Edgar Filing: UnifiedOnline, Inc.

uoip_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended June 30, 2015

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

Commission File Number 0-27865

UNIFIEDONLINE, INC.

(Exact name of registrant as specified in its charter)

Delaware		13-2640971
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

4126 Leonard Drive, Fairfax, VA		22030
(Address of principal executive offices)		(Zip Code

Registrant’s telephone number, including area code: 816-979-1893

Securities registered under Section 12(b) of the Exchange Act:

Title of each class		Name of each exchange on which registered
None		None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 Par Value

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act Yes ¨ No þ

Indicate by checkmark 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 þ No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained in this form, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o

Smaller reporting company þ

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold on December 31, 2014 was $345,849.

The number of common shares issued and outstanding as of September 30, 2015 was 912,897,537 shares.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

PART I	4

ITEM 1. BUSINESS.	4

ITEM 1A. RISK FACTORS.	6

ITEM 1B. UNRESOLVED STAFF COMMENTS.	11

ITEM 2. PROPERTIES.	11

ITEM 3. LEGAL PROCEEDINGS.	11

ITEM 4. MINE SAFETY DISCLOSURE.	11

PART II	12

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.	12

ITEM 6. SELECTED FINANCIAL DATA.	13

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13

ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	19

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.	20

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	52

ITEM 9A. CONTROLS AND PROCEDURES	52

ITEM 9B. OTHER INFORMATION	52

PART III	53

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	53

ITEM 11. EXECUTIVE COMPENSATION	56

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS and	57

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	58

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	59

PART IV	60

ITEM 15. EXHIBITS	60

Cautionary Statement Regarding Forward Looking Statements

This Annual Report on Form 10-K contains statements that are considered forward-looking statements. Forward-looking statements give our current expectations and forecasts of future events. All statements other than statements of current or historical fact contained in this annual report, including statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate”, “believe”, “continue”, “estimate”, “expect”, “intend”, “may”, “plan”, and similar expressions, as they relate to the Company, are intended to identify forward-looking statements. These statements are based on our current plans, and our actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this report may turn out to be inaccurate. We have based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. We undertake no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained in this report.

OTHER PERTINENT INFORMATION

When used in this report, the terms the “Company”, “UOIP”, "we", "our", and "us" refers to UnifiedOnline, Inc., a Delaware corporation, and our subsidiaries. When used in this report, “fiscal year 2014” or “Fiscal 2014” means the nine month transition period ended June 30, 2014, “fiscal year 2015” or “Fiscal 2015” means the twelve months ended June 30, 2015 and “fiscal year 2016” or “Fiscal 2016” means the twelve months ended June 30, 2016.

PART I

ITEM 1. BUSINESS.

BUSINESS OF UNIFIEDONLINE, INC.

OVERVIEW

With our acquisition of Computers & Telecom, Inc. and KCNAP, LLC, (collectively “CTC”) in October 2013, UnifiedOnline, Inc. provides wireless and fiber broadband service, co-location space and related services and operates a Network Access Point (“NAP”) where customers directly interconnect with a network ecosystem of partners and customers. This access to Internet routes provides CTC customers improved reliability and streamlined connectivity while significantly reducing costs by reaching a critical mass of networks within a centralized physical location. In addition, through our IceWEB Storage Corporation subsidiary we can deliver on-line cloud computing application services, other managed services such as Disaster Recovery, Archive Storage, Redundant File Storage, Redundant Broadband Services and Business Continuity Services.

CTC operates a wireless internet service business, providing various technologies for wireless broadband, including FCC Licensed Wireless, to small and medium-size businesses in the metro Kansas-City, Missouri and Kansas City, Kansas area. Through our network of broadband carriers, we provide services in other US markets as well. In addition, CTC offers the following solutions: (i) premium data center co-location, (ii) interconnection and (iii) exchange and outsourced IT infrastructure services (iv) Business Class Voice over IP services (v) Cloud-based PBX services (vi) Private and Public Cloud services and (vii) Private Network services.

We leverage our NAP which allows our customers to increase information and application delivery performance while significantly reducing costs. Our platform enables scalable, reliable and cost-effective co-location, interconnection and traffic exchange thus lowering overall cost and increasing flexibility.

Our customer base includes enterprise companies, and small to medium sized businesses (“SMB”).

UnifiedOnline, Inc. unified data storage line of products

As customer requirements have migrated from deploying physical on premise hardware to increasing use of a cloud-centric Information Technology strategy, we are transitioning out of our hardware assembly business, while we continue to maintain those customers whose support agreements remain in effect. Unified storage continues to be a significant area of focus for customers who require various types of storage in our Kansas City and affiliated datacenters and Wireless Internet Service Provider (WISP) businesses.

Competitive Landscape

We compete as well as cooperate (in a “co-opetition model”) with business class wireless, land-based and cloud based providers of broadband and datacenter services. Our flexibility and nimble ability to quickly deploy business class services, particularly in areas in which major carriers such as AT&T and TW Telecom do not offer such services, gives us both a competitive and sustainable advantage. We successfully compete for standard business users in the hospitality, medical, professional services, manufacturing, food services, distribution, governmental, human resources and general retail areas with our robust offerings, our deep understanding of requirements, design strategies, and rapid deployment. A significant market in which we excel and in which we frequently work with our competitors in a “co-opetition” fashion is the “pop-up” event market requiring very short-term setup and takedown of complex network deployments ether for public or private events, or for short term construction deployments for which land-based broadband is not feasible or available in a timely way.

Cloud Computing Products and Services

Following market conditions and preferences, we have evolved from being strictly a hardware assembler to a provider of cloud and complex broadband services. We have focused our engineering and research and development efforts on crafting our products to perform as “smart infrastructure” to facilitate the highly complex application centric requirements of companies moving to a cloud-based IT strategy. A smart infrastructure addresses the myriad of implementation issues faced by companies moving from a premise-based IT strategy to a cloud based one. Complex switching, routing, cabling, monitoring and storage all require the types of both physical and intellectual infrastructure our facilities and deployment strategies provide.

By implementing our smart infrastructure and network design approaches we are able to quickly deploy all of the benefits of cloud computing, while reducing the potential for security breaches. High performance data transfers are maintained by back-hauling the data and replicating it from remote branch offices across existing wide area network links to our IT infrastructure. This “hardware-agnostic” approach to providing smart infrastructure is the approach being taken by the customers we seek as they implement their cloud-based IT strategies.

Customers

Our products have been sold to customers in the U.S across a broad range of industries, including GIS, oil and gas, state, local and federal government, hospitality, professional services, manufacturing, food services, distribution and healthcare. We believe that our customers have a high level of satisfaction with our products and services.

Sales and Marketing

We sell our products via a “channel-based” model and through a direct sales force. In a channel-based sales model, companies with products or services build partnerships with systems integrators, agents, manufacturers, value-added resellers, IT consultants and value-added distributors leveraging the sales resources of those groups to drive sales of products and services. We believe that the value of a channel-based sales model is twofold. First it allows us to grow total sales volume significantly while keeping sales staff, and our general and administrative expenses, low. Rather than building a significant direct sales force of our own, this model allows us to build a small channel organization responsible for identification, training and support of partner organizations to ensure their success and productivity. The second value of the channel-based model is that partners bring their own knowledge of key accounts and have relationships already in place which compresses the sales cycle and increases the close ratio on new business, with the goal of generating more sales for our company’s products and services.

We continue to aggressively pursue partner agreements to increase our sales and market exposure and footprint. These partner agreements typically take between three and six months to develop prior to materially increasing sales revenues.

Competition

The market for our products and services is highly competitive and likely to continue to be competitive in the future. Competition in our product and service areas has a relatively high barrier to entry, however, as the build out of and deployment of smart infrastructure and development of the expertise to provide its concomitant services requires significant investment in infrastructure, training, development, licensure and time.

We believe that we compete effectively across all of these factors. In particular, we believe that our smart infrastructure provides significant competitive advantages in terms of performance, scalability, ease of management and low total cost of ownership. Historically, our direct sales and our reseller partners have provided us with a significant number of reference accounts which address credibility and helps in our marketing efforts to new customers.

Many of the competitors especially in the larger urban markets have longer operating histories, better name recognition, larger customer bases and significantly greater financial, technical, sales and marketing resources than we have. Competitors may also be able to devote greater resources to the development, promotion, sale and support of their products. Competitors may also have more extensive customer bases and broader customer relationships than we do, including relationships with our potential customers.

Intellectual Property

Success in our technological markets depends, in part, upon our ability to obtain and maintain proprietary protection for our products, technology and know-how. This must be accomplished without infringing the proprietary rights of others and while simultaneously preventing others from infringing upon our proprietary rights.

We seek to protect our proprietary positions by, among other methods, filing patent applications. Patent efforts are focused in the United States and, when justified by cost and strategic importance, we plan to file related foreign patent applications in jurisdictions such as the European Union and Japan.

Pending patent applications relate to various software development projects and to the rapid ingestion of massive amounts of video and other data and other network storage concepts. It is unknown if any of the patent applications will issue as patents. The patent applications may be opposed, contested, circumvented, designed around by a third-party, or found to be invalid or unenforceable.

Copyright law, trademarks and trade secret agreements are also used to protect and maintain proprietary positions. Our proprietary information is protected by internal and external controls, including contractual agreements with employees, end-users and channel partners. There is no assurance that these parties will abide by the terms of their agreements.

Trademarks are used on some of our products and these distinctive marks may be an important factor in marketing the products. Inline® and Inline logo trademarks have been registered in the United States.

Our Recent History

On October 1, 2013 we acquired 100% of the outstanding stock of Computers and Tele-Comm., Inc., a Missouri corporation (“CTCI”), and its wholly owned subsidiary, KC NAP, LLC (“KC NAP”) in exchange for 23,921 shares of common stock. Concurrently, and as part of the share exchange agreement, the Company issued shares to retire an outstanding debt owing by CTCI to Streamside Partners, LLC, which totaled $155,000, and other debts of CTCI totaling $267,823, in exchange for 33,714 shares of our $0.001 par value common stock (such transactions taken together are sometimes referred to herein as the “Share Exchange”). As a result of the Share Exchange, we are now the holding company of CTCI and we now operate a company in the business of operating data centers and providing Information Technology (“IT”) services. The acquisition was accounted for using the purchase method of accounting.

EMPLOYEES

At September 30, 2015 we had 6 full-time employees, including our executive officer. None of our employees are covered by collective bargaining agreements, and we believe our relationships with our employees to be good.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a significant degree of risk. You should not invest in our common stock unless you can afford to lose your entire investment. You should consider carefully the following risk factors and other information in this annual report before deciding to invest in our common stock. If any of the following risks and uncertainties were to develop into actual events, our business, financial condition or results of operations could be materially adversely affected and you could lose your entire investment in our company.

RISKS RELATED TO OUR COMPANY

WE HAVE AN ACCUMULATED DEFICIT AND MAY HAVE CONTINUING LOSSES THAT WOULD RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS ABSENT MATERIAL INCREASES IN REVENUES.

We had an accumulated deficit of approximately $54.7 million at June 30, 2015. For the year ended June 30, 2015 we had a net loss of approximately $1.9 million and for the nine months ended June 30, 2014, we had a net loss of approximately $4.9 million. In the year ended June 30, 2015, cash used in operations was approximately $811K. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended June 30, 2015 contains a qualification expressing substantial doubt as to our ability to continue as a going concern as a result of net losses and cash used in operations. We cannot assure prospective investors that sales will increase in future periods, nor can we assure prospective investors that they will not further decrease. We expect to potentially make significant expenditures related to the development of the business, potentially including hiring additional personnel relating to sales and marketing, customer service and support and technology development. As a result of these increased expenditures, we will be required to generate and sustain increased revenue to achieve profitability. As long as cash flow from operations remains insufficient to fund operations, we will continue depleting cash and other financial resources. Our failure to achieve profitable operations in future periods will adversely affect our ability to continue as a going concern. In this event, prospective investors could lose all of their investment in our company.

OUR SALES HAVE DECLINED SUBSTANTIALLY FROM PRIOR PERIODS AND THERE ARE NO ASSURANCES OUR SALES WILL RETURN TO HISTORIC LEVELS.

Our acquisition of CTC & KC NAP in October, 2013 concurrent with our transition from the hardware assembly business caused our revenue to decline. Our revenues from CTC KC NAP throughout the fiscal period have either maintained their levels or have shown slight increases, but there is no assurance that our revenues will return to previous levels in the near future.

WE MAY NEED ADDITIONAL FINANCING WHICH WE MAY NOT BE ABLE TO OBTAIN ON ACCEPTABLE TERMS, IF AT ALL. IF WE CANNOT RAISE ADDITIONAL CAPITAL AS NEEDED, OUR ABILITY TO EXECUTE OUR GROWTH STRATEGY AND TO FUND OUR ONGOING OPERATIONS MAY BE IN JEOPARDY.

Historically, our operations have been financed primarily through the issuance of equity and short-term loans. Capital is typically needed not only to fund ongoing operations and to pay existing obligations, but capital is also necessary if we wish to acquire additional assets or companies and for the effective integration, operation and expansion of these businesses. Future capital requirements, however, depend on a number of factors, including the ability to internally grow revenues, manage the business and control expenses. At June 30, 2015, we had a working capital deficit of $4.4 million as compared to a working capital deficit of $3.1 million at June 30, 2014. We may need to raise additional capital to fund ongoing operations, pay existing obligations and fund future growth. There are no assurances that additional working capital will be available in the future upon terms acceptable to us. If we do not raise funds as needed, our ability to provide for current working capital needs, make additional acquisitions, grow the company, and continue our existing business and operations may be in jeopardy. In this event, prospective investors could lose all of their investment in our company.

MANAGEMENT MAY BE UNABLE TO EFFECTIVELY INTEGRATE ACQUISITIONS AND TO MANAGE GROWTH AND UOIP MAY BE UNABLE TO FULLY REALIZE ANY ANTICIPATED BENEFITS OF THESE ACQUISITIONS.

Our business strategy includes growth through acquisition and internal development. We are subject to various risks associated with our growth strategy, including the risk that we will be unable to identify and recruit suitable acquisition candidates in the future or to integrate and manage the acquired companies. Acquired companies’ histories, geographical locations, business models and business cultures can be different from ours in many respects. Our directors and senior management face a significant challenge in their efforts to integrate the businesses and the business of the acquired companies or assets, and to effectively manage continued growth. There can be no assurance that efforts to integrate the operations of any acquired assets or companies acquired in the future will be successful, that we can manage growth or that the anticipated benefits of these proposed acquisitions will be fully realized. The dedication of management resources to these efforts may detract attention from day-to-day business. There can be no assurance that there will not be substantial costs associated with these activities or of the success of integration efforts, either of which could have a material adverse effect on operating results.

ECONOMIC CONDITIONS AND WORLD EVENTS COULD AFFECT OUR COMPANY’S OPERATING RESULTS.

We and our customers could be adversely affected by an economic downturn such as changes in consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending. The economy as a whole also may be affected by future world events such as acts of terrorism, developments in the war on terrorism, conflicts in international situations, and by natural disasters. These factors may affect our results of operations by reducing sales, gross profits and/or net income as a result of a slowdown in customer orders or order cancellations. In addition, political and social turmoil related to international conflicts and terrorist acts may put further pressure on economic conditions abroad. Unstable political, social and economic conditions may make it difficult for our company, our customers, and our suppliers to accurately forecast and plan future business activities. If such conditions persist, our business, financial condition, results of operations and cash flow could be negatively affected.

THE CONDITION OF THE U.S. AND GLOBAL FINANCIAL MARKETS HAS BEEN VOLATILE AND MAY CONTINUE TO BE VOLATILE.

Prospective investors should be aware that the U.S. and global financial markets are currently quite volatile and that the condition of the financial markets has become significantly weakened and destabilized in the past few years. Continued volatility and instability could adversely affect our ability to finance our business. Further, financial market instability could result in significant regulatory changes that would have an unpredictable effect on the financial markets in general.

OUR BUSINESS HAS INHERENT OPERATIONAL RISKS THAT CANNOT BE ADEQUATELY COVERED BY INSURANCE OR INDEMNITY.

We may face unanticipated risks of legal liability for damages caused by the actual or alleged failure of technologies and products that we supply. We sell products to a variety of large entities, and because of our size, we have limited ability to negotiate favorable commercial terms in our product purchase/sale documentation. While we have attempted to secure appropriate insurance coverage at reasonable cost it is not possible to insure against all risks inherent in the markets we serve, nor can we assure investors that our insurers will pay a particular claim, or that we will be able to maintain coverage at reasonable rates in the future. Substantial claims resulting from a failure of a product to perform in excess of or not otherwise covered by indemnity or insurance could harm our financial condition and operating results. Insurance policies also contain deductibles, limitations and exclusions which increase our costs in the event of a claim.

OUR SUCCESS AND COMPETITIVE POSITION DEPENDS ON OUR ABILITY TO OBTAIN AND PROTECT INTELLECTUAL PROPERTY. FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS WOULD IMPAIR OUR ABILITY TO COMPETE EFFECTIVELY AND DEFEND AGAINST THIRD PARTY CLAIMS THAT WE ARE INFRINGING ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

We maintain our proprietary technology and know-how as trade secrets as well as through the use of patents. Some of our proprietary technology may be covered by provisional patents. Our policy is to use confidentiality agreements, licensing agreements and similar arrangements to establish and protect intellectual property. For example, our policy is to maintain confidentiality agreements with our employees, consultants, vendors and business partners and this has controlled access to, and distribution of its product design documentation and other proprietary information. We intend to continue to protect existing and new processes and technologies that are developed as trade secrets but may not be able to do so. We hold or have filed patents related to several of our products and technology, however there is no guarantee that we will be able to enforce these patents or that the applications will be issued as patents. Failure to protect our intellectual property could affect our ability to secure additional contracts or preserve market advantages as we develop and commercialize our products.

