhibits are included as part of this report:

Exhibit No.	SEC Report Reference No.	Description

31.1/31.2	*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1/32.2	*	Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document

___________

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CÜR MEDIA, INC.

Dated: August 20, 2018	By:	/s/ Kelly Sardo
	Name:	Kelly Sardo
	Title:	Interim President, Chief Financial Officer, Secretary and Treasurer
		(Principal Executive Officer and Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	SEC Report Reference No.	Description

31.1/31.2	*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1/32.2	*	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	*	XBRL Instance Document
101.SCH	*	XBRL Taxonomy Extension Schema Document
101.CAL	*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	*	XBRL Taxonomy Extension Presentation Linkbase Document

___________

* Filed herewith

CUR MEDIA, INC. - FORM 10-Q - August 20, 2018

Attached files

CUR MEDIA, INC. Reports