UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

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

For the fiscal year ended December 31, 2018

or

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

FOR THE TRANSITION PERIOD FROM OCTOBER 1, 2015 TO DECEMBER 31, 2016For the transition period from            to

Commission file number:000-31355

FTE NETWORKS, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:1-877-878-8136

Securities registered pursuant to Section 12(b) of the Act: Not Applicable

Securities registered pursuant of section 12(g) of the Act: Common Stock, par value $0.001 per shareNone

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule-405 of the Securities Act. [  ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [X] No

Note-Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports 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. [X][  ] Yes [  ][X] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 235.405232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant of Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definite proxy of information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [X]

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

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

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

As of June 30, 2016, theThe aggregate market value of the registrant’s outstanding common stock held by non-affiliates as of the registrantJune 30, 2019, was $2,632,421.approximately $10.1 million.

As ofOn May 11, 2017,1, 2020, there were 126,247,69425,572,148 shares of common stock outstanding.

FTE NETWORKS, INC.

FORM 10-K

TABLE OF CONTENTS

TRANSITION PERIOD ENDED DECEMBER 31, 2015 AND DECEMBER 31, 2016

EXPLANATORY NOTE

FORWARD-LOOKING STATEMENTSSee Part 1, Item 1 Business, Recent Developments “Internal Investigation”

SomeAdditionally, as of the statementsfiling date of this report, the business of the Company has substantially changed as described in Part I, Item 1 of this report under the heading “Business”.

PART I

DEFINITIONS

In this Annual Report on Form 10-K, the words “FTE”, the “Company”, the “Registrant”, “we”, “our”, “ours” and “us” refer to FTE Networks, Inc. and, except as otherwise specified herein, to our subsidiaries.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes certain statements that may be deemed “forward-looking statements.statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, all of which are based upon various estimates and assumptions that the Company believes to be reasonable as of the date hereof. In some cases, you can identify forward-looking statements by terminology such as “may,” Forward-looking“will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “seek,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology. These statements are not historical facts butinvolve risks and uncertainties that could cause the Company’s actual future outcomes to differ materially from those set forth in such statements. Such risks and uncertainties include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict.

Forward-looking statements can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements which are contained in this Annual Report on Form 10-K because they reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include, without limitation:to:

All written and oralYou should understand that the foregoing, as well as other risk factors discussed in this document, including those listed in Part I, Item 1A of this report under the heading “Risk Factors”, could cause future outcomes to differ materially from those experienced previously or those expressed in such forward-looking statements. The Company undertakes no obligation to publicly update or revise any information, including information concerning its net operating losses, borrowing availability or cash position, or any forward-looking statements madeto reflect events or circumstances that may arise after the date of this report. Forward-looking statements are provided in connection with this Annual Report on Form 10-K that are attributablepursuant to us or persons acting on our behalf are expressly qualifiedthe safe harbor established under the Private Securities Litigation Reform Act of 1995 and should be evaluated in their entirety by these cautionary statements. Any forward-looking statements speak only asthe context of the date on which they are made,estimates, assumptions, uncertainties and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances afterrisks described herein.

Item 1. Business.

The following historical business description should be read in conjunction with the date ofConsolidated Financial Statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

PART IOur Corporate History

Item 1. Business.

FTE Networks, Inc. (FTNW), and its wholly owned subsidiaries, is a leading international networking infrastructure service solutions company. The Company designs, build, and support telecommunications and technology systems and infrastructure services for Fortune 500 companies operating four (4) telecommunications markets; Data Center Infrastructure, Fiber Optics, Wireless Integration, and Surveillance & Security. FTE Networks is headquartered in Naples, Florida, with offices throughout the United States and Europe.

● Jus-Com, Inc., (dba FTE Network Services) specializes in the design, engineering, installation, and maintenance of all forms of telecommunications infrastructure. Services include engineering consulting, design, installation, maintenance, and emergency response in various categories including cabling, equipment installation and configuration, rack and stack, wiring build-outs, infrastructure build-outs, DC power installation, OSP/ISP fiber placement, fiber cable splicing and testing.