Our efforts to protect our intellectual property rights may not:

	●	prevent challenges to, or the invalidation or circumvention of, existing intellectual property rights;
	●	prevent competitors from independently developing similar products or duplicating our products;
	●	provide adequate protection for intellectual property rights;
	●	prevent disputes with third parties regarding ownership of our intellectual property rights;
	●	prevent disclosure of trade secrets and know-how to third parties or their release into the public domain; or
	●	prevent our company from being subject to claims of infringement of the intellectual property rights of third-parties.

Others may attempt to copy or otherwise obtain and use our proprietary technologies without consent. Monitoring the unauthorized use of technologies is difficult. There is a significant risk that customers or their end-user customers may attempt to copy or otherwise obtain and use our proprietary technologies without our consent.

We may find it necessary to litigate against others, including customers, to protect our intellectual property and to challenge the validity and scope of the proprietary rights asserted by others, and the company could face counterclaims. Legal disputes with customers could adversely affect relationships and sales. Litigation is inherently uncertain, and an adverse outcome could subject us to significant liability for damages or invalidate our proprietary rights. The complexity of the technology involved and inherent uncertainty and cost of intellectual property litigation increases our risks.

Third parties may claim that we are infringing on their intellectual property rights, and we may already be unknowingly infringing. We may face additional liability if we agree to indemnify customers against third party infringement claims. If a third party establishes that we are infringing upon their intellectual property rights, we may be forced to modify products or manufacturing processes and such changes may be expensive or impractical. We may be forced to seek royalty or license agreements. If we are unable to agree on acceptable terms, we may be required to discontinue products or to halt other aspects of our operations. We may also be liable for significant damages. Even if intellectual property claims brought against us are without merit, the litigation may be costly and time consuming, and may divert management and key personnel from normal business operations.

WE HAVE BEEN ENGAGED IN VARIOUS LEGAL DISPUTES WHICH COULD IMPACT OUR COMPANY AND OUR SUPPLIER RELATIONSHIPS.

We are currently engaged in four legal proceedings. These legal proceedings relate to non-payment of vendors. Claims relating to these proceedings currently total approximately between $40,000 and $55,000. These and/or the remaining and/or future potential legal proceedings could impact our financial position and/or our relationships with customers, vendors, suppliers, distributors and/or other parties.

RISKS RELATING TO UNIFIEDNLINE, INC.’S COMMON STOCK

THE EXERCISE OF WARRANTS AND OPTIONS AND THE CONVERSION OF SHARES OF OUR SERIES B CONVERTIBLE PREFERRED STOCK WILL BE DILUTIVE TO OUR EXISTING STOCKHOLDERS.

At June 30, 2015 we had outstanding:

●	912,466,204 shares of our common stock,

●	626,667 shares of Series B Convertible Preferred Stock owned by the estate of our former Chief Executive Officer which is convertible into 1,567 shares of our common stock,

●	Common stock purchase warrants to purchase a total of 64,436,748 shares of our common stock with exercise prices ranging from $0.024 to $60.00 per share

●	Stock options granted under our 2012 Equity Compensation Plan and our 2013 Equity Compensation Plan which are exercisable into 7,232 shares of our common stock with a weighted average exercise price of $33.53 per share.

The exercise of the outstanding options and warrants or the conversion of the outstanding convertible securities will be dilutive to our security holders.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS MAY DELAY OR PREVENT A TAKE-OVER WHICH MAY NOT BE IN THE BEST INTERESTS OF OUR SECURITY HOLDERS.

Provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of security holders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of the Delaware General Corporations Law also may be deemed to have certain anti-takeover effects, including a provisions stipulating that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation’s disinterested security holders.

In addition, our certificate of incorporation authorizes the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors. We presently have outstanding 626,667 shares of Series B convertible preferred stock owned by the estate of former CEO and Chairman John R. Signorello. Our board of directors may, without stockholder approval, issue additional series of preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.

PUBLIC COMPANY COMPLIANCE MAY MAKE IT MORE DIFFICULT TO ATTRACT AND RETAIN OFFICERS AND DIRECTORS.

The Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and rules subsequently implemented by the Commission have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to continue to increase compliance costs in 2016 and beyond and to make certain activities more time consuming and costly than if we were not a public company. As a public company, we also expect that these rules and regulations may make it more difficult and expensive to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult to attract and retain qualified persons to serve on our board of directors or as executive officers.

OUR STOCK PRICE MAY BE VOLATILE IN RESPONSE TO MARKET AND OTHER FACTORS.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

	●	competitive pricing pressures;
	●	ability to obtain working capital financing;
	●	additions or departures of key personnel;
	●	limited public float in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
	●	sales of common stock
	●	ability to execute our business plan;
	●	operating results that fall below expectations;
	●	loss of any strategic relationship;
	●	regulatory or legal developments;
	●	economic and other external factors; and
	●	period-to-period fluctuations in our financial results.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

OUR COMMON STOCK IS A “PENNY STOCK,” WHICH WILL MAKE IT MORE DIFFICULT FOR INVESTORS TO SELL THEIR SHARES.

Our common stock is presently subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act of 1934. The penny stock rules apply to companies whose common stock is not listed on a national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $2,500,000, or $2,000,000 if the company has been operating for three or more years. In certain instances, these rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. In addition, many brokers and broker-dealers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we continue to remain subject to the penny stock rules, it could have an adverse effect on the market, if any, for our common stock, and investors will find it more difficult to dispose of their securities.

OFFERS OR AVAILABILITY FOR SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE OF OUR COMMON STOCK TO DECLINE.

If security holders sell substantial amounts of our common stock in the public market, or upon the expiration of any statutory holding period, under Rule 144, or expiration of lock-up periods applicable to outstanding shares, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

OUR COMMON STOCK MAY BE SUBJECT TO FURTHER DILUTION IF WE SELL ADDITIONAL SHARES OF OUR COMMON STOCK IN THE FUTURE AT PRICES BELOW THE PRICES IN ITS RECENT PRIVATE OFFERINGS.

If it becomes necessary for us to issue additional shares of common stock in the future at prices below the prices that trigger the anti-dilution protections in connection with previous private offerings, we will be required to issue such additional shares and lower the warrant exercise price of the existing warrants, in order to account for the dilutive impact of such future issuances. The anti-dilutive protections are known as “full-ratchet” protections, meaning that the additional shares of common stock to be issued, and the new exercise price of the warrants, will match the lowest price at which we issue additional shares of common stock in the future. These additional shares of common stock, and warrants to purchase additional shares of common stock, if exercised, could result in substantial future dilution to the holders of our common stock. We currently have warrants outstanding to purchase 64,314,335 shares of common stock which contain “full-ratchet” protections.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable to a smaller reporting company.

ITEM 2. PROPERTIES.

We lease office space in Kansas City Missouri at two locations totaling 6,875 square feet. These operating leases are standard commercial leases. We believe these facilities are suitable and adequate for our present purposes.

ITEM 3. LEGAL PROCEEDINGS.

At June 30, 2015 the Company is the subject of, or party to, four known, pending or threatened, legal actions. Following is a discussion of each:

The Company was named as the defendant in a legal proceeding brought by FedEx Customer Information Services, Inc. (the plaintiff) on May 28, 2010 in the Circuit Court of Fairfax County, Virginia. The plaintiff asserts that the Company failed to pay the full amount owed for services. The plaintiff obtained a judgment for $16,322 plus interest and costs. The Company is seeking an out-of-court settlement.

The Company was named as the defendant in a legal proceeding brought by FedEx Customer Information Services, Inc. (the plaintiff) on September 15, 2010 in the General District Court of Fairfax County, Virginia. The plaintiff asserts that the Company failed to pay the full amount owed for services. The plaintiff obtained a Consent Judgment for $12,900 in compensatory damages plus $58 in costs. The Company is seeking an out-of-court settlement.

The Company was named as the defendant in a legal proceeding brought by i-Cubed Information LLC (the plaintiff) on August 10, 2012 in the General District Court of Fairfax County, Virginia. The plaintiff asserts that the Company failed to pay for delivery of services provided by plaintiff. The plaintiff was granted a judgment by consent in the amount of $12,920. The Company is seeking an out-of-court settlement.

The Company was named as the defendant in a legal proceeding brought by Pelligrino and Associates (the plaintiff) on August 14, 2014 in the Marion County Superior Court, Marion County, Indiana. The plaintiff asserts that the Company failed to pay the full amount owed for services. The plaintiff is seeking $20,159 plus attorney’s fees, interest and cots. The Company is seeking an out-of-court settlement.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable to our operations.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Our common stock is quoted on the OTCBB under the symbol UOIP. The reported high and low closing prices for the common stock as reported on the OTCBB are shown below for the periods indicated. The quotations reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not represent actual transactions.

	High		Low
Nine months ended June 30, 2014
First quarter ended December 31, 2013	$	12.4000	$	3.6400
Second quarter ended March 31, 2014	$	8.0000	$	1.6400
Third quarter ended June 30, 2014	$	2.9600	$	0.4000

Fiscal 2015
First quarter ended September 30, 2014	$	0.5600	$	0.0400
Second quarter ended December 31, 2014	$	0.2400	$	0.0004
Third quarter ended March 31, 2015	$	0.0450	$	0.0101
Fourth quarter ended June 30, 2015	$	0.0280	$	0.0130

As of October 7, 2015 the last sale price of our common shares as reported on the OTC Bulletin Board was $0.008 per share. As of September 16, 2015 there were approximately 5,900 record owners of our common stock.

Dividend Policy

We have never paid cash dividends on our common stock. Under Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits any dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired.

We do not anticipate that any cash dividends will be declared or paid on our common stock in the foreseeable future.

Recent Sales of Unregistered Securities

Year Ended June 30, 2015 Transactions:

In July, 2014, the Company issued 243,750 shares of common stock, at the original conversion terms, at a per share price ranging from $0.240 to $0.096 valued at $35,250 as a partial conversion of principal and interest due under a convertible note.

In July, 2014, the Company issued 132,396 shares of common stock, at the original conversion terms, at a per share price of $0.096 valued at $12,710 as a partial conversion of principal and interest due under a convertible note.

In July, 2014, the Company issued 357,182 shares of common stock, at the original conversion terms, at a per share price ranging from $0.192 to $0.0096 valued at $48,400 as a partial conversion of principal and interest due under a convertible note.

In August, 2014, the Company issued 119,614 shares of common stock, at the original conversion terms, at a per share price of $0.072 valued at $8,612, in full satisfaction of $62,222 of principal and interest due under a convertible note.

In August, 2014, the Company issued 867,827 shares of common stock, at the original conversion terms, at a per share price ranging from $0.072 to $0.040 valued at $42,410 in full satisfaction of principal and interest due under a convertible note.

In August, 2014, the Company issued 942,008 shares of common stock, at the original conversion terms, at a per share price ranging from $0.072 to $0.024 valued at $38,714 as a partial conversion of principal and interest due under a convertible note.

In September, 2014, the Company issued 1,327,239 shares of common stock, at the original conversion terms, at a per share price ranging from $0.032 to $0.024 valued at $33,360 as a partial conversion of principal and interest due under a convertible note.

In September, 2014, the Company issued 942,961 shares of common stock, at the original conversion terms, at a per share price of $0.024 valued at $22,631 in full satisfaction of principal and interest due under a convertible note.

In September, 2014, the Company issued 1,649,708 shares of common stock, at the original conversion terms, at a per share price of $0.024 valued at $39,593 as a partial conversion of principal and interest due under a convertible note.

In October, 2014, the Company issued 320,601 shares of common stock, at the original conversion terms, at a per share price of $0.024 valued at $7,694 in full satisfaction of principal and interest due under a convertible note.

In January, 2015, the Company issued 903,825,954 shares of common stock, at the original conversion terms, to the holder of the Company’s Series AA convertible preferred stock upon conversion of 400,000 shares of Series AA convertible preferred stock.

In June, 2015, the Company retired 5,976 shares of common stock held in escrow at time of CTC acquisition.

All stock based transactions listed above were valued at fair market value (quoted market prices) or the contractual rate which approximates fair market value, as applicable.

Transactions after June 30, 2015:

In July, 2015, the Company issued 431,333 shares of common stock, at the original conversion terms, at a per share price of $0.0075 valued at $3,235 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable for a smaller reporting company.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. It should be read in conjunction with the accompanying consolidated financial statements and notes. MD&A is organized as follows:

●	Overview. Discussion of our business and overall analysis of financial and other highlights affecting the company in order to provide context for the remainder of MD&A.

●	Results of Operations. An analysis of our financial results comparing Fiscal 2015 to the nine month transition period ended June 30, 2014.

●	Liquidity and Capital Resources. An analysis of changes in our balance sheets and cash flows, and discussion of our financial condition and potential sources of liquidity.

●	Off Balance-Sheet Arrangements.

●	Recent Accounting Pronouncements.

In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs and are subject to a number of known and unknown risks and external factors that in addition to general, economic, competitive and other business conditions, could cause actual results, performance and achievements to differ materially from those described or implied in the forward-looking statements, as more fully discussed below and elsewhere in this filing.

OVERVIEW

UOIP is a provider of high performance network services (wireless, wireline and fiber), ISP services, private networking services, datacenter services and storage solutions. Our wireless point-to-point network and private fiber ring provide customers with a unique capability for not only high speed business to business networking, but also redundant backup circuitry for disaster preparedness purposes. Our datacenter provides highly secure, power-dense rack and cross-connect capabilities to business customers seeking co-location, disaster recovery, managed services and business continuity capability. The efficiency of our location and our solar assisted power generation enables our low cost of operations.

In addition to lower capital expenditures for the enterprise, by outsourcing IT capabilities through our networks to our datacenters, customers can increase the security of their data assets while increasing the availability to their users’ off-premise. Utilizing our smart infrastructure, customers can also avail themselves of rapid deployment of event-based wireless capabilities saving them time and money and providing optimum time savings for broadband-remote locations.

Through our acquisition of Computers & Telecom, Inc. and KCNAP, LLC, (collectively “CTC”) in October 2013, UOIP now provides these wireless and fiber broadband service, co-location space and related services and operates a Network Access Point (“NAP”) where customers directly interconnect with a network ecosystem of partners and customers. This access to highly efficient Internet routes provides customers improved reliability and streamlined connectivity while significantly reducing costs by reaching a critical mass of networks within a centralized physical location.

CTC operates a wireless internet service business, providing wireless broadband to small and medium size businesses in the metro Kansas-City, Missouri area. In addition CTC offers the following solutions: (i) premium data center co-location, (ii) interconnection and (iii) exchange and outsourced IT infrastructure services.

We leverage our NAP which allows our customers to increase information and application delivery performance. Our platform enables scalable, reliable and cost-effective co-location, interconnection and traffic exchange.

Our customer base includes enterprise companies, and small to medium sized businesses in hospitality, healthcare, retail and other market spaces (“SMB”).

We anticipate revenues for Fiscal 2016 will increase as a result of organic growth, the introduction of new products and services, such as additional cloud services offerings through alliances and strategic partnerships with other ISPs and wireless providers, and other products sold through our resellers and OEM partners. There are no assurances, however, that our revenues will return to historic levels.

RESULTS OF OPERATIONS

YEAR ENDED JUNE 30, 2015 AS COMPARED TO THE NINE MONTH TRANSITION PERIOD ENDED JUNE 30, 2014

The following table provides an overview of certain key factors of our results of operations for the year ended June 30, 2015 as compared to the nine month transition period ended June 30, 2014:

	Year Ended			Nine Months Ended
	June 30,						$			%
	2015			2014			Change			Change
Net Revenues	$	924,472		$	722,784		$	201,688			27.9	%
Cost of sales		797,980			860,981			(63,001	)		(7.3	%)
Operating Expenses
Sales and marketing		160,897			114,271			46,626			40.8	%
Depreciation		136,052			133,420			2,632			2.0	%
Technical		335,426			292,750			42,676			14.6	%
General and administrative		919,277			987,979			(68,702	)		(7.0	%)
Total Operating Expenses		1,551,652			1,528,420			23,232			1.5	%
Loss from operations		(1,425,160	)		(1,666,617	)		241,457			(14.5	%)
Total other expense		(455,507	)		(3,227,661	)		2,772,154			(85.9	%)
Net loss	$	(1,880,667	)	$	(4,894,278	)	$	3,013,611			(61.6	%)

Other Key Indicators:

	Year Ended			Nine Months Ended
	June 30,
	2015			2014
Cost of sales as a percentage of revenue		86.3	%		119.1	%
Gross profit margin		13.7	%		(19.1	%)
Sales and marketing expense as a percentage of sales		17.4	%		15.8	%
General and administrative expenses as a percentage of sales		99.4	%		136.7	%
Total operating expenses as a percentage of sales		167.8	%		211.5	%

Revenues

The increase in sales is primarily due to a nine month period compared to a twelve month period. Prorated, sales are slightly down due to non-recurring Fiscal 2014 installation revenue.

