7. CAPITAL LEASE PAYABLE

12 Months Ended

Jun. 30, 2015

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

UnifiedOnline, Inc. 10-K