● FTE Wireless, LLC, offers wireless solutions to major wireless carriers including equipment installation, fiber backhaul, antennae installation and testing, small cell solutions, fiber-to-site and other turnkey solutions as needed by such clients.

● Focus Venture Partners, Inc. (dba FVP Worx) is a multifaceted employment firm offering full service staffing solutions, specializing in the telecommunications, technology and construction services industries.

FTE Network Services and FTE Wireless Service, LLC are reported in the Company’s telecommunications segment. FVP Worx represents the Company’s staffing segment.

CORPORATE HISTORY

Prior to Beacon Merger

Beacon Enterprise Solutions Group

Beacon Enterprise Solutions Group, Inc. (“Beacon”) was originally incorporated in the state of Nevada on December 30, 2007.in May 2000 as Galaxy Specialties, Inc. On September 5, 2012March 13, 2014, following a series of mergers, acquisitions and business combinations, the Company changed its name from Beacon sold its operating assets and Beacon ceased its business operations,Enterprise Solutions Group, Inc. to FTE Networks, Inc. The Company is headquartered in order to meet its financial obligations and avoid bankruptcy, but maintained its public company “shell” status.New York, New York.

Focus Venture Partners, Inc.Prior to October 2019, the Company was a provider of end-to-end design, construction management, build and support solutions for networks, data centers, residential, and commercial properties and services at Fortune 100/500 companies (our “Historical Business”). The Company’s primary activities included engineering, building, installation, maintenance and support solutions for state-of-the-art networks and commercial properties, including the following services: data-center infrastructure, fiber optics, wireless integration, network engineering, internet service provider, general contracting management and general contracting.

Focus Venture Partners, Inc. (“Focus”) was incorporated in the state of Nevada on March 26, 2012 as a holding companyThe Company had three operating in the telecommunications industry managing and developing its wholly owned subsidiaries, which were focused on the development of telecommunications networks, acting as a service and support provider, as well as providing temporary and part-time staffing solutions.

Through Optos Capital Partners, LLC, a Delaware limited liability company (“Optos”), its wholly owned subsidiary, Focus operated the following wholly owned entities:subsidiaries:

Beacon Merger

On May 10, 2013, Beacon and Beacon Acquisition Sub, Inc. a Nevada corporation and a wholly owned subsidiary of Beacon (the “Merger Sub”) entered into a merger agreement with Focus (the “Merger Agreement”). Pursuant to the Merger Agreement, the Merger Sub merged with and into Focus, with Focus continuing as the surviving corporation, with the result that Focus became a subsidiary of Beacon (the “Beacon Merger”). The closing of the merger took place on June 19, 2013.

For accounting purposes, the Beacon Merger has been treated as an acquisition of Beacon, and a recapitalization of Focus Venture Partners. The historical consolidated financial statements prior to June 19, 2013 are those of Focus Venture Partners. In connection with the Beacon Merger, Focus Venture Partners has restated its statements of stockholders’ deficiency on a recapitalization basis so that all equity accounts are presented as if the recapitalization had occurred as of the beginning of the earliest period presented.

In connection with the Beacon Merger, the Board of Directors authorized the designation of a new series of preferred stock, the Beacon Series D Shares, out of its available “blank check preferred stock” and authorized the issuance of up to 2,000,000 Beacon Series D Shares. We filed a Certificate of Designation with the Secretary of State of the State of Nevada on June 17, 2013. Under the Certificate of Designation, each Beacon Series D Share has various rights, privileges and preferences, including: (i) a stated value of $4.00 per share; (ii) mandatory conversion into 20 shares of Common Stock (subject to adjustments) upon the filing of the amendment to our Articles of Incorporation after incorporating the 1 for 20 reverse stock split of the outstanding shares of common stock required by the Merger Agreement (and an effective increase in the Company’s authorized common stock); and (iii) a liquidation preference in the amount of the stated value.