Cost of Sales and Gross Profit

Our cost of sales consists primarily of the costs of providing wireless and fiber bandwidth and colocation services. For the year ended June 30, 2015 cost of sales were $798K or approximately 86% of revenues compared to $861K or approximately 119% of revenues for the nine months ended June 30, 2014. Of this amount, $272K and $417K related to depreciation expense for the year ended June 30, 2015 and the nine months ended June 30, 2014, respectively. The decrease in costs of sales as a percentage of revenue and the corresponding increase in gross profit margin was due to the change in focus of the business. We anticipate that gross profit margin will remain between 10% and 20% during Fiscal 2016.

Total Operating Expenses

Our total operating expenses increased approximately 1% for the year ended June 30, 2015 as compared to the nine month period ended June 30, 2014. Prorated the decrease in operating expenses for the year ended June 30, 2015 as compared to the prorated twelve month period ended June 30, 2014 is 24%. The changes include:

●

Sales and Marketing expense. Sales and marketing expense includes salaries, commission, telephone and travel and entertainment expenses for sales personnel. For the year ended June 30, 2015, sales and marketing expense increased approximately 41% from the nine month period ended June 30, 2014. The increase was due primarily to the three extra months offset by the issuance of stock based compensation in 2014 in connection with the purchase of CTC.

●	Depreciation expense. For the year ended June 30, 2015, depreciation expense was $136,052 compared to $133,420 for the nine month period ended June 30, 2014.

●

Technical expense. For the year ended June 30, 2015, technical expenses increased approximately 15% from the nine months period ended June 30, 2014 due primarily to the three extra months offset by lower headcount as a result of a shift in the business focus due to the acquisition of CTC in October, 2013. Prorated, technical expense decreased approximately 14% due to a decrease in headcount.

●

General and administrative expense. For the year ended June 30, 2015, general and administrative expenses decreased approximately 7% from the nine months ended June 30, 2014. For the year ended June 30, 2015 and the nine months ended June 30, 2014, general and administrative expenses consisted of the following:

	Year Ended		Nine Months Ended
	June 30,
	2015		2014
Occupancy	$	162,266	$	135,623
Consulting		154,192		187,473
Employee compensation		264,090		119,886
Professional fees		130,206		139,163
Travel and entertainment		20,987		34,692
Insurance		62,225		42,353
Investor relations		2,350		132,844
Other		122,961		195,945
	$	919,277	$	987,979

The principal changes between the two periods include:

●	For the year ended June 30, 2015, occupancy expense increased approximately 20% from the nine months ended June 30, 2014 due to the nine month period compared to the twelve month period. On an annualized basis, occupancy expense decreased approximately 14% due to a decrease in utility expense.

●	For the year ended June 30, 2015, consulting expense decreased approximately 18% due to a reduced use of consultants for business development efforts as well as reduced non-recurring stock-based consulting fees related to merger and acquisition activity in the nine months ended June 30, 2014.

●

For the year ended June 30, 2015, employee compensation which includes related taxes and benefits increased approximately $144K primarily due to the return and cancellation of restricted share compensation in the nine month period ended June 30, 2014. Excluding that adjustment, compensation expense during the year ended June 30, 2015 decreased approximately 48% from the nine month period ended June 30 2014 due to reduced headcount and lower stock-based compensation expense.

●	For the year ended June 30, 2015, professional fees decreased approximately 6% due to lower litigation and legal fees incurred in the normal course of business as compared to the nine months ended June 30, 2014.

●	For the year ended June 30, 2015, insurance expense increased approximately 47% from the nine month period ended June 30, 2014 due to three additional months and higher premiums paid for directors and officer’s insurance.

●	For the year ended June 30, 2015, investor relations decreased approximately 98% as compared to the nine months ended June 30, 2014 due to substantially lower general investor relations activity.

●	For the year ended June 30, 2015, other expense decreased approximately 37% from the nine month period ended June 30, 2014 primarily due to a decrease in bad debt expense and other cost control measures.

Loss from Operations

We reported a loss from operations of $1.4 million for the year ended June 30, 2015 as compared to a loss from operations of $1.7 million for the nine month period ended June 30, 2014.

Total Other Income (Expenses)

Gain (loss) from change of fair value of derivative liability. For the year ended June 30, 2015 we had a gain on the change of fair value of derivative liability of $195,693 as compared to a loss on the change of fair value of derivative liability of $61,221 in the nine month period ended June 30, 2014. This represents the change in the value of the derivative liability based on the Black-Scholes value of our outstanding variably-priced convertible debt and warrants. The variance is primarily attributable to the change in the Company’s stock price, conversion of notes and due to new convertible note liabilities in Fiscal 2015.

Derivative expense. For the year ended June 30, 2015 we had a derivative expense of $184,813 as compared to a derivative expense of $35,102 for the nine months ended June 30, 2014. The increase is attributable to the volatility in the stock price.

Loss on extinguishment of debt. For the nine month period ended June 30, 2014 we had a loss on extinguishment of debt of $265,311 related to the sale and assignment of the Agility Master Lease and Equipment Schedule to a third party, UO! IP of NC, LLC. UO! IP of NC, LLC is a related party to the holder of the Series AA Preferred Stock, Unified Online! LLC. We did not incur a similar expense in Fiscal 2015.

Impairment of Goodwill. For the nine months ended June 30, 2014, we incurred a loss on the impairment of intangible assets of $2.1 million which related to the acquisition of CTC in October 2013. We did not incur a similar expense in Fiscal 2015.

Interest Expense. For the year ended June 30, 2015, interest expense decreased approximately 39% compared to the nine month period ended June 30, 2014. The decrease in interest expense is primarily attributable to higher loan fee amortization and debt discount amortization on convertible notes in the nine month period ended June 30, 2014.

Net Loss

Our net loss was $1.9 million for the year ended June 30, 2015 compared to $4.9 million for the nine month period ended June 30, 2014, an improvement of $3.6 million or approximately 65%.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate adequate amounts of cash to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

In summary, our cash flows are as follows:

	Year Ended			Nine Months Ended
	June 30,
	2015			2014

Net cash used in operating activities	$	(811,118	)	$	(1,286,842	)

Net cash used in investing activities		(12,477	)		(18,226	)

Net cash provided by financing activities		788,513			1,352,243

Net increase (decrease) in cash	$	(35,082	)	$	47,175

At June 30, 2015, we had a working capital deficit of $4.4 million compared to a working capital deficit of $3.1 million at June 30, 2014, an increase in the deficit of $1.3 million. The increase in the deficit is primarily attributable to the increase in capital lease payable of $226K due to the classification between short-term and long-term driven by the increased payment amounts in Fiscal 2016 as compared to Fiscal 2015, an increase in our notes payable of $490K due to new notes payable in Fiscal 2015, an increase in our related-party notes payable of $549K, the decrease in derivative liability of $341K, a non-cash liability and an increase in accounts payable and accrued liabilities of $203K.

Net cash used in operating activities was $811,118 for the year ended June 30, 2015 as compared to net cash used in operating activities of $1,286,842 for the nine months ended June 30, 2014, a decrease of $684,276. For the year ended June 30, 2015, our cash used in operations of $811K consisted of a net loss of $1.9 million offset by non-cash items totaling $1.1 million including items such as depreciation of $408K, amortization of debt discount of $196K and other non-cash items of $95K. Additionally, during the year ended June 30, 2015, we had a decrease in operating liabilities combined with an increase in operating assets which increased our net loss.

For the nine month period ended June 30, 2014, our cash used in operating activities of $1.3 million consisted of a net loss of $4.9 million offset by non-cash items totaling $3.6 million including items such as depreciation of $551K, goodwill impairment of $2.1 million, loss on extinguishment of debt of $265K, amortization of debt discount of $478K and other non-cash items of $75K. Additionally, during the nine month period ended June 30, 2014, we had a decrease in operating liabilities offset by a decrease in operating assets which increased our net loss.

Net cash used in investing activities for the year ended June 30, 2015 was $12K as compared to net cash used in investing activities for the nine month period ended June 30, 2014 of $18K for property and equipment purchases.

Net cash provided by financing activities for the year ended June 30, 2015 was $788,513 as compared to $1,352,243 for the nine months ended June 30, 2014, a decrease of $564K. In the year ended June 30, 2015, proceeds from the sale of convertible notes of $150K, proceeds from notes payable from a related party of $999K and proceeds from a note payable of $50K, offset by payments on notes payable of $411K.

In the nine months ended June 30, 2014, we received proceeds from the issuance of preferred stock of $116K, proceeds from the sale of convertible notes of $428K, proceeds from notes payable from a related party of $665K and proceeds from the exercise of common stock options of $271K, offset by payments on notes payable of $127K.

At June 30, 2015 we had an accumulated deficit of $54.7 million and the report from our independent registered public accounting firm on our consolidated audited financial statements at June 30, 2015 contained an explanatory paragraph regarding doubt as to our ability to continue as a going concern as a result of our net losses in operations. In spite of our sales, there is no assurance that we will be able to maintain or increase our sales in Fiscal 2016 or that we will report net income in any future periods.

In November 2012 we entered into a Loan Agreement with IWEB Growth Fund, LLC, a company which was established by Messrs. Compton, Bush, Carosi, Pirtle and Stavish and General Soyster, our former independent directors. Under the terms of the Loan Agreement, IWEB Growth Fund agreed to make one or more loans to us up to the total principal amount of $1.5 million and as of the date hereof we have borrowed $186,000 from it under one year 12% secured notes. Under the terms of these loans, we granted IWEB Growth Fund a second position security interest in all of our assets and executed a confession of judgment. Any additional amounts to be lent to us under this master agreement are at the discretion of the lender and there are no assurances any additional funds will be available to us. In addition, there are no assurances that the terms of these loans are as favorable to us as we might have received from unrelated third parties. Lastly, should we fail to pay these obligations when due, the lender could seek to foreclose on our assets or otherwise obtain a judgment against us.

Between November 9, 2012 and July 11, 2013, IWEB Growth Fund lent us an aggregate of $186,000 under the terms of 9 separate Confession of Judgment Promissory Notes. These notes, which are identical in their terms other than the dates and principal amounts, are for a one year term and bear interest at 12% per annum payable at maturity. Embodied in each of the notes is a confession of judgment which means that should we default upon the payment of the note, we have agreed to permit IWEB Growth Fund to enter a judgment against us in the appropriate court in Virginia before filing suit against us for collection of the amounts. Pursuant to the terms of the Loan Agreement, we paid IWEB Growth Fund’s expenses of $1,500 for the preparation of the Loan Agreement and related documents. We used the net proceeds from these initial loans for general working capital. We are currently in default on these loans.

On April 23, 2014, we entered into a Subscription Agreement with UnifiedOnline! LLC (the “Subscriber”), a Delaware limited liability company, pursuant to which the Subscriber purchased 400,000 shares of Series AA Preferred Stock which were converted on January 5, 2015 to 903,825,954 shares of common stock. In consideration for the Shares, Subscriber paid $116,087 to various vendors and obtained the agreement of a certain related party lessor to temporarily forbear exercising non-payment default remedies. Since entering into the Subscription Agreement, the Subscriber has advanced $664,578 bearing interest at 10% per annum to fund general working capital.

Historically, our revenues have not been sufficient to fund our operations and we have relied on capital provided through the sale of equity securities, and various financing arrangements and loans from related parties. At June 30, 2015 we had cash on hand of $21,745.

We do not have any commitments for capital expenditures. Our working capital needs in future periods depend primarily on the rate at which we can increase our revenues while controlling our expenses and decreasing the use of cash to fund operations. Additional capital may be needed to fund acquisitions of additional companies or assets, although we are not a party to any pending agreements at this time and, accordingly, cannot estimate the amount of capital which may be necessary, if any, for acquisitions.

As long as our cash flow from operations remains insufficient to completely fund operations, we will continue depleting our financial resources and seeking additional capital through equity and/or debt financing. There can be no assurance that acceptable financing can be obtained on suitable terms, if at all. Our ability to continue our existing operations and to continue our growth strategy could suffer if we are unable to raise the additional funds on acceptable terms which will have the effect of adversely affecting our ongoing operations and limiting our ability to increase our revenues and maintain profitable operations in the future. If we are unable to secure the necessary additional working capital as needed, we may be forced to curtail some or all of our operations.

OFF BALANCE SHEET ARRANGEMENTS

As of June 30, 2015 we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

RECENT ACCOUNTING PRONOUNCEMENTS

Various accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable to a smaller reporting company.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

UNIFIEDONLINE, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

CONTENTS

Report of Independent Registered Public Accounting Firm	21

Consolidated Financial Statements:

Consolidated Balance Sheets	22

Consolidated Statements of Operations	23

Consolidated Statements of Comprehensive Loss	24

Consolidated Statements of Changes in Stockholders’ Deficit	25

Consolidated Statements of Cash Flows	26

Notes to Consolidated Financial Statements	27 - 51

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

UnifiedOnline, Inc.

We have audited the accompanying consolidated balance sheets of UnifiedOnline, Inc. and Subsidiaries as of June 30, 2015 and 2014 and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ deficit and cash flows for the year ended June 30, 2015 and the nine months ended June 30, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of our internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of UnifiedOnline, Inc. and Subsidiaries, as of June 30, 2015 and 2014 and the consolidated results of their operations, comprehensive loss and their cash flows for the year ended June 30, 2015 and the nine months ended June 30, 2014, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had net losses of $1,880,667 and $4,894,278, for the year ended June 30, 2015 and for the nine months ended June 30, 2014 and net cash used in operations of $811,118 for the year ended June 30, 2015 and $1,286,842 for the nine months ended June 30, 2014. Additionally, the Company is currently in default on the loans to IWEB Growth Fund and there is no guarantee that IWEB Growth Fund will not enter a judgment against the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

	/s/ D’Arelli Pruzansky, P.A.
	Certified Public Accountants

Boca Raton, Florida

October 9, 2015

UNIFIEDONLINE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

	June 30,			June 30,
	2015			2014
Assets
Current Assets:
Cash	$	21,745		$	56,827
Accounts receivable, net		19,945			84,091
Inventory		-			19,069
Prepaid expenses		66,543			136,927
Marketable securities		2			3
Other current assets		10,208			51,708
Total Current Assets		118,443			348,625

Property and equipment, net of accumulated depreciation of $1,140,249 and $939,408 respectively		51,462			451,843
Deposits		5,923			5,923
Other assets		1,545			1,545
Total Assets	$	177,373		$	807,936

Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable and accrued liabilities	$	1,043,088		$	840,009
Notes payable, current portion		962,810			472,017
Capital lease payable, current portion		886,356			660,458
Note payable, related party		1,029,005			479,578
Deferred revenue		85,407			74,824
Convertible notes payable, net of discount		115,632			197,645
Derivative liability - warrants		83,766			302,065
Derivative liability - embedded conversion option		346,734			469,632
Total Current Liabilities		4,552,798			3,496,228

Capital lease payable, long term portion		517,686			1,143,501
Total Liabilities		5,070,484			4,639,729

Commitments and Contingencies (Note 14)

Stockholders' Deficit:
Series B convertible preferred stock ($.001 par value; 10,000,000 shares authorized; 626,667 shares issued and outstanding)		626			626
Series AA convertible preferred stock ($.001 par value; 10,000,000 shares authorized; 0 and 400,000 shares issued and outstanding, respectively)		-			400
Common stock ($.001 par value; 6,000,000,000 shares authorized; 912,466,204 and 1,742,940 shares issued and outstanding, respectively)		912,466			1,743
Additional paid in capital		48,984,686			49,075,659
Accumulated deficit		(54,696,891	)		(52,816,224	)
Accumulated other comprehensive loss		(80,998	)		(80,997	)
Treasury stock, at cost, (406 shares)		(13,000	)		(13,000	)
Total Stockholders' Deficit		(4,893,111	)		(3,831,793	)
Total Liabilities and Stockholders' Deficit	$	177,373		$	807,936

See accompanying notes to consolidated financial statements

UNIFIEDONLINE, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

	Year Ended			Nine Months Ended
	June 30,
	2015			2014

Sales	$	924,472		$	722,784

Cost of sales		797,980			860,981
Gross profit (loss)		126,492			(138,197	)

Operating expenses:
Sales and marketing		160,897			114,271
Depreciation		136,052			133,420
Technical		335,426			292,750
General and administrative		919,277			987,979
Total Operating Expenses		1,551,652			1,528,420

Loss from Operations		(1,425,160	)		(1,666,617	)

Other income (expenses):
Gain (loss) on sale of assets		8,943			(1,895	)
Gain (loss) from change of fair value of derivative liability		195,693			(61,221	)
Derivative expense		(184,813	)		(35,102	)
Loss on extinguishment of debt		-			(265,311	)
Impairment of goodwill		-			(2,084,710	)
Interest expense		(475,330	)		(779,422	)
Total other income (expenses)		(455,507	)		(3,227,661	)

Net loss	$	(1,880,667	)	$	(4,894,278	)

Loss per common share basic and diluted	$	0.00		$	(3.79	)

Weighted average common shares outstanding - basic and diluted		443,252,450			1,291,231

See accompanying notes to consolidated financial statements

UNIFIEDONLINE, INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss

	Year Ended			Nine Months Ended
	June 30,
	2015			2014

Net loss	$	(1,880,667	)	$	(4,894,278	)

Other comprehensive loss, net of tax:

Unrealized loss on securities		(1	)		(2	)

Other comprehensive loss		(1	)		(2	)

Comprehensive loss	$	(1,880,668	)	$	(4,894,280	)

See accompanying notes to consolidated financial statements

UNIFIEDONLINE, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Deficit

For the Year Ended June 30, 2015 and the Nine Month Period Ended June 30, 2014

	Series B and Series AA												Accumulated Other			Additional
	Pref Stock						Common Stock						Comprehensive			Paid-In			Accumulated			Treasury Stock
	Shares			Amount			Shares			Amount			Loss			Capital			Deficit			Share			Amount			Total
Balance at September 30, 2013		626,667		$	626			1,028,743		$	1,027		$	(80,180	)	$	47,642,898		$	(47,921,946	)		(406	)	$	(13,000	)	$	(370,575	)

Common stock issued for exercise of options								62,500			63						271,105												271,168
Common stock issued for services								42,500			43						218,957												219,000
Common stock issued to employees								27,169			27						169,973												170,000
Common stock returned by employees								(40,000	)		(40	)					(527,960	)											(528,000	)
Net loss for the nine months																				(4,894,278	)								(4,894,278	)
Shares issued as finance fee								18,513			19						104,481												104,500
Amortization of deferred compensation																	194,531												194,531
Common stock issued for acquisition								57,635			58						564,667												564,725
Payment on convertible note								527,666			528						321,338												321,866
Exercise of common stock warrants								18,214			18						(18	)											-
Unrealized loss on securities, net														(817	)														(817	)
Preferred stock		400,000			400												115,687												116,087
Balance at June 30, 2014		1,026,667		$	1,026			1,742,940		$	1,743		$	(80,997	)	$	49,075,659		$	(52,816,224	)		(406	)	$	(13,000	)	$	(3,831,793	)

Net loss for the year																				(1,880,667	)								(1,880,667	)
Amortization of deferred compensation																	49,660												49,660
Shares issued for conversion of notes payable								6,903,286			6,903						282,470												289,373
Write-off of derivative liability upon conversion																	480,317												480,317
Unrealized loss on securities, net														(1	)														(1	)
Retirement of shares								(5,976	)		(6	)					6												-
Conversion of Series AA convertible preferred stock		(400,000	)		(400	)		903,825,954			903,826						(903,426	)											-
Balance at June 30, 2015		626,667		$	626			912,466,204		$	912,466		$	(80,998	)	$	48,984,686		$	(54,696,891	)		(406	)	$	(13,000	)	$	(4,893,111	)

See accompanying notes to consolidated financial statements

UNIFIEDONLINE, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

	Year Ended			Nine Months Ended
	June 30,
	2015			2014
Net Loss	$	(1,880,667	)	$	(4,894,278	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		408,408			550,799
Gain on sale of assets		8,943			1,895
Share-based compensation		-			170,000
Return of restricted shares		-			(528,000	)
Amortization of deferred compensation		49,660			194,531
Loss on extinguishment of debt		-			265,311
Impairment of goodwill		-			2,084,710
Change in fair value of derivative liability		(195,693	)		61,221
Derivative expense		184,813			35,102
Common stock and options issued for services rendered		-			219,000
Amortization of deferred finance costs		45,650			56,292
Amortization of debt discount		195,670			477,813
Bad debt expense		2,155			18,852
Changes in operating assets and liabilities:
Accounts receivable		61,991			(44,775	)
Prepaid expense		63,734			(15,599	)
Other		-			107,150
Inventory		19,069			144,099
Accounts payable and accrued liabilities		214,566			(203,397	)
Deferred revenue		10,583			12,432
NET CASH USED IN OPERATING ACTIVITIES		(811,118	)		(1,286,842	)

CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchase of property and equipment		(12,477	)		(18,226	)
NET CASH USED IN INVESTING ACTIVITIES		(12,477	)		(18,226	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable		(410,914	)		(127,410	)
Proceeds from convertible note payable		150,000			427,820
Proceeds from notes payable		500,000			185,000
Proceeds from notes payable, related party		549,427			479,578
Proceeds from issuance of preferred stock		-			116,087
Proceeds from exercise of common stock options		-			271,168
NET CASH PROVIDED BY FINANCING ACTIVITIES		788,513			1,352,243

NET INCREASE (DECREASE) IN CASH		(35,082	)		47,175

CASH - beginning of period		56,827			9,652

CASH - end of period	$	21,745		$	56,827

Supplemental disclosure of cash flow information:
Cash paid for interest	$	52,651		$	169,457

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of convertible note into common stock	$	289,373		$	321,866
Shares issued for acquisition of subsidiary	$	-		$	564,725
Shares issued for conversion of Series AA convertible preferred stock	$	903,826		$	0

See accompanying notes to consolidated financial statement

NOTE 1 – NATURE OF BUSINESS

On January 5, 2015, IceWEB, Inc. changed its name to UnifiedOnline, Inc.

UnifiedOnline, Inc. (the “Company”) began trading publicly in April 2002. During the year ended June 30, 2015 we had three wholly owned operating subsidiaries, Computers & Telecom, Inc. and KCNAP, LLC, (collectively “CTC) and IceWEB Storage Corporation (formerly known as Inline Corporation). CTC provides wireless and fiber broadband service, co-location space and related services and operates a Network Access Point (“NAP”) where customers directly interconnect with a network ecosystem of partners and customers. This access to Internet routes provides CTC customers improved reliability and streamlined connectivity while significantly reducing costs by reaching a critical mass of networks within a centralized physical location. In addition, through our IceWEB Storage Corporation subsidiary we deliver on-line cloud computing application services, other managed services such as Disaster Recovery, Archive Storage, Redundant File Storage, Redundant Broadband Services and Business Continuity Services.

CTC operates a wireless internet service business, providing WIMAX broadband to small and medium size businesses in the metro Kansas-City, Missouri area. In addition CTC offers the following solutions: (i) premium data center co-location, (ii) interconnection and (iii) exchange and outsourced IT infrastructure services.

We leverage our NAP which allows our customers to increase information and application delivery performance while reducing costs. Our platform enables scalable, reliable and cost-effective co-location, interconnection and traffic exchange thus lowering overall cost and increasing flexibility.

NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Reclassifications

Certain reclassifications have been made to previously reported amounts to conform to 2015 amounts. The reclassifications had no impact on previously reported results of operations or stockholders’ deficit. The changes were as a result of the reverse stock split which occurred on January 5, 2015, which was retrospectively applied, the reclass of certain depreciation related to assets used for providing service to cost of sales from operating expense, the reclass of a capital lease payable from notes payable to capital lease payable and the reclass of derivative expense from interest expense.

Going Concern

The Company has had losses since inception that raise substantial doubt about our ability to continue as a going concern. For the year ended June 30, 2015 and the nine months ended June 30, 2014 we incurred a net loss of approximately $1.9 million and $4.9 million, respectively and net cash used in operations of approximately $811K for the year ended June 30, 2015 and approximately $1.2 million for the nine month period ended June 30, 2014. The consolidated financial statements do not include any adjustments related to the recovery and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event we cannot continue in existence. Additionally, the Company is currently in default on the loans to IWEB Growth Fund, and there is no guarantee that IWEB Growth Fund will not enter a judgment against the Company.

Management has established plans intended to increase the sales of our products and services. Management intends to seek new capital from new equity securities offerings to provide funds needed to increase liquidity, fund growth, and implement its business plan. However, no assurances can be given that we will be able to raise any additional funds.

Marketable Securities

The Company accounts for the purchase of marketable equity securities in accordance with FASB Accounting Standards Codification (ASC) 320, “Investment – Debt and Equity Securities” with any unrealized gains and losses included as a net amount as a separate component of stockholders’ equity. However, those securities may not have the trading volume to support the stock price if the Company were to sell all their shares in the open market at once, so the Company may have a loss on the sale of marketable securities even though they record marketable equity securities at the current market value.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable allowances, useful lives of property and equipment, valuation of stock-based compensation, derivative liabilities, deferred tax asset valuation allowance and litigation reserves. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Cash and Cash Equivalents

We consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents.

Accounts Receivable

We record accounts receivable at the invoiced amount. We maintain an allowance for doubtful accounts to reserve for potentially uncollectible receivables. We recorded a bad debt allowance of $4,768 and $45,000 as of June 30, 2015 and 2014, respectively. The Company performs ongoing evaluations of its accounts receivable to identify specific customers with known disputes or collectability issues. Bad debt expense amounted to $2,155 and $18,852 for the year ended June 30, 2015 and the nine months ended June 30, 2014, respectively.

Derivative Liability

The Company issued warrants to purchase the Company’s common stock in connection with the issuance of convertible debt, which contain certain ratchet provisions that reduce the exercise price of the warrants or the conversion price in certain circumstances. In accordance with ASC 815 the Company determined that the warrants and/or the conversion features with provisions that reduce the exercise price of the warrants did not qualify for a scope exception under ASC 815 as they were determined not to be indexed to the Company’s stock.

Derivatives are required to be recorded on the balance sheet at fair value (see Note 11). These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The established fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, receivables, accounts payable and accrued liabilities and notes payable are carried at cost, which approximates their fair value, due to the relatively short maturity of these instruments.

Our derivative financial instruments, consisting of embedded conversion features in our convertible debt and ratchet provisions in our warrants, are required to be measured at fair value on a recurring basis under FASB ASC 815. As of June 30, 2015 and 2014 the Company’s derivatives are measured at fair value, using a Black-Scholes valuation model which approximates a binomial lattice valuation methodology utilizing Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities (see Note 12).

Inventory

Inventory is valued at the lower of cost or market, on an average cost basis.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation. Depreciation expense is recorded by using the straight-line method over the estimated useful lives of the related assets.

Product Warranties

The Company’s products typically carry a warranty for periods of up to three years. We have not had any significant warranty claims on our products.

Long-lived Assets

In accordance with Accounting Standards Codification (ASC) Topic 360, “Property, Plant, and Equipment”, we review the carrying value of intangibles and other long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.

Revenue Recognition

We follow the guidance of ASC Topic 605, “Revenue Recognition” for revenue recognition. In general, we record revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.

It is our practice to obtain a signed master sales agreement for recurring revenue sales, and/or a sales order for events and one-time services. Taxes collected from customers and remitted to government authorities are reported on a net basis and are excluded from revenue.

We derive the majority of our revenues from recurring revenue streams, consisting of:

1.	Wireless and fiber broadband service;

2.	Co-location, which includes the licensing of cabinet space and power;

3.	Interconnection services, such as cross connects;

4.	Managed infrastructure services.

●	Revenues from recurring revenue streams are generally billed monthly and recognized ratably over the term of the contract, generally one to three years for data center space customers. We generally recognize revenue beginning on the date the customer commences use of our services.

●	Implementation and set-up fees are recognized at the time those services are completed and service is working.

●	For services that are billed according to customer usage, revenue is recognized in the month in which the usage is provided.

●	Professional services are recognized in the period services are provided.

●	Amounts that have been invoiced are recorded in accounts receivable and revenue.

Our customers generally have the right to cancel their contracts by providing prior written notice to us of their intent to cancel the remainder of the contract term. The customer would be required to pay any charge for early cancellation that their contract specifies. In the event that a customer cancels their contract, they are not entitled to a refund for services already rendered. A customer can continue service on a month-to-month basis after their contract expires.

Advertising

Advertising costs are expensed as incurred and amounted to approximately $40,000 in the year ended June 30, 2015 and approximately $31,200 in the nine months ended June 30, 2014.

Barter Transactions

Barter activity is accounted for in accordance with ASC 845, “Nonmonetary Transactions”. Barter revenue relates to the exchange of wireless bandwidth and internet connectivity provided by CTC to business customers in exchange primarily for roof rights for antennae, advertising and other products and services that CTC would otherwise be required to buy for cash. Barter expenses reflect the expense offset to barter revenue. The amount of barter revenue and expense is recorded at the estimated fair value of the services received or the services provided, whichever is more objectively determinable, in the month the services are exchanged. For the year ended June 30, 2015, the Company recorded barter revenue of approximately $24,400 and barter expense of approximately $39,800. For the nine months ended June 30, 2014, the Company recorded barter revenue of approximately $22,500 and barter expense of approximately $31,200.

Prepaid Expenses

Prepaid expenses are comprised primarily of prepaid costs related to the installation of new customers, prepaid advertising costs which are expensed when used and prepaid financing costs which are amortized over the life of the related financing.

Deferred Revenue

Amounts billed in advance of services being provided are recorded to deferred revenue and are recognized in the consolidated statements of operations as services are provided.

Deferred Financing Costs

Debt issuance costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense based on the related debt agreements on a straight-line basis, which approximates the effective interest method. Unamortized amounts are included in prepaid expenses in the accompanying consolidated balance sheets.

Earnings per Share

We compute earnings per share in accordance with ASC Topic 260, “Earnings Per Share” Under the provisions of ASC Topic 260, basic earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) for the period by the weighted average number of common and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of the common shares issuable upon the exercise of stock options and warrants (using the treasury stock method) and upon the conversion of convertible notes and preferred stock (using the if-converted method). Potentially dilutive common shares are excluded from the calculation if their effect is antidilutive. At June 30, 2015, there were options and warrants to purchase 64,443,980 shares of common stock, there was $115,632 of convertible debt outstanding, which, if converted on June 30, 2015 would amount to 26,700,000 shares, and 1,567 shares issuable upon conversion of Series B preferred stock outstanding which could potentially dilute future earnings per share.

Stock-Based Compensation

As more fully described in Note 15, we have three stock option plans that provide for non-qualified options to be issued to directors, officers, employees and consultants (the 2012 Equity Compensation Plan, 2013 Equity Plan and the 2015 Employee Option Plan (the “Plans”).

Cost of Sales

Cost of sales consists primarily of the costs of providing wireless and fiber bandwidth and colocation services.

Recently Adopted and Recently Issued Accounting Standards

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

	Estimated Life	June 30, 2015			June 30, 2014
Equipment	3 years	$	1,125,304		$	1,324,844
Computer Software	3 years		59,694			59,694
Vehicle	3 years		1,979			1,979
Leasehold Improvements	3 years		4,734			4,734
			1,191,711			1,391,251
Less: Accumulated Depreciation			(1,140,249	)		(939,408	)

Net, Property and Equipment		$	51,462		$	451,843

The Company disposed of $212,016 of equipment in the year ended June 30, 2015. The Company recognized a gain on the disposal of the assets of $8,943 for the year ended June 30, 2015.

Depreciation expense for the year ended June 30, 2015 and the nine months ended June 30, 2014 was $408,408 and $550,799, respectively, of which $272,356 and $417,379 was included in cost of sales for the year ended June 30, 2015 and the nine months ended June 30, 2014, respectively.

NOTE 4 – OTHER CURRENT ASSETS

Other current assets totaled $10,208 and $51,708 at June 30, 2015 and 2014, respectively. The balance at June 30, 2015 and 2014 consisted primarily of prepaid loan fees related to the capitalized lease obligation to Agility Ventures, LLC.

NOTE 5 - RELATED PARTY TRANSACTIONS

On April 23, 2014, we entered into a Subscription Agreement with UnifiedOnline! LLC (the “Subscriber”), a Delaware limited liability company, pursuant to which the Subscriber purchased 400,000 shares of Series AA Preferred Stock which were converted on January 5, 2015 to 903,825,954 shares of common stock becoming a majority shareholder in the Company. UO! IP of NC, LLC is a related party to Unified Online! LLC. In consideration for the Shares, Subscriber paid $116,087 to various vendors and obtained the agreement of a certain related party lessor to temporarily forbear exercising non-payment default remedies. Since entering into the Subscription Agreement, the Subscriber has advanced $1.0 million bearing interest at 10% per annum to fund general working capital. The balance due was $1,029,005 and $479,578 at June 30, 2015 and 2014, respectively, and is reflected as note payable, related party in the balance sheet.

NOTE 6 - NOTES PAYABLE

IWEB Growth Fund, LLC

On November 2, 2012 UnifiedOnline, Inc. entered into a Loan Agreement with IWEB Growth Fund, LLC, a Virginia limited liability company (“IWEB Growth Fund”) established by Messrs. Compton, Bush, Carosi, Pirtle and Stavish and General Soyster, our former independent directors. Under the terms of the Loan Agreement, IWEB Growth Fund agreed to make one or more loans to the Company up to the total principal amount of $1.5 million. The lending of any amounts under the Loan Agreement is conditioned upon the negotiation of notes and related loan documents which contain terms and conditions that are acceptable to the lender to be determined at the time of the loans. We agreed to grant IWEB Growth Fund a security interest in our assets as collateral for these loans. In the event we should default under the terms of the Loan Agreement, IWEB Growth Fund is entitled to declare all amounts advanced under the various notes immediately due and payable. An event of default includes a breach by us of any covenant, representation or warranty in the Loan Agreement or a default under any note entered into with the lender.

On February 27, 2014, Agility Ventures LLC sold and assigned the Master Lease and Equipment Schedule to a third party, UO! IP of NC, LLC (see Note 7). UO! IP of NC, LLC has advanced the payments made on this lease to the Company at a rate of 10% per annum. The balance due to UO!IP of NC, LLC was $635,000 and $185,000 at June 30, 2015 and 2014, respectively.

On June 16, 2015, we entered into a loan agreement with Power Up Lending Group, LTD. (“Power Up”) for $50,000 to fund working capital. The note is for a nine month term, payable at $365 per day, for a total repayment amount of $69,000. The balance due to Power Up was $48,315 and $0 at June 30, 2015 and 2014, respectively.

As part of the acquisition of CTC (see Note 20), the Company acquired two debt obligations – one with Blue Ridge Bank and one for rent payable on an old building which was converted into a loan. The balance due to Blue Ridge Bank was $56,996 and $65,308 at June 30, 2015 and 2014, respectively. The balance due for the rent payable converted into a loan was $37,499 and $35,709 at June 30, 2015 and 2014, respectively.