In connection with the Beacon Merger the Board of Directors authorized the designation of a new series of preferred stock, the Beacon Series E Shares, out of its available “blank check preferred stock” and authorized the issuance of up to 1,000,000 Beacon Series E Shares. We filed a Certificate of Designation with the Secretary of State of the State of Nevada on June 17, 2013. Under the Certificate of Designation, each Beacon Series E Share has various rights, privileges and preferences, including (i) a liquidation value of $1.00 per share (subject to adjustments); (ii) mandatory redemption of 10,000 shares per month at the liquidation value; and (iii) conversion at the option of the Company of all outstanding Beacon Series E Shares at a price equal to half the liquidation value after 48 mandatory redemption payments have been made.

Pursuant to the terms of the Merger Agreement: (i) shares of Series B Preferred Stock of Focus, par value $0.0001 per share (the “Focus Preferred B Shares”) and common stock of Focus, par value $0.0001 per share (the “Focus Common Stock”) were converted into the right to receive an aggregate of 1,250,011 shares of Beacon Series D Preferred Shares, par value $0.01 per share); (ii) all shares of Series A Preferred Stock of Focus, par value $0.0001 per share, were converted into the right to receive an aggregate number of 1,000,000 shares of Beacon Series E shares, par value $0.01 per share, (iii) all shares of capital stock of Merger Sub were converted into one share of Focus Common Stock. Each Beacon Series D and Beacon Series E share is entitled to vote alongside the common stockholders and has 20 and 1 vote(s) each, respectively. The Beacon Series E shares were subject to redemption and were recorded as a liability, but the shares were returned to the Company and derecognized on September 30, 2013. The Beacon Merger represented a change of control of Beacon and Focus management became responsible for the consolidated entity.

The consideration issued in the Merger was determined as a result of arm’s length negotiations between the parties.

Changes Resulting from the Merger

Our mission is to expand the operations of Jus-Com Inc. dba FTE Network Services as our primary line of business. Jus-Com is headquartered in Naples, Florida specializing in the design, engineering, installation, constructionCurrent Business and maintenance of telecommunications and technology networks and infrastructure.Corporate Strategy

Following a year of corporate and financial restructuring in response to the Beacon Merger, on March 13, 2014, Beacon changed its namefindings of an internal investigation (see Item 1. Business “Recent Developments”) which examined the acts and omissions of certain former officers and directors, and the loss of our principal operating subsidiary through a foreclosure by our former senior secured lenders, the Company was presented with an opportunity to “FTE Networks, Inc.” (“FTE” oracquire a real estate portfolio consisting of approximately 3,200 rental homes across the “Company”). JusCom began doing business asUnited States moving FTE Network Services (“FTE Network Services”) -into a turn-key infrastructure services company. Focus Venture Partners began doing business as FVP Worx, Inc., offering full service staffing solutions. Optos Capital Partners remainsnew direction which current management believes offers substantial opportunity for the purposebenefit of future diversification opportunities. The following graphic depicts our organization following the Beacon Mergershareholders. Accordingly, on December 30, 2019, FTE acquired nearly 3,200 real estate properties by and the organizational changes described above, and represents the current organization of the Company:through its newest subsidiary, US Home Rentals, LLC (the “Vision Transaction”).

RECENT DEVELOPMENTS

The Registration and Trading of Our SecuritiesInternal Investigation

Prior to September 12, 2014 (the “Revocation Date”), our Common Stock was registered under Section 12(g) of the Exchange Act of 1934, as amended (the “Exchange Act”). Pursuant to such registration, the Company was subject to the requirements of Regulation 13(a) of the Exchange Act which required us to file with the SEC, in part, annual reports on Form 10-K, quarterly reports on Form 10-Q, andIn current reports on Form 8-K filed on March 11, 2019 and to complyMarch 22, 2019, the Company disclosed that it had entered into certain securities purchase agreements (the “Purchase Agreements”) with all other obligationscertain investors (the “Investors”), which the Company sold an aggregate principal amount of $22,700,000 in convertible notes (the “Notes”) between January 2017 and January 2019. Approximately $9,800,000 of principal and interest had been converted into 5,186,306 shares of the Company’s common stock through March 19, 2019. These issuances were not supported by a listing application with the New York Stock Exchange (“Exchange’), which resulted in the Company receiving a public reprimand letter from the NYSE Regulation Staff of the Exchange Act applicableon March 25, 2019. On March 22, 2019, the Company announced the initiation of an independent investigation (the “Investigation”) of these issuances and engaged K&L Gates LLP and Credibility International, LLC, an independent forensic accounting firm (together, the “Team”) to issuers filing registration statementsconduct the Investigation.