A summary of our Notes Payable is as follows:

	June 30, 2015		June 30, 2014
IWEB Growth Fund	$	185,000	$	186,000
UO!IP of NC, LLC		635,000		185,000
Power Up Lending Group, LTD.		48,315		-
Other Notes Payable		94,495		101,017
	$	962,810	$	472,017

NOTE 7 – CAPITAL LEASE PAYABLE

Agility Ventures, LLC and UO! IP of NC, LLC

On October 1, 2013, in conjunction with the acquisition of CTC (See Note 20), we entered into an equipment lease agreement with Agility Ventures, LLC in the principal amount of $1,678,531 which is secured by all of the assets of the Company. The lease agreement has a term of 36 months and bears interest at 15% per annum. We also issued Agility Ventures 2,500 shares of the Company’s restricted common stock, and a Series T common stock warrant covering a total of 9,187 shares with a term of two years and a conversion price of $22.00 per share. The Company has the option to purchase the equipment at the end of the term.

On February 27, 2014, Agility Ventures LLC sold and assigned the Master Lease and Equipment Schedule to a third party, UO! IP of NC, LLC. UO! IP of NC, LLC is a related party to the Company’s majority shareholder, Unified Online! LLC. The agreement changed the interest rate to 3.75% on the outstanding principal balance of the lease at February 27, 2014. UO! IP of NC, LLC assigned the lease back to UOIP as part of the subscription agreement at the same terms.

The Company applied the 10% cash flow test pursuant to Topic ASC 470-50-40-10 "Debt Modification and Extinguishment" to calculate the difference between the present value of the new loan's cash flows and the present value of the old loan's remaining cash flow and concluded that the results exceeded the 10% factor, the debt modification is considered substantially different and applied extinguishment accounting. Accordingly, the gain or loss on extinguishment should be measured by the difference between the carrying amount of the old debt and the fair value of the new debt. Additionally, Topic ASC 470-50-40-17 states if the exchange or modification is to be accounted for in the same manner as a debt extinguishment and the new debt instrument is initially recorded at fair value, then the fees paid or received shall be associated with the extinguishment of the old debt instrument and included in determining the debt extinguishment gain or loss to be recognized. The fair value of the new debt was determined to be $1,983,164 and the carrying amount of the old debt of principal and accrued interest totaling $1,717,853 resulted in a total loss on the extinguishment of debt of $265,311 at June 30, 2014.

The underlying assets and related depreciation were included in the appropriate fixed asset category, and related depreciation account. Capitalized equipment under lease agreements totaled approximately $1.9 million prior to the CTC acquisition of which $666,782 was recorded at fair value at the time of acquisition (See Note 20). $16,176 remains net of accumulated depreciation as of June 30, 2015 and $279,981 remains net of accumulated depreciation as of June 30, 2014. The lease term of each capital equipment lease is 36 months.

Future minimum payments required under capital leases at June 30, 2015 are as follows:

2016	$	1,170,000
2017		273,356

Total future payments		1,443,356
Less amount representing interest		39,314

Present value of future minimum payments		1,404,042
Less current portion		886,356

Long-term portion	$	517,686

NOTE 8 - INVENTORY

Inventory consisted of the following:

	June 30, 2015		June 30, 2014
Raw Materials	$	-	$	19,069
Work in Progress		-		-
Finished Goods		-		-
	$	-	$	19,069

The decrease in inventory is due to a shift in the business’ focus to wireless and fiber broadband service, co-location space and data center operations related to our acquisition of CTC in October 2013.

NOTE 9 - COMMITMENTS

The Company leased office space in Sterling, Virginia under a two-year operating lease that expired on March 31, 2011. We occupied the office space on a month-to-month basis until October 31, 2013, when we relocated our operations to Kansas City, Missouri in conjunction with our acquisition of CTC. In Kansas City we currently have real estate leases at two locations, totaling 6,875 square feet. These operating leases are standard commercial leases.

As of June 30, 2015, future minimum lease payments under these operating leases are as follows:

For the Year Ending,
June 30,	Amount
2016		63,275
2017		15,385
2018		-
	$	78,660

Rent expense was approximately $90,100 and $73,700 for the year ended June 30, 2015 and for the nine months ended June 30, 2014, respectively.

NOTE 10 - INCOME TAXES

The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits.

The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of June 30, 2015, tax years ended September 30, 2014, 2013 and 2012, are still potentially subject to audit by the taxing authorities.

Due to recurring losses, the Company’s tax provision for the year ended June 30, 2015 and the nine month period ended June 30, 2014 was $0.

A summary of our deferred tax is as follows:

	June 30,			June 30,
	2015			2014
Tax benefit of net operating loss carry forward	$	9,941,000		$	9,249,000
Less: valuation allowance		(9,941,000	)		(9,249,000	)
Net deferred tax assets	$	-		$	-

The Company’s tax year is the twelve month period ending September 30th. As of September 30, 2014, the Company had unused net operating loss carry forwards of approximately $24.3 million available to reduce future federal taxable income. As of June 30, 2015, the estimated tax loss had increased to approximately $26.4 million. Net operating loss carryforwards expire through fiscal years ending 2035. Internal Revenue Code Section 382 places a limitation on the amount of taxable income that can be offset by carryforwards after a change in control (generally a greater than 50% change in ownership). In April 2014, there was an ownership change of more than 50%, which resulted in an IRC Section 382 limitation on the utilization of the Company's tax loss carry forwards. Accordingly, the full benefit of such loss carryforwards is not likely to be realized.

The valuation allowance at June 30, 2015 was $9,941,000. The increase during the twelve months ended June 30, 2015 was approximately $692,000.

The table below summarizes the differences between our effective tax rate and the statutory federal rate as follows for fiscal 2015 and 2014. The effective tax rate is 34% Federal and 3.6% State after Federal tax benefit:

	2015			2014
Computed "expected" tax benefit		(34.0	%)		(34.0	%)
State income taxes, net of federal tax benefit		(3.6	%)		(3.6	%)
Goodwill		0.0	%		16.0	%
Other permanent differences		(5.3	%)		4.6	%
Change in valuation allowance		42.9	%		17.0	%
Effective tax rate		0.0	%		0.0	%

NOTE 11 – CONVERTIBLE NOTES

As of June 30, 2015 and 2014 the Company had the following convertible notes outstanding:

	June 30, 2015			June 30, 2014
December 2013 $62,222 Convertible Note, 12% interest, due July 2014, with a 10% original issue discount	$	-		$	43,862	(1)
November 2013 $132,000 Convertible Note, 10% interest, due November 2014, with a 10% original issue discount		-			102,000	(2)
December 2013 $43,821 Convertible Note, 10% interest, due December 2014		-			43,821	(3)
December 2013 $60,000 Convertible Note, 10% interest, due December 2014		60,000			60,000	(4)
January 2014 $53,000 Convertible Note, 8% interest, due October 2014		-			53,000	(5)
February 2014 $32,500 Convertible Note, 8% interest, due November 2014		-			32,500	(6)
January 2015 $53,500 Convertible Note, 8% interest, due October 2015		53,500			-	(7)
February 2015 $33,000 Convertible Note, 8% interest, due November 2015		33,000			-	(8)
April 2015 $30,500 Convertible Note, 12% interest, due April 2017, with a 10% original issue discount		30,500			-	(9)
May 2015 $33,000 Convertible Note, 8% interest, due February 2016		33,000			-	(10)
		210,000			335,183
Less: Debt Discount		(94,368	)		(137,538	)
	$	115,632		$	197,645

(1)

The Company borrowed $62,222 in December 2013, due July 2014, with a one-time interest charge of 12%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 60% (representing a discount rate of 40%) of the lowest trade price of the Company's common stock in the twenty-five days prior to the date of Conversion Notice, with a floor of $0.001 per share. The Company recorded a debt discount of $62,222 and a derivative liability of $117,798, related to the conversion feature of the note, in December 2013. Interest expense for the amortization of the debt discounts is calculated on a straight-line basis over the seven month term of the note. Also, see Note 12.

During July and August 2014, the holder of the Convertible Note exercised their conversion rights and converted $43,862 of the outstanding principal and accrued interest balance.

(2)

The Company borrowed $132,000 in November 2013, due November 2014, with interest at 10%. The holder of the note has the right to convert the note and accrued interest into common stock at a price per share equal to 60% of the lowest trade price in the 15 trading days previous to the conversion, with a floor of $0.001 per share. The note has an original issue discount of $12,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a derivative liability at inception of $114,000. Interest expense for the amortization of the debt discount is calculated on a straight-line basis over the twelve month life of the note. During the year ended June 30, 2015 total amortization was recorded in the amount of $51,500 resulting in a debt discount of $0 at June 30, 2015. Interest expense of $45 was recorded during the year ended June 30, 2015. Also, see Note 12.

During the period July through September 2014, the holder of the Convertible Note exercised their conversion rights and converted $109,745 of the outstanding principal and accrued interest balance, at the contractual terms per the note agreement.

(3)

The Company borrowed $43,821 in December 2013, due December 2014, with interest at 10%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 60% (representing a discount rate of 40%) of the lowest trading price for the Common Stock during the fifteen trading day period ending one trading day prior to the date of Conversion Notice, with a floor of $0.001 per share. The Company recorded a debt discount at inception of the note of $43,821. During the year ended June 30, 2015 total amortization was recorded in the amount of $18,259 resulting in a debt discount of $0 at June 30, 2015. Interest expense of $910 was recorded during the year ended June 30, 2015. Also, see Note 12.

During September and October 2014, the holder of the Convertible Note exercised their conversion rights and converted $47,286 of the outstanding principal and accrued interest balance, at the contractual terms per the note agreement.

(4)

The Company borrowed $60,000 in December 2013, due December 2014, with interest at 10%. This note is currently in default. The holder of the note intends to convert at some point in the future. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 60% (representing a discount rate of 40%) of the lowest trading price for the Common Stock during the fifteen trading day period ending one trading day prior to the date of Conversion Notice, with a floor of $0.001 per share. The Company recorded a debt discount at inception of the note of $60,000. During the year ended June 30, 2015 total amortization was recorded in the amount of $25,000 resulting in a debt discount of $0 at June 30, 2015. Interest expense of $4,200 was recorded during the year ended June 30, 2015. Also, see Note 12.

(5)

The Company borrowed $53,000 in January 2014, due October 2014, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 60% of the average of the lowest three trading prices during the 10 trading days previous to the conversion, with a floor of $0.001 per share. The Company recorded a debt discount and derivative liability at inception of $44,040. During the year ended June 30, 2015, the Company recorded amortization of debt discount of $24,724 resulting in a debt discount of $0 at June 30, 2015. Interest expense of $353 was recorded during the year ended June 30, 2015. Also, see Note 12.

During July and August 2014, the holder of the Convertible Note exercised their conversion rights and converted $55,120 of the outstanding principal and accrued interest balance, at the contractual terms per the note agreement, at the contractual terms per the note agreement.

(6)

The Company borrowed $32,500 in February 2014, due November 2014, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 60% of the average of the lowest three trading prices during the 10 trading days previous to the conversion, with a floor of $0.001 per share. The Company recorded a debt discount and derivative liability at inception of $32,500. During the year ended June 30, 2015, the Company recorded amortization of debt discount of $18,055 resulting in a debt discount of $0 at June 30, 2015. Also, see Note 12.

During September 2014, the holder of the Convertible Note exercised their conversion rights and converted $33,360 of the outstanding principal and accrued interest balance, at the contractual terms per the note agreement.

(7)

The Company borrowed $53,500 in January 2015, due October 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 58% of the average of the lowest three trading prices during the 10 trading days previous to the conversion. The agreement includes a ratchet provision resulting in the recording of a derivative liability. The Company recorded a derivative liability of $81,133 at inception of the note of which $53,500 was recorded as a debt discount. During the year ended June 30, 2015, the Company recorded amortization of debt discount of $32,694 resulting in a debt discount of $20,806 at June 30, 2015. Interest expense of $1,962 was recorded during the year ended June 30, 2015. Also, see Note 12.

(8)

The Company borrowed $33,000 in February 2015, due November 2015, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 58% of the average of the lowest three trading prices during the 10 trading days previous to the conversion. The agreement includes a ratchet provision resulting in the recording of a derivative liability. The Company recorded a derivative liability of $127,624 at inception of the note of which $33,000 was recorded as a debt discount. During the year ended June 30, 2015, the Company recorded amortization of debt discount of $14,667 resulting in a debt discount of $18,333 at June 30, 2015. Interest expense of $880 was recorded during the year ended June 30, 2015. Also, see Note 12.

(9)

The Company borrowed $30,500 in April 2015, due April 2017, with a one-time interest charge of 12%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to the lesser of $0.03 per share or 60% (representing a discount rate of 40%) of the lowest trade price of the Company's common stock in the twenty-five days prior to the date of Conversion Notice. The note has an original issue discount of $3,000 which has been added to the principal balance of the note and is being recognized in interest expense over the life of the note. The Company recorded a debt discount of $2,500 related to the conversion feature of the note, along with a derivative liability of $50,833 of which $30,500 was recorded as a debt discount in April, 2015. During the year ended June 30, 2015, the Company recorded amortization of $3,437 resulting in a debt discount of $29,562 at June 30, 2015. Interest expense of $312 was recorded during the year ended June 30, 2015. Also, see Note 12.

(10)

The Company borrowed $33,000 in May 2015, due February 2016, with interest at 8%. The holder of the note has the right, after the first one hundred eighty days of the note to convert the note and accrued interest into common stock at a price per share equal to 58% of the average of the lowest three trading prices during the 10 trading days previous to the conversion. The agreement includes a ratchet provision resulting in the recording of a derivative liability. The Company recorded a derivative liability of $75,223 at inception of the note of which $33,000 was recorded as a debt discount. During the year ended June 30, 2015, the Company recorded amortization of debt discount of $7,333 resulting in a debt discount of $25,667 at June 30, 2015. Interest expense of $440 was recorded during the year ended June 30, 2015. Also, see Note 12.

NOTE 12 - DERIVATIVE LIABILITIES

Derivative liability - warrants

The Company has warrants issued in connection with its convertible notes payable outstanding with price protection provisions that allow for the reduction in the exercise price of the warrants in the event the Company subsequently issues stock or securities convertible into stock at a price lower than the exercise price of the warrants. Simultaneously with any reduction to the exercise price, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased or decreased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. The Company accounted for its warrants with price protection in accordance with FASB ASC Topic 815.

Accounting for Derivative Warrant Liability

The Company’s derivative warrant instruments have been measured at fair value at June 30, 2015 using the Black-Scholes model, which approximates a binomial or lattice model. The Company recognizes all of its warrants with price protection in its consolidated balance sheet as liabilities. The liability is revalued at each reporting period and changes in fair value are recognized currently in the consolidated statements of operations. The initial recognition and subsequent changes in fair value of the derivative warrant liability have no effect on the Company’s cash flows.

The derivative warrants outstanding at June 30, 2015 are all currently exercisable with a weighted-average remaining life of 1.25 years.

Derivative liability – convertible notes

From November, 2013 through June 30, 2015 the Company issued convertible notes in the total principal amount of $553,543. Upon the issuance of these convertible notes and as a consequence of its convertible features, the convertible notes give rise to derivative liabilities. The Company’s derivative liabilities related to its convertible notes payable have been measured at fair value at June 30, 2015 and 2014 using the Black-Scholes model.

The revaluation of the warrants and convertible notes at each reporting period, as well as the charges associated with issuing additional warrants due to the price protection features, resulted in the recognition of income of approximately $196,000 for the year ended June 30, 2015 and a loss of approximately $61,000 for the nine months ended June 30, 2014 within the Company’s consolidated statements of operations, under the caption “Gain (loss) from change of fair value of derivative liability. The fair value of the warrants at June 30, 2015 is approximately $84,000 which is reported on the consolidated balance sheet under the caption “Derivative liability - warrants”. The fair value of the convertible debt at June 30, 2015 is approximately $347,000 which is reported on the consolidated balance sheet under the caption “Derivative liability – embedded conversion option”.

The following summarizes the changes in the value of the derivative warrant liability and the derivative embedded conversion option liability from June 30, 2014 until June 30, 2015:

	Value			No. of Warrants
Balance at June 30, 2014 - Derivative liability - warrants	$	302,065			5,846,758
Decrease in fair value of derivative warrant liability		(218,299	)
Balance at June 30, 2015 - Derivative liability - warrants	$	83,766			64,436,748

	Value
Balance at June 30, 2014 - Derivative liability - embedded conversion option	$	469,632
Decrease in derivative liability related to conversion of convertible debt		(480,317	)
Increase in derivative liability related to issuance of convertible debt		334,813
Increase in fair value of derivative liability		22,606
Balance at June 30, 2015 - Derivative liability - embedded conversion option	$	346,734

Fair Value Assumptions Used in Accounting for Derivative Warrant Liability

The Company has determined its derivative warrant liability and convertible debt to be a Level 3 fair value measurement and has used the Black-Scholes pricing model to calculate the fair value as of June 30, 2015. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. The key inputs used in the June 30, 2015 fair value calculations were as follows:

	June 30, 2015
Current exercise price	$	0.024 - $60
Time to expiration	.25 to 2.0 years
Risk-free interest rate		0.64	%
Estimated volatility		1068.84	%
Dividend	$	-
Stock price on June 30, 2015	$	0.01300
Expected forfeiture rate	0% to 90%

NOTE 13 - CONCENTRATION OF CREDIT RISK

Bank Balances

The Company maintains cash in bank deposit accounts which do not exceed the federally insured limits as provided through the Federal Deposit Insurance Corporation (“FDIC”). At June 30, 2015 all of the Company’s cash balances were fully insured. In 2010 the FDIC insurance coverage limit was increased to $250,000 per depositor, per institution as a result of the Dodd-Frank Wall Street Consumer Protection Act. The Company has not experienced any losses in such accounts.

Major Customers

Sales to two customers for the year ended June 30, 2015 represented 17% of total sales and sales to one major customer represented 13% of total sales for the nine months ended June 30, 2014.

	Year Ended			Nine Months Ended
	June 30,
	2015			2014
Customer A		11	%		13	%
Customer B		6	%		0	%
All others		83	%		87	%
		100	%		100	%

As of June 30, 2015 and 2014, respectively, approximately 61% and 95% of our accounts receivable was due from two customers.

	June 30,			June 30,
	2015			2014
Customer A		44	%		68	%
Customer B		17	%		27	%
All others		39	%		5	%
		100	%		100	%

NOTE 14 - STOCKHOLDERS’ DEFICIT

Preferred Stock

Our authorized capital includes 10,000,000 shares of blank check preferred stock, par value $0.001 per share. Our Board of Directors, without further stockholder approval, may issue our preferred stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. In March 2005, our Board of Directors authorized a series of 1,666,667 shares of blank check preferred stock be designated as Series A Convertible Preferred Stock and on April 1, 2005 we filed a Certificate of Designations of Preferences, Rights and Limitations of Series A Convertible Preferred Stock with the Secretary of State of Delaware. In September 2005, our Board of Directors authorized a series of 833,334 shares of blank check preferred stock be designated as Series B Convertible Preferred Stock and on September 28, 2005, we filed a Certificate of Designations of Preferences, Rights and Limitations of Series B Preferred with the Secretary of State of Delaware. On December 29, 2005, we filed an Amended and Restated Certificate of Designations of Preferences, Rights and Limitations of Series B Convertible Preferred Stock increasing the number of shares authorized under this series to 1,833,334 shares.

A) Series B Convertible Preferred Stock

The designations, rights and preferences of the Series B Convertible Preferred Stock provide:

●

No dividends are payable on the Series B Convertible Preferred Stock. So long as these shares are outstanding, we cannot pay dividends on our common stock nor can it redeem any shares of its common stock, the shares of Series B Convertible Preferred Stock do not have any voting rights, except as may be provided under Delaware law,

●

So long as the shares are outstanding, we cannot change the designations of the Series B Convertible Preferred Stock, create a class of securities that in the instance of payment of dividends or distribution of assets upon our liquidation ranks senior to or pari passu with the Series B Convertible Preferred Stock or increase the number of authorized shares of Series B Convertible Preferred Stock,

●

Each share of Series B Convertible Preferred Stock is convertible at the option of the holder into one share of our common stock based upon an initial conversion value of $0.2727 per share. The conversion ratio is subject to adjustment in the event of stock dividends, stock splits or reclassification of our common stock. No conversion of the Series B Convertible Preferred Stock may occur if a conversion would result in the holder, and any of its affiliates beneficially owning more than 4.9% of our outstanding common shares following such conversion. This provision may be waived or amended only with the consent of the holders of all of the Series B Convertible Preferred Stock and the consent of the holders of a majority of our outstanding shares of common stock who are not affiliates, and

●	The shares of Series B Convertible Preferred Stock automatically convert into shares of our common stock in the event of change of control of the Company.

●

Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the Holders shall be entitled to receive out of the assets of the Company, whether such assets are capital or surplus, for each share of Series B Preferred Stock an amount equal to $0.2727, before any distribution or payment shall be made to the holders of Common Stock and all other equity or equity equivalent securities of the Company other than those securities that are explicitly senior in rights or liquidation preference to the Series B Preferred Stock.

●	At June 30, 2015, there were 626,667 shares of Series B Convertible Preferred Stock outstanding.

B) Series AA Preferred Stock

On April 23, 2014, the Company authorized the creation of the Corporation’s Series AA Preferred Stock pursuant to the terms and conditions of that certain Certificate of Designations, Preferences and Rights and Limitations of Series AA Preferred Stock (the “Certificate of Designations”). The Corporation is authorized to issue 10,000,000 shares of preferred stock, of which 626,667 shares of Series B Convertible Preferred Stock have been previously issued and remain outstanding. Out of the remaining 9,373,333 authorized but unissued shares of preferred stock, the Certificate of Designations creates four hundred thousand (400,000) shares of Series AA Preferred Stock, $0.001 par value per share (the “Series AA Preferred Stock”), with the following powers and rights:

●	the holders of the Series AA Preferred Stock have five thousand (5,000) times that number of votes on all matters submitted to the shareholders of the Corporation that is equal to the number of shares of Common Stock of the Corporation,

●	the holders of the Series AA Preferred Stock shall vote together with the holders of Common Stock as a single class upon all matters submitted to the holders of Common Stock of the Corporation,

●	the holders of the Series AA Preferred Stock are not entitled to receive dividends paid on the Common Stock of the Corporation,

●	the holders of the Series AA Preferred Stock are not entitled to receive any preference over the holders of Common Stock of the Corporation following a liquidation, dissolution and winding up of the Corporation, and

●

on or after May 15, 2014, to the extent sufficient shares of Common Stock are authorized, the Series AA Preferred Stock is convertible into the shares of the Corporation’s fully diluted Common Stock, taking into account the exercise of all warrants, options or any other rights of issuance, of such number sufficient to provide the holders thereof, in the aggregate, ninety percent (90%) of all shares of Common Stock of the Corporation on a fully diluted basis. On January 5, 2015, the Series AA Preferred Stock was converted into 903,825,954 shares of Common Stock giving the holders ninety percent (90%) of all shares of Common Stock of the Corporation on a fully diluted basis.

●	At June 30, 2015, there were 0 shares of Series AA Preferred Stock outstanding.

Common Stock

On January 5, 2015, the board of directors and majority stockholder of our company approved a Certificate of Amendment to our Certificate of Incorporation to:

●

change our company’s name from "IceWEB, Inc." to “UnifiedOnline, Inc.”;

●

increase the number of authorized shares of our common stock from 5,000,000,000 to 6,000,000,000 shares; and

●

effect a reverse stock split of our outstanding common stock on the basis of one for four hundred (1:400).

Accordingly, we have adjusted all issued and outstanding warrants and employee stock options to reflect the reverse stock split. Additionally, we have retroactively adjusted all share and per share data for all periods presented.

On July 1, 2014, the Company filed a Certificate of Amendment of Certificate of Incorporation with the State of Delaware Secretary of State Division of Corporations to reflect an increase in authorized shares of Common Stock (the “Increase in Authorized”) from One Billion (1,000,000,000) shares of Common Stock, par value $0.001 per share, to Five Billion (5,000,000,000) authorized shares of Common Stock, par value $0.001 per share. The increase in Authorized has an effective date with the State of Delaware Secretary of State Division of Corporations of July 1, 2014, the date the Certificate of Amendment of Certificate of Incorporation was filed.

Year ended June 30, 2015 Transactions

In June, 2015, the Company retired 5,976 shares of common stock held in escrow at time of CTC acquisition.

All stock based transactions listed above were valued at fair market value (quoted market prices) or the contractual rate which approximates fair market value, as applicable.

Nine months ended June 30, 2014 Transactions

In conjunction with our acquisition of Computers & Telecom, Inc. and Subsidiary in October, 2013, the Company issued 2,500 shares of UnifiedOnline, Inc. common stock to Agility Ventures, LLC at the closing price of $9.8 on October 1, 2013, valued at $24,500. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

Additionally, in conjunction with the Company’s acquisition of Computers & Telecom, Inc. and Subsidiary in October, 2013, the Company issued 57,635 shares of common stock to employees and other individuals involved in the acquisition at the closing price of $9.80 on October 1, 2013, valued at $564,725. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In November, 2013, the Company issued 5,000 shares of common stock at the closing price of $6.2 on November 13, 2014, valued at $31,000 to an accredited investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In November, 2013, the Company issued 12,500 shares of common stock at the closing price of $5.20 on November 26, 2013, valued at $65,000 to an accredited investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In November, 2013, the Company issued 11,875 shares of common stock at the closing price of $6.40 on November 12, 2013, valued at $76,000 to four employees as compensation. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In November, 2013, the Company issued 10,294 shares of common stock at the closing price of $6.80 on November 11, 2013, valued at $70,000 to the directors of the Company as board compensation. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In November, 2013, the Company issued 7,500 shares of common stock, at the original conversion terms, at a per share price of $2.424 valued at $18,180 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In December, 2013 and June, 2014, the Company issued 16,013 shares of common stock, at the original conversion terms, at a per share price ranging from $4.24 to $4.28 to an accredited investor as a commitment fee for a convertible note. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In December, 2013, the Company issued 11,250 shares of common stock, at the original conversion terms, at a per share price of $2.376 valued at $26,730 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In January, 2014, the Company issued 5,000 shares of common stock at the closing price of $4.80 on January 15, 2014, valued at $24,000 to an executive officer as compensation. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In January, 2014 the Company issued 18,214 shares of common stock upon the exercise of common stock warrants.

In January, 2014 and February, 2014, 49,000 shares of common stock were returned by two executive officers at the contractual price of $13.20, valued at $528,000.

In February, 2014, the Company issued 20,000 shares of common stock the closing price of $4.96 on February 3, 2014, valued at $99,200 to an accredited investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In February, 2014, the Company issued 5,000 shares of common stock at the closing price of $4.64 on February 5, 2014, valued at $23,200 to an accredited investor for services rendered. The issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In February, 2014 the Company issued 17,500 shares of common stock, at the original conversion terms, at a per share price of $2.40 valued at $42,000 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In March, 2014, the Company issued 12,500 shares of common stock, at the original conversion terms, at a per share price of $1.68 valued at $21,000 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In March, 2014, the Company issued 20,000 shares of common stock, at the original conversion terms, at a per share price of $0.984 valued at $19,680 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In April, 2014, the Company issued 17,500 shares of common stock, at the original conversion terms, at a per share price of $0.984 valued at $17,220 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In May, 2014, the Company issued 74,701 shares of common stock, at the original conversion terms, at a per share price ranging from $0.48 to $0.72 valued at $41,856.66 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In June, 2014, the Company issued 208,078 shares of common stock, at the original conversion terms, at a per share price ranging from $0.76 to $0.48, in full satisfaction of $86,840 of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In June, 2014, the Company issued 113,637 shares of common stock, at the original conversion terms, at a per share price of $0.264 valued at $30,000 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

In June, 2014, the Company issued 45,000 shares of common stock, at the original conversion terms, at a per share price of $0.408 valued at $18,360 as a partial conversion of principal and interest due under a convertible note. The recipient was an accredited investor and the issuance was exempt from registration under the Securities Act of 1933 in reliance on an exemption provided by Section 4(2) of that act.

The Company issued 62,500 shares of common stock upon the exercise of stock options at various contractual exercise prices ranging from $6.46 to $2.47 valued at $271,168.

All stock based transactions listed above were valued at fair market value (quoted market prices) or the contractual rate which approximates fair market value, as applicable.

Common Stock Warrants

The Company has issued and outstanding Series N warrants for 64,314,335 common shares, as adjusted, with a current exercise price of $0.024, as adjusted, which have price protection provisions that allow for the reduction in the current exercise price upon the occurrence of certain events, including the Company’s issuance of common stock or securities convertible into or exercisable for common stock, such as options and warrants, at a price per share less than the exercise price then in effect. Simultaneously with any reduction to the exercise price of the Series N warrants, the number of shares of common stock that may be purchased upon exercise of each of these warrants shall be increased proportionately, so that after such adjustment the aggregate exercise price payable for the adjusted number of warrants shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. The Series N warrants expire September 30, 2016.

The Company’s issuance of the following securities will not trigger the price protection provisions of the warrants described above: (a) shares of common stock or standard options to the Company’s directors, officers, employees or consultants pursuant to a board-approved equity compensation program or other contract or arrangement; (b) shares of common stock issued upon the conversion or exercise of any security, right or other instrument convertible or exchangeable into common stock (or securities exchangeable into common stock) issued prior to November 23, 2011; and (c) shares of common stock and warrants in connection with strategic alliances, acquisitions, mergers, and strategic partnerships, the primary purpose of which is not to raise capital, and which are approved in good faith by the Company’s board of directors.

The Company has issued and outstanding Series O and Series Q warrants for 76,222 common shares, as adjusted, with a current exercise price of $11.20, as adjusted, expiring November 23, 2016.

The Company has issued and outstanding Series R warrants for 37,004 common shares, as adjusted, with a current exercise price of $60.00, as adjusted, expiring June 30, 2017.

In conjunction with our acquisition of Computers & Telecom, Inc. and subsidiary in October, 2013, we issued a warrant to Agility Ventures, LLC covering a total of 9,187 common shares, as adjusted, with a term of two years and a conversion price of $22.00 per share, as adjusted.

A summary of the Company’s outstanding common stock warrants as of June 30, 2015 and 2014 and changes during the period ending on that date is as follows:

	Year Ended June 30, 2015				Nine Months Ended June 30, 2014
	Number of		Weighted Average		Number of			Weighted Average
	Warrants		Exercise Price		Warrants			Exercise Price
Balance at beginning of period		5,969,171	$	0.00202		257,051		$	0.02800
Granted (due to ratchet provisions)		58,467,577		0.00006		5,743,276			0.00124
Exercised		-		-		(12,942	)		0.00540
Forfeited		-		-		(18,214	)		0.00540
Balance at end of period		64,436,748	$	0.07480		5,969,171		$	0.00202

The following table summarizes information about common stock warrants outstanding at June 30, 2015:

Warrants Outstanding					Warrants Exercisable
Number Outstanding at		Weighted Average	Weighted Average		Number Exercisable at		Weighted Average
June 30, 2015		Remaining Life	Exercise Price		June 30, 2015		Exercise Price
	64,314,335	1.25 Years	$	0.02400		64,314,335	$	0.02400
	76,222	1.40 Years		11.20000		76,222		11.20000
	37,004	2.00 Years		60.00000		37,004		60.00000
	9,187	.25 Year		22.00000		9,187		22.00000
	64,436,748	1.25 Years	$	0.07480		64,436,748	$	0.07480

NOTE 15 - STOCK OPTION PLAN

On April 8, 2015 the Board of Directors of UnifiedOnline, Inc. adopted the UnifiedOnline, Inc. 2015 Employee Option Plan (the "Plan"). The purpose of the Plan is to enable our company to attract and retain employees and consultants and provide them with the long-term financial incentives to enhance our performance. The Plan authorizes the grant of (i) options which qualify as incentive stock options under Section 422(b) of the Internal Revenue Code of 1986, as amended, (ii) non-qualified options which do not qualify as incentive stock options, (iii) awards of our common stock (iv) and rights to make direct purchases of our common stock which may be subject to certain restrictions. The maximum number of shares which can be issued over the term of the Plan is 1,800,000 shares.

In August 2012, the Board of Directors adopted the 2012 Equity Compensation Plan (the “2012 Plan”) for directors, officers and employees that provides for non-qualified and incentive stock options to be issued enabling holders thereof to purchase common shares of our stock at exercise prices determined by our Board of Directors.

The purpose of the Plan is to advance the Company’s interests and those of its stockholders by providing a means of attracting and retaining key employees, directors and consultants. In order to serve this purpose, the Company believes the Plan encourages and enables key employees, directors and consultants to participate in its future prosperity and growth by providing them with incentives and compensation based on its performance, development and financial success. Participants in the Plan may include the Company’s officers, directors, other key employees and consultants who have responsibilities affecting our management, development or financial success.

Awards may be made under the Plan in the form of Plan options, shares of the Company’s common stock subject to a vesting schedule based upon certain performance objectives (“Performance Shares”) and shares subject to a vesting schedule based on the recipient’s continued employment (“restricted shares”). Plan options may either be options qualifying as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended or options that do not so qualify. Any incentive stock option granted under the Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of such grant, but the exercise price of any incentive option granted to an eligible employee owning more than 10% of our common stock must be at least 110% of such fair market value as determined on the date of the grant. Only persons who are officers or other key employees are eligible to receive incentive stock options and performance share grants. Any non-qualified stock option granted under the Plan must provide for an exercise price of not less than 50% of the fair market value of the underlying shares on the date of such grant.

The Plan, as amended permits the grant of options and shares for up to 105,000,000 shares of our common stock. The Plan terminates 10 years from the date of the Plan’s adoption by our stockholders.

The term of each Plan option and the manner in which it may be exercised is determined by the Board of Directors, provided that no Plan option may be exercisable more than three years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of our common stock, no more than five years after the date of the grant. The exercise price of the stock options may be paid in either cash, or delivery of unrestricted shares of common stock having a fair market value on the date of delivery equal to the exercise price, or surrender of shares of common stock subject to the stock option which has a fair market value equal to the total exercise price at the time of exercise, or a combination of the foregoing methods.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes options pricing model. We used the following assumptions for determining the fair value of options granted under the Black-Scholes option pricing model:

	Nine Months Ended June 30,
	2014
Expected volatility	13% - 278%
Expected term	1 -3 Years
Risk-free interest rate	0.01% - 0.34%
Forfeiture rate	0.00%
Expected dividend yield	0.00%

The expected volatility was determined with reference to the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise, employee termination, and forfeiture rate within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate in effect at the time of grant.