Scope of the Investigation

The Investigation focused primarily on the following areas: (i) whether prior management, including former Chief Executive Officer (“former CEO”), Michael Palleschi, and former Chief Financial Officer (“former CFO”), David Lethem, had proper authorization to issue the Notes; (ii) whether the Company properly accounted for and disclosed certain expenses incurred by prior management; (iii) the use of personal credit cards by employees to pay routine Company expenses; (iv) whether the Company properly entered into and disclosed certain related party transactions (v) whether certain transactions were improperly reported to increase revenue; (vi) the payment of certain wage and salary amounts to employees; (vii) the Company’s interactions with its external auditors and (viii) issues related to Mr. Palleschi’s compensation.

In connection with the Investigation, the Team visited the Company’s Naples, Florida office and collected hard copy documents, created images of electronic equipment belonging to various members of the prior management team, copied many folders from the Company’s SharePoint database, conducted interviews with sixteen individuals, and collected and processed over four hundred thousand e-mails and documents.

Findings of the Investigation

The Team found the following:

1. Issuances of the Notes.

In numerous instances, prior FTE management, including Mr. Palleschi and Mr. Lethem, caused the Company to issue the Notes as well as other financings without proper Board authorization. Specifically, the Team found: (i) several issuances for which the supporting resolutions did not comply with Nevada state law and the Company’s bylaws; (ii) several issuances for which there were no Board resolutions; and (iii) several issuances for which the supporting resolutions had been falsified. Moreover, the prior management caused the Company to make incomplete disclosures about the Notes in its required SEC filings for fiscal year 2017 and the first three quarters of fiscal year 2018. Notably, because of the prior management, the Company did not disclose that each of the Notes contained a conversion feature that allowed the holders of the Notes to convert the debt into the Company’s common stock.

2. Reimbursement of Expenses and the Use of Personal Credit Cards for Business Expenses.

The Investigation revealed that prior management misused Company funds for personal expenses, including charter flights and automobile leases. The Team also found that prior management instructed FTE employees to charge FTE-related business expenses to their personal credit cards from 2018 forward. However, the Team found that the expenses charged pursuant to Section 12(g)such instruction were largely business-related.

3. Related Party Transactions.

The Team found that prior management caused the Company to engage in numerous related party transactions, some of which were implemented to the Company’s detriment and were not disclosed properly or were not disclosed at all. Such transactions included loans provided to the Company by former officers and directors, as well as instances of deferred salary or deferred bonus pay. The Team identified transactions between the Company and former officers or directors, as well as between the Company and entities controlled by former officers or directors.

4. Revenue Recognition and Interaction with Auditors

The Team found that prior management caused the Company to improperly recognize revenue in 2016 and 2017. The revenue was recorded to unbilled Accounts Receivable and later written off in three separate transactions during 2018. The Team also found that members of prior management provided inaccurate and incomplete statements to the Company’s former independent registered public accounting firm, Marcum LLP (“Marcum”), regarding the basis for recognizing the revenue.