For the year ended June 30, 2015, total stock-based compensation charged to operations for option-based arrangements amounted to $49,660. At June 30, 2015, there was approximately $8,328 of total unrecognized compensation expense related to non-vested option-based compensation arrangements under the Plan.

A summary of the status of our outstanding stock options as of June 30, 2015 and changes during the period ending on that date is as follows:

	Year Ended June 30, 2015					Nine Months Ended June 30, 2014
	Number of			Weighted Average		Number of			Weighted Average
	Options			Exercise Price		Options			Exercise Price
Balance at beginning of period		2,892,970		$	0.08366		3,417,970		$	0.08600
Granted		-			-		27,000,000			0.01110
Exercised		-			-		(27,000,000	)		0.01110
Forfeited		-			-		(525,000	)		0.09890
Adjusted for reverse split		(2,885,738	)		-		-			-
Balance at end of period		7,232		$	33.47		2,892,970		$	0.08366

The following table summarizes information about employee stock options outstanding at June 30, 2015:

		Options Outstanding					Options Exercisable
Range of Exercise Price		Number Outstanding at 6/30/2015		Weighted Average Remaining Life	Weighted Average Exercise Price		Number Outstanding at 6/30/2015		Weighted Average Exercise Price
$	0.07700		625	2.21 Years	$	30.80		573	$	30.80
$	0.0847 - $0.081		6,607	2.21 Years	$	33.79		6,607	$	33.79
			7,232	2.21 Years	$	33.53		7,180	$	33.53

NOTE 16 – INVESTMENTS

(a) Summary of Investments

Marketable Equity Securities:

As of June 30, 2015 and 2014, the Company’s investments in marketable equity securities are based on the June 30, 2015 and 2014 stock price as reflected on the OTCBB, respectively. These marketable equity securities are summarized as follows:

			Gross		Gross
			Unrealized		Unrealized			Fair
June 30, 2015	Cost		Gains		Losses			Value

Publicly traded equity securities	$	81,000	$	-	$	(80,998	)	$	2

Total	$	81,000	$	-	$	(80,998	)	$	2

			Gross		Gross
			Unrealized		Unrealized			Fair
June 30, 2014	Cost		Gains		Losses			Value

Publicly traded equity securities	$	81,000	$	-	$	(80,997	)	$	3

Total	$	81,000	$	-	$	(80,997	)	$	3

The unrealized losses are presented in comprehensive income in the consolidated statements of comprehensive loss.

(b) Fair Value Measurements

On January 1, 2008, the Company adopted ASC 820, which, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. The Company did not adopt the ASC 820 fair value framework for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements at least annually. ASC 820 clarifies that fair value is an exit price, representing the amount that would either be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets for identical assets or liabilities;

Level 2. Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Investments Measured at Fair Value on a Recurring Basis:

	Quoted		Significant
	Prices		Other		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
June 30, 2015	(Level 1)		(Level 2)		(Level 3)
Marketable Equity Securities	$	2	$	-	$	-
Derivative liabilities, warrants	$	-	$	-	$	83,766
Derivative liabilities, embedded conversion option	$	-	$	-	$	346,734

June 30, 2014
Marketable Equity Securities	$	3	$	-	$	-
Derivative liabilities, warrants	$	-	$	-	$	302,065
Derivative liabilities, embedded conversion option	$	-	$	-	$	469,632

Under the guidance of ASC 320, “Investments”, we periodically evaluate other-than-temporary impairment (OTTI) of securities to determine whether a decline in their value is other than temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other than temporary. The term “other-than-temporary” is not intended to indicate that the decline is permanent. It indicates that the prospects for a near term recovery of value are not necessarily favorable, or that there is a lack of evidence to support fair values equal to, or greater than, the carrying value of the investment. Once a decline in value is determined to be other than temporary, the value of the security is reduced and a corresponding impairment charge to earnings is recognized. In the assessment of OTTI for various securities at June 30, 2014 the guidance in ASC 320, “the Investment-Debt and Equity Securities,” is carefully followed.

There were no impairment charges on investments in publicly traded equity securities for the year ended June 30, 2015 or the nine months ended June 30, 2014.

The Company has evaluated its publicly traded equity securities as of June 30, 2015, and has determined that there were no unrealized losses that indicate an other-than-temporary impairment. This determination was based on several factors, which include the length of time and extent to which fair value has been less than the cost basis and the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the publicly traded equity securities for a period of time sufficient to allow for any anticipated recovery in market value.

NOTE 17 - COMPREHENSIVE LOSS

Comprehensive loss is comprised of net loss and other comprehensive loss. Other comprehensive loss refers to revenue, expenses, gains and losses that under accounting principles generally accepted in the United States are included in comprehensive loss but excluded from net loss as these amounts are recorded directly as an adjustment to stockholders’ equity.

The Company’s accumulated other comprehensive loss at June 30, 2015 consists of unrealized losses on marketable securities available for sale of $80,998.

NOTE 18 - SEGMENT REPORTING

Although the Company has a number of operating divisions, separate segment data has not been presented as they meet the criteria for aggregation as permitted by ASC Topic 280, “Segment Reporting” (formerly Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures About Segments of an Enterprise and Related Information”).

Our chief operating decision-maker is considered to be our Chief Executive Officer (CEO). The CEO reviews financial information presented on a consolidated basis for purposes of making operating decisions and assessing financial performance. The financial information reviewed by the CEO is identical to the information presented in the accompanying consolidated statements of operations. Therefore, the Company has determined that it operates in a single operating segment, specifically, web communications services. For the year ended June 30, 2015 and the nine months ended June 30, 2014 all material assets and revenues of the Company were in the United States.

NOTE 19 - COMMITMENTS AND CONTINGENCIES

At June 30, 2015 the Company is the subject of, or party to, four known, pending or threatened, legal actions. Following is a discussion of each:

NOTE 20 – ACQUISITION

On October 1, 2013 (the “Closing Date”), the Company entered into a share exchange agreement (the “Exchange Agreement”) by and among the Company, Computers and Tele-Comm., Inc., a Missouri corporation (“CTCI”), KC NAP, LLC (“KC NAP”), the stockholders of CTCI, and Streamside Partners, LLC, pursuant to which the Company purchased all of the outstanding common stock of CTCI and the outstanding membership interests in KC NAP, in exchange for 9,568,400 shares of our $0.001 par value common stock. Concurrently, and as part of the share exchange agreement, the Company issued shares to retire an outstanding debt owing by CTCI to Streamside Partners, LLC, which totaled $155,000, and other debts of CTCI totaling $267,823, in exchange for 13,485,798 shares of our $0.001 par value common stock (such transactions taken together are sometimes referred to herein as the “Share Exchange”). As a result of the Share Exchange, we are now the holding company of CTCI and we now operate a company in the business of operating data centers and providing Information Technology (“IT”) services.

On the Closing Date, pursuant to the Exchange Agreement, the shareholders of CTCI exchanged 250,000 shares of common stock of CTCI, representing 100% of the issued and outstanding stock of CTCI, for 9,568,400 newly issued shares of $0.001 par value common stock, which represents 2.2% of the Company’s issued and outstanding common stock, immediately following the Share Exchange. In addition, we issued 13,485,798 shares of the Company’s common stock to pay a debt owing by CTCI to Streamside Partners, LLC, and other liabilities of CTCI which together totaled $422,823, at an effective exchange rate of $0.0314 per share.

On October 1, 2013, in conjunction with the acquisition, we entered into a lease agreement with Agility Ventures, LLC in the principal amount of $1,678,531 which is secured by all of the assets of the Company. The note has a term of 36 months and bears interest at 15% per annum. We also issued Agility Ventures 1,000,000 shares of the Company’s restricted common stock, and a Series T common stock warrant covering a total of 3,675,000 shares with a term of two years and a conversion price of $0.055 per share.

The purchase of Computers and Tele-Comm, Inc. and Subsidiary (“CTCI”) included the acquisition of assets of $1,386,066, and liabilities of $1,469,269. The aggregate purchase price consisted of the following:

Fair Value of common stock issued to seller valued at quoted market price	$	234,426
Fair Value of common stock issued in exchange for debt valued at quoted market price		330,402
	$	564,828

The following table summarizes the estimated fair values of CTCI’s assets acquired and liabilities assumed at the date of the acquisition:

Cash	$	3,609
Accounts Receivable		67,160
Prepaid Expenses		93,802
Property and equipment		678,443
Goodwill		2,084,710
Accounts payable and accrued expenses		(538,716	)
Deferred revenue		(59,396	)
Notes payable		(1,764,784	)
	$	564,828

In conjunction with the acquisition of CTCI, we recorded goodwill in the amount of $2,084,710. We subsequently performed an impairment test on goodwill which requires an analysis based on estimates of future cash flows and an impairment loss is recognized for the difference between the carrying amount and the implied fair value of the asset. Based on this analysis we recorded an impairment expense of $2,084,710 for the nine months ended June 30, 2014.

NOTE 21 – SUBSEQUENT EVENTS

Stock transactions after June 30, 2015:

In October, 2015, the Company entered into $60,000 loan agreement (the “Loan”) with Power UP Lending Group, LTD. The Loan has a maturity date of nine (9) months from the Funding Date of October 5, 2015. The Loan is repayable daily at a rate of $428.57 for a total repayment amount of $81,000. A portion of the proceeds from the Loan were used to pay off a Convertible Promissory Note and accrued interest to Vis Vires Group, Inc. in the amount of $34,000. The Company realized a gain on extinguishment of debt of approximately $28,000 as a result of writing off the associated derivative liability.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were effective.

Management's Annual Report on Internal Control Over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

As of June 30, 2015, management assessed the effectiveness of our company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control--Integrated Framework, (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the Registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company has addressed the deficiencies that existed in the design or operation of our internal control over the calculation of share-based expenses that adversely affected our internal controls and that may be considered to be a material weakness. Management believes that the correction of the material weaknesses of our disclosure controls and procedures did not have an effect on our company’s financial results.

Inherent Limitations on Effectiveness of Controls

Our management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following individuals serve as our executive officers and members of our Board of Directors:

Name	Age	Positions
Robert M. Howe, III	69	Chairman of the Board & Chief Executive Officer

Ellen Sondee	50	Chief Financial Officer

Robert M. Howe, III is a technology industry veteran with over twenty (20) years of experience running high tech and consumer electronics businesses or business units. Mr. Howe previously served as Chief Executive Officer of the Corporation from July 23, 2012 until January 14, 2014. In the past five years, Mr. Howe has served on the Board of UnifiedOnline, Inc. twice. He is currently Chairman of the Board. Mr. Howe has served on no other Boards of Directors during the previous five years. Mr. Howe has extensive experience in both Business Development and Operations of technology companies. His vision, experience and passion for technology make him uniquely qualified as a Director. His additional experience includes working at Dell Computer Corporation from 1992-1994 as a Senior Vice President where he was instrumental in launching the DellWare business model, as well as creating a virtual logistics model that subsequently became the industry standard; working at AT&T GIS from 1994-1997 (now known as NCR), where he served as VP and General Manager for their worldwide PC business; and working at CompUSA where he held the titles of Corporate Senior Vice President and President, from 1997-2000 where he oversaw the turnaround of CompUSA’s in-house PC brand. From September 2000 to May 2006, Mr. Howe served as a consultant to technology firms, both independently and in collaboration with the Sightline Group, in connection with go-to–market readiness. From May 2006 to February 2007, Mr. Howe served as President and Chief Operations Officer of DualCor Technologies, Inc., a technology firm that developed a mobile handheld computer. Mr. Howe holds a BA in English from Birmingham-Southern College, and a Masters of Arts from Auburn University.

We believe that as a result of his years of managerial and operational experience, Mr. Howe brings to the board of directors demonstrated management ability at senior levels. These experiences, qualifications and attributes have led to our conclusion that Mr. Howe should be serving as Chief Executive Officer.

Ellen Sondee is a Chief Financial Officer and Director with Scale Finance, LLC since 2012. Based in Charlotte, North Carolina, Scale Finance, LLC provides integrated finance solutions, including chief financial officer and controller services. Prior to joining Scale Finance, LLC, from 2001 until 2008, Ms. Sondee was Chief Financial Officer of the Television Group of Lincoln Financial Media, a subsidiary of Lincoln Financial, where she was responsible for all finance and control functions, and from 2000 until 2001 she was Vice President of Business Development for Sony Pictures Entertainment, Motion Picture Group, where she was responsible for establishing a business development function. Prior to this position, from 1994 until 2000 she was Assistant Corporate Controller for Sony Pictures Entertainment where she was primarily responsible for strategic planning, budget and forecast development. From 1987 until 1994 Ms. Sondee was employed by Arthur Andersen, LLP, serving as both a Manager in the Consulting Division and an Audit Manager. Ms. Sondee received a B.A. in Economics and Business from the University of California at Los Angeles and an M.B.A. from The Anderson School, University of California at Los Angeles. A certified public accountant, she is also a member of the American Institute of Certified Public Accountants.

Ms. Sondee’s compensation for her services as our Chief Financial Officer will be paid to Scale Finance, LLC under the terms of our agreement with that entity. Ms. Sondee will providing services to us on a part-time basis.

We believe that Ms. Sondee’s extensive accounting experience and expertise bring valuable knowledge to the Company and that these experiences, qualifications and attributes have led to our conclusion that Ms. Sondee should be serving as Chief Financial Officer.

Committees of the Board of Directors

We do not have an Audit Committee, a Compensation Committee or a Nominating Committee or any committee performing a similar function. The functions that such committees would undertake are being undertaken by the entire board as a whole. We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors or any inquiry as to what the procedures may be if a stockholder wished to make such a recommendation. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board will participate in the consideration of director nominees. There have not been any material changes to the procedures by which stockholders may recommend nominees to the Company’s board of directors.

Audit Committee. The Audit Committee of our Board of Directors was formed to assist the Board of Directors in fulfilling its oversight responsibilities for the integrity of our consolidated financial statements, compliance with legal and regulatory requirements, the independent registered public accounting firm’s qualifications and independence, and the performance of our internal audit function and independent auditors. The Audit Committee will also prepare the report that SEC rules require be included in our annual proxy statement. The Audit Committee has adopted a charter which sets forth the parameters of its authority The Audit Committee Charter provides that the Audit Committee is empowered to:

	●	Appoint, compensate, and oversee the work of the independent registered public accounting firm employed by our company to conduct the annual audit. This firm will report directly to the audit committee;

	●	Resolve any disagreements between management and the auditor regarding financial reporting;

	●	Pre-approve all auditing and permitted non-audit services performed by our external audit firm;

	●	Retain independent counsel, accountants, or others to advise the committee or assist in the conduct of an investigation;

	●	Seek any information it requires from employees - all of whom are directed to cooperate with the committee’s requests - or external parties;

	●	Meet with our officers, external auditors, or outside counsel, as necessary; and

	●	The committee may delegate authority to subcommittees, including the authority to pre-approve all auditing and permitted non-audit services, provided that such decisions are presented to the full committee at its next scheduled meeting.

Each Audit Committee member is required to:

	●	satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be listed from time to time, and

	●	meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section 162(m) of the Internal Revenue Code.

Each committee member is required to be financially literate and at least one member is to be designated as the “financial expert,” as defined by applicable legislation and regulation. No committee member is permitted to simultaneously serve on the audit committees of more than two other public companies. As we expand our Board of Directors with additional independent directors the number of directors serving on the Audit Committee will also increase.

A copy of the Audit Committee Charter is available on our website at www.iceweb.com under the “Investor Relations” tab.

Compensation Committee. The Compensation Committee was appointed by the Board to discharge the Board’s responsibilities relating to:

	●	compensation of our executives,

	●	equity-based compensation plans, including, without limitation, stock option and restricted stock plans, in which officers or employees may participate and

	●	arrangements with executive officers relating to their employment relationships with our company, including employment agreements, severance agreements, supplemental pension or savings arrangements, change in control agreements and restrictive covenants.

The Compensation Committee has adopted a charter. The Compensation Committee charter provides that the Compensation Committee has overall responsibility for approving and evaluating executive officer compensation plans, policies and programs of our company, as well as all equity-based compensation plans and policies. In addition, the Compensation Committee oversees, reviews and approves all of our ERISA and other employee benefit plans which we may establish from time to time. The Compensation Committee is also responsible for producing an annual report on executive compensation for inclusion in our proxy statement and assisting in the preparation of certain information to be included in other periodic reports filed with the SEC.

Each Compensation Committee member is required to:

	●	satisfy the independence requirements of Section 10A(m)(3) of the Securities Exchange Act of 1934, and all rules and regulations promulgated by the SEC as well as the rules imposed by the stock exchange or other marketplace on which our securities may be listed from time to time, and

	●	meet the definitions of “non-employee director” for purposes of SEC Rule 16b-3 and “outside director” for purposes of Section 162(m) of the Internal Revenue Code.

Pursuant to our Compensation Committee Charter, the Compensation Committee is charged with evaluating and recommending for approval by the Board of Directors the compensation of our executive officers. In addition, the Compensation Committee also evaluates and makes recommendations to the entire Board of Directors regarding grants of options which may be made as director compensation. The Compensation Committee does not delegate these authorities to any other persons nor does it use the services of any compensation consultants.

As we expand our Board of Directors with additional independent directors the number of directors serving on the Compensation Committee will also increase. A copy of the Compensation Committee Charter is available on our website at www.iceweb.com under the “Investor Relations” tab.

Code of Ethics

In May 2005, we adopted a Code of Business Conduct and Ethics applicable to our Chief Executive Officer, principal financial and accounting officers and persons performing similar functions. A Code of Business Conduct and Ethics is a written standard designed to deter wrongdoing and to promote:

	●	honest and ethical conduct,

	●	full, fair, accurate, timely and understandable disclosure in regulatory filings and public statements,

	●	compliance with applicable laws, rules and regulations,

	●	the prompt reporting of violation of the code, and

	●	accountability for adherence to the Code.

A copy of our Code of Business Conduct and Ethics is filed as an exhibit to this annual report. We will provide a copy, without charge, to any person desiring a copy of the Code of Business Conduct and Ethics, by written request to us at our principal offices to the attention of Corporate Secretary.

Board Leadership Structure

Mr. Howe serves as the Company’s CEO and Chairman of our board of directors and presides over meetings of the board of directors, and holds such other powers and carries out such other duties as are customarily carried out by the Chairman of our board of directors. Mr. Howe brings valuable insight to our board of directors due to the perspective and experience he brings from the technology industry.

Section 16(a) Beneficial Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission (SEC) require our directors, executive officers and persons who own more than 10% of our common stock or Series AA preferred stock to file reports of their ownership and changes in ownership of our common stock and Series AA preferred stock with the SEC. Based solely on our review of the reports filed during the year ended June 30, 2015, we determined that no director, executive officer or beneficial owner of more than 10% of our common stock or Series AA preferred stock failed to file a report on a timely basis during the year ended June 30, 2015.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table summarizes all compensation recorded by us for the year ended June 30, 2015 and the nine months ended June 30, 2014 for our principal executive officer, our principal financial officer, our three most highly compensated executive officers other than the principal executive officer and the principal financial officer who were serving as executive officers at June 30, 2014 and up to two additional individuals for whom disclosure would have been made in this table but for the fact that the individual was not serving as an executive officer of our company at June 30, 2014. The value attributable to any option awards is computed in accordance with accordance with ASC Topic 718, “Compensation – Stock Compensation (Formerly SFAS No. 123 (R), “Share-Based Payments. The assumptions made in the valuations of the option awards are included in Note 14 of the Notes to our Financial Statements for the nine months ended June 30, 2014.

SUMMARY COMPENSATION TABLE

Name and						Stock		All Other
Principal Position	Year	Salary		Bonus		Awards		Compensation		Total
Robert M. Howe III, CEO	2015	$	96,000	$	-	$	-	$	28,019	$	124,019
	2014		59,750		-		24,000		17,350		101,100

Ellen Sondee, CFO	2015		147,623		-		-		-		147,623
	2014		13,500		-		-		-		13,500

Mark B. Lucky, CFO	2014		208,296		5,000		-		9,695		222,991

Mr. Howe served as the Company’s Chief Executive Officer from July 2012 until January 14, 2014 and from May 2014 until present. In the year ended June 30, 2015, Mr. Howe received a salary of $96,000. All other compensation in the period represents the value of health insurance premiums. In the nine month transition period ended June 30, 2014, the Company granted Mr. Howe 2,000,000 shares of the Company’s restricted stock, valued at $24,000. All other compensation in this period represents the value of health insurance premiums.

Ms. Sondee served as the Company’s Chief Financial Officer from May 2014 until present. Ms. Sondee’s compensation for her services as our Chief Financial Officer will be paid to Scale Finance, LLC under the terms of our agreement with that entity.

Mr. Lucky served as the Company’s Chief Financial Officer from March 2007 until May 2014. All other compensation in the nine month transition period ended June 2014 represents the value of health insurance premiums.

How Mr. Howe’s compensation is determined

Mr. Howe is not a party to an employment agreement with our company. His compensation is determined by the Compensation Committee of our Board of Directors. The Compensation Committee considered a number of factors in determining Mr. Howe’s compensation including the scope of his duties and responsibilities to our company and the time he devotes to our business. The Compensation Committee did not consult with any experts or other third parties in fixing the amount of Mr. Howe’s compensation. During the year ended June 30, 2015 Mr. Howe’s compensation package included a base salary of $96,000 and Company provided health care benefits.

How Ms. Sondee’s compensation is determined

On May 22, 2014 we entered into a letter agreement with Scale Finance, LLC to provide CFO-level support focused on SEC reporting and general senior-level finance and accounting oversight and management. Under the terms of this agreement, Ms. Sondee is serving as our Chief Financial Officer. As compensation for these services, Ms. Sondee’s time will be billed at $135.00 per hour. In the event we should elect to hire an employee of Scale Finance, LLC we are obligated to pay that firm a one-time fee equal to 30% of the agreed upon annualized salary, reduced by 2% for each month of the engagement to a base fee of 20%. We have indemnified Scale Finance, LLC and its officers, directors, agents and employees against certain liabilities.

Director Compensation

We have not established standard compensation arrangements for our directors and the compensation payable to each individual for their service on our Board is determined from time to time by our Board of Directors based upon the amount of time expended by each of the directors on our behalf. The following table provides information concerning the compensation of our directors for their services as members of our Board of Directors for the year ended June 30, 2015.

	Fees						Non-Equity		Nonqualified
	Earned						Incentive		Deferred		All
	or Paid		Stock		Option		Plan		Compensation		Other
Name	in Cash		Awards		Awards		Compensation		Earning		Compensation		Total
Robert M. Howe III	$	3,000		-	$	-	$	-	$	-	$	-	$	3,000
Marc Abrams		3,000		-		-		-		-		-		3,000
Bernie Stolar		3,000		-		-		-		-		-		3,000

Outstanding Equity Awards at Fiscal Year-End

There are no unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of June 30, 2015.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

At October 9, 2015, there were 912,897,537 shares of our common stock issued and outstanding. The Company’s common stock is the only outstanding classes of the Company’s voting securities. The following table sets forth, as of September 28, 2015, information known to us relating to the beneficial ownership of these shares by:

	●	each person who is the beneficial owner of more than 5% of the outstanding shares of common stock;

	●	each director;

	●	each executive officer and

	●	all executive officers and directors as a group.

Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of 4126 Leonard Drive, Fairfax, Virginia 22030.

Under securities laws, a person is considered to be the beneficial owner of securities he owns and that can be acquired by him within 60 days from September 28, 2015 upon the exercise of options, warrants, convertible securities or other understandings. We determine a beneficial owner’s percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not those held by any other person and which are exercisable within 60 days of September 28, 2015, have been exercised or converted. Unless otherwise noted, the address of each of these principal stockholders is our principal executive offices.

	Common Stock
Name of Beneficial Owner	Shares		%
Robert M. Howe, III		16,120		0.00	%
UnifiedOnline! LLC.		903,825,954		99.01	%
Ellen Sondee		-		0.00	%
Marc Abrams		-		0.00	%
Bernie Stolar		-		0.00	%

Securities Authorized For Issuance Under Equity Compensation Plans

The following table sets forth securities authorized for issuance under equity compensation plans, including individual compensation arrangements, by the Company under the Company’s 2012 Equity Compensation Plan and the Company’s 2015 Employee Option Plan and any compensation plans not previously approved by our stockholders as of June 30, 2015.

Plan Category

	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plans not approved by stockholders:
2012 Equity Incentive Plan		7,232	$	33.53		-
2015 Employee Option Plan		-		-		1,800,000

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

On April 23, 2014, we entered into a Subscription Agreement with UnifiedOnline! LLC (the “Subscriber”), a Delaware limited liability company, pursuant to which the Subscriber purchased 400,000 shares of Series AA Preferred Stock. In consideration for the Shares, Subscriber paid $116,087 to various vendors and obtained the agreement of a certain related party lessor to temporarily forbear exercising non-payment default remedies. Since entering into the Subscription Agreement, the Subscriber has advanced $1.7 million bearing interest at 10% per annum to fund general working capital. The Subscriber converted the 400,000 shares of Series AA Preferred Stock on January 5, 2015 in accordance with the subscription agreement to 903,825,954 shares of common stock.

On November 2, 2012 we entered into a Loan Agreement with IWEB Growth Fund, LLC, a Virginia limited liability company (“IWEB Growth Fund”) which was recently established by Messrs. Compton, Bush, Carosi, Pirtle and Stavish and General Soyster, our independent directors. Under the terms of the Loan Agreement, IWEB Growth Fund agreed to make one or more loans to us up to the total principal amount of $1.5 million. The lending of any amounts under the Loan Agreement is conditioned upon the negotiation of notes and related loan documents which contain terms and conditions that are acceptable to the lender to be determined at the time of the loans. We agreed to grant IWEB Growth Fund a security interest in our assets as collateral for these loans, which such security interest is subordinate to the interest of our primary lender Sand Hill Finance, LLC. In the event we should default under the terms of the Loan Agreement, IWEB Growth Fund is entitled to declare all amounts advanced under the various notes immediately due and payable. An event of default includes a breach by us of any covenant, representation or warranty in the Loan Agreement or a default under any note entered into with the lender.

Between November 9, 2012 and July, 2013, IWEB Growth Fund lent us an aggregate of $186,000 under the terms of nine separate Confession of Judgment Promissory Notes. These notes, which are identical in their terms other than the dates and principal amounts, are for a one year term and bear interest at 12% per annum payable at maturity. Embodied in each of the notes is a confession of judgment which means that should we default upon the payment of the note, we have agreed to permit IWEB Growth Fund to enter a judgment against us in the appropriate court in Virginia before filing suit against us for collection of the amounts. Pursuant to the terms of the Loan Agreement, we paid IWEB Growth Fund’s expenses of $1,500 for the preparation of the Loan Agreement and related documents. We are currently in default of these loans.

Director Independence

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

The aggregate fees billed for professional services rendered by our principal accountant for the audit of our annual financial statements, review of our financial statements included in our quarterly reports and other fees that are normally provided by our accountant in connection with our audits and reviews for the year ended June 30, 2015 and the nine months ended June 30, 2014 were $53,000 and $79,250, respectively.

AUDIT-RELATED FEES

This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting. Our audit-related and review fees for the year ended June 30, 2015 and the nine months ended June 30, 2014 were $500 and $0, respectively.

TAX FEES

The aggregate fees billed for professional services rendered by our principal accountant for tax compliance, tax advices and tax planning for the year ended June 30, 2015 and the nine months ended June 30, 2014 were $5,500 and $2,750, respectively.

ALL OTHER FEES

There were no other fees billed by our principal accountant for the year ended June 30, 2015 and the nine months ended June 30, 2014, except as provided above.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of the Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting. The audit and tax fees paid to the auditors with respect to the year ended June 30, 2015 were pre-approved by the entire Board of Directors.

PART IV

ITEM 15. EXHIBITS

Exhibit No.		Description
3.1		Certificate of Incorporation (1)
3.2		Certificate of Amendment to Certificate of Incorporation (1)
3.3		Certificate of Amendment to Certificate of Incorporation (1)
3.4		Certificate of Amendment to Certificate of Incorporation (1)
3.5		Certificate of Amendment to Certificate of Incorporation (2)
3.6		Certificate of Amendment to Certificate of Incorporation (3)
3.7		Certificate of Amendment to Certificate of Incorporation (4)
3.8		Certificate of Designations of Series A Convertible Preferred Stock (5)
3.9		Certificate of Amendment to Certificate of Incorporation (6)
3.1		Bylaws (1)
3.11		Certificate of Designations of Series B Convertible Preferred Stock (8)
3.12		Certificate of Designations, Preferences and Rights and Limitations of Series AA Preferred Stock dated April 23, 2014 (25)
3.13		Amendment of Bylaws of the Corporation, dated April 23, 2014 (25)
3.14		Certificate of Amendment to Certificate of Incorporation (26)
4.1		Form of Common Stock Purchase Warrant for Sand Hill Finance LLC (9)
4.2		Secured Convertible Debenture for Sand Hill Finance LLC (11)
4.3		Warrant Amendment Agreement with Sand Hill Finance LLC (11)
4.4		Form of Series Common Stock Purchase Warrant “N” (12)
4.6		Form of Series Common Stock Purchase Warrant “O” (13)
4.8		Form of Series Common Stock Purchase Warrant “Q” (13)
4.9		Form of Series Common Stock Purchase Warrant “R” (16)
10.6		Preferred Stock Purchase Agreement dated March 30, 2005 (5)
10.11		Preferred Stock Purchase Agreement dated September 8, 2005 (9)
10.13		Financing Agreement with Sand Hill Finance LLC (9)
10.17		Convertible Debenture with Sand Hill Finance LLC (10)
10.18		Convertible Note with KBM Worldwide, Inc. (27)
10.19		Convertible Note with Vis Vires Group, Inc. (28)
10.2		Convertible Note with JMJ Financial (30)
10.24		Form of Subscription Agreement (16)
10.25		Form of Registration Rights Agreement (16)
10.26		2012 Equity Compensation Plan (14)
10.27		Ninth Amendment to Financing Agreement and Waiver with Sand Hill Finance, LLC (15)
10.28		Loan Agreement dated November 2, 2012 by and between the Company and IWEB Growth Fund, LLC (17)
10.29		Form of Confession of Judgment Promissory Note (18)
10.3		Amendment to Series “O” and “Q” Warrants (19)
10.31		Form of Secured Convertible Debenture with Sand Hill Finance, LLC (20)
10.32		Agreement of Cancellation of Secured Convertible Debenture with Sand Hill Finance, LLC (22)
10.33		Share Exchange Agreement between the Company, Computers & Tele-Com, Inc., KC NAP, LLC, the Stockholders of Computers & Tele-Com, Inc., and Streamside Partners, LLC (24)
10.34		Escrow Agreement between parties of Computers & Tele-Com, Inc. and Law Offices of Donovan Dodrill, LLC (24)
10.35		Master Lease Agreement with Agility Lease Fund III, LLC (24)
10.36		Equipment Lease Schedule with Agility Lease Fund III, LLC (24)
10.37		Security Agreement with Agility Lease Fund III, LLC (24)
10.38		Form of Series T Warrant (24)
10.39		2013 Employee Option Plan (21)
10.4		Amendment 2 dated September 25, 2013 to the 2012 Equity Compensation Plan (23)
10.41		Subscription Agreement by and between the Corporation and Subscriber, dated April 23, 2014 (25)
10.42		2015 Employee Option Plan (29)
14.1		Code of Business Conduct and Ethics (7)
21.1		Subsidiaries of the registrant (7)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer *
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer *
32.1		Section 906 Certification of Chief Executive Officer *
32.2		Section 906 Certification of Chief Financial Officer *

* filed herewith

(1)	Incorporated by reference to the Form 10-SB, file number 000-27865, filed with on October 28, 1999, as amended.
(2)	Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on June 18, 2001.
(3)	Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on June 26, 2001.
(4)	Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on August 20, 2004.
(5)	Incorporated by reference to the Report on Form 8-K as filed on April 5, 2005.
(6)	Incorporated by reference to the definitive Information Statement on Schedule14C as filed on April 4, 2005.
(7)	Incorporated by reference to the registration statement on Form SB-2, SEC file number 333-126898, as amended
(8)	Incorporated by reference to our Annual Report on Form 10-KSB as filed on January 18, 2006.
(9)	Incorporated by reference to the Report on Form 8-K as filed on January 30, 2006.
(10)	Incorporated by reference to the Report on Form 8-K as filed on December 1, 2009.
(11)	Incorporated by reference to the registration statement on Form S-1, SEC file number 333-167501, as amended.
(12)	Incorporated by reference to the Report on Form 8-K as filed on November 16, 2011.
(13)	Incorporated by reference to the Report on Form 8-K as filed on November 23, 2011.
(14)	Incorporated by reference to the Current Report on Form 8-K filed on August 28, 2012.
(15)	Incorporated by reference to the Current Report on Form 8-K filed on September 10, 2012.
(16)	Filed as an exhibit to the registration statement on Form S-1, SEC File No. 333-183463.
(17)	Incorporated by reference to the Current Report on Form 8-K filed on November 13, 2012.
(18)	Incorporated by reference to the Current Report on Form 8-K filed on November 13, 2012.
(19)	Incorporated by reference to the Current Report on Form 8-K as filed on April 10, 2013.
(20)	Incorporated by reference to the Current Report on Form 8-K as filed on April 12, 2013.
(21)	Incorporated by reference to the Current Report on Form 8-K as filed on June 11, 2013.
(22)	Incorporated by reference to the Current Report on Form 8-K as filed on August 20, 2013.
(23)	Incorporated by reference to the Current Report on Form 8-K as filed on September 25, 2013.
(24)	Incorporated by reference to the Current Report on Form 8-K as filed on October 1, 2013.
(25)	Incorporated by reference to the Current Report on Form 8-K as filed on April 23, 2014.
(26)	Incorporated by reference to the definitive Information Statement on Schedule 14C as filed on 12/15/2014.
(27)	Incorporated by reference to the Report on Form 8-K as filed on January 14, 2015.
(28)	Incorporated by reference to the Report on Form 8-K as filed on March 3, 2015.
(29)	Incorporated by reference to the Report on Form 8-K as filed on April 10, 2015.
(30)	Incorporated by reference to the Report on Form 8-K as filed on April 17, 2015.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ICEWEB, INC.

October 13, 2015	By:	/s/ Robert M. Howe III
		Robert M. Howe III, Chairman and Chief Executive Officer, principal executive officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Robert M. Howe III	Chairman of the Board and CEO, principal executive officer	October 13, 2015
Robert M. Howe III

/s/ Ellen Sondee	Chief Financial Officer, principal financial and accounting officer	October 13, 2015
Ellen Sondee