5. Payment of Certain Wages, Salary Amounts, and Payroll Expenses

The Team found that the Company’s former CEO, Mr. Palleschi, engaged in improper conduct in connection with his compensation including the following: (i) Mr. Palleschi, without proper authorization, caused the Company to amend his employment agreement, significantly increasing his salary and bonus pay; (ii) Mr. Palleschi, without proper authorization, caused the Company to grant him deferred compensation and to issue “demand notes,” which characterized the deferred compensation as debt of the Exchange Act.Company owed to Mr. Palleschi, this mischaracterization resulted in the Company making three substantial wire transfers to Mr. Palleschi to pay him the amounts he was owed on the “demand notes; and (iii) Mr. Palleschi, without proper authorization, caused the Company to enter into a release agreement under which the Company agreed to pay amounts purportedly owed to Messrs. Palleschi and Lethem, in exchange for a mutual release. The Team also found that each of the payments noted above were made without the required withholding of income taxes. In addition, the Team identified multiple instances where Messrs. Palleschi and Lethem made or attempted unsupported cash payments to themselves and certain family members, through direct wire transfers, PayPal and other means. Furthermore, the Team identified three instances in which the Company paid each of its employees through direct wire transfer rather than through its outside payroll processing firm. In each instance the Company wired the amount due, net of income taxes, but failed to remit payroll taxes.

After we ceased our business operationsFurther to the findings of the investigation as noted above, the Company also has found that former management created and became adistributed false and misleading documents to its internal accounting staff resulting in improper accounting for (i) convertible notes by removing certain language regarding conversion features and registration rights, (ii) revenue recognition by falsifying support for unbilled revenue, (iii) compensation and characterization of certain cash disbursements, (iv) related party transactions and (v) equity issuances which were later determined to be improperly authorized, and other issues. The Company also found that former management withheld requested documentation and similarly provided false and misleading documents to its former independent registered public company “shell” on September 5, 2012, we fell behind onaccounting firm.

Remediation

The Company self-reported the compilation of our booksmatters raised in the Investigation to both the U.S. Securities and records, due to challenges related to staffing, access to historical dataExchange Commission (“SEC”) and insufficient funding. Consequently, we failed to complythe New York County District Attorney’s Office (“NYCDA”), and kept both agencies, along with the reporting requirementsU.S. Attorney’s Office for the Southern District of Regulation 13(a)New York (“SDNY”), updated on its progress throughout the Investigation. The Company continues to cooperate with all three agencies.

The Company has also taken numerous remedial actions in response to the findings of the Exchange Act. Further,Investigation. Most notably, the Company underestimatedhas made dramatic changes to its management team, completely replacing senior management, including Messrs. Palleschi and Lethem as well as a majority of the time that it would takeformer Board of Directors. The Company has also restated its financial statements for fiscal year 2017 and the periods ended March 31, June 30 and September 30, 2018 and 2017, as discussed below. Among other things, the restatement corrects the improperly recognized revenue identified by the Investigation and accounts for the registrantconvertible feature of the Notes. In addition, the Company has taken significant steps to accessimprove its policies and analyzeprocedures and internal controls relating to, among other things, the historical datafollowing: (i) tracking, approving and disclosing all issuances of equity and debt; (ii) its expense reimbursement policy; and (iii) tracking, approving and disclosing related party transactions. See “Item 9A Controls and Procedures”.

Finally, to enable it to become currentremedy deficiencies in its financial reporting.equity issuances, the Board of Directors held a total of four special meetings on April 29, May 7, May 8, and May 13, 2019, respectively, at which it reviewed all equity issuances and decided which issuances were (i) valid; (ii) noncompliant but should be ratified; (iii) noncompliant but would not be challenged; and (iv) noncompliant and should be nullified. As a result, certain issuances to convertible noteholders, current and former personnel and related parties were nullified. Additionally, the Company sent a letter to its shareholders, dated May 23, 2019, to notify them of noncompliant issuances that were approved and validated during the Board’s review.

Departure of Executive Officers

On January 17, 2019, Lynn Martin, the Company’s then-Chief Operating Officer, resigned from the Company, effective January 25, 2019.

On January 19, 2019, Michael Palleschi, was granted a temporary leave of absence by the Board. On May 11, 2019, Mr. Palleschi notified the Company of his resignation from the Company’s Board and as the Company’s CEO. On May 13, the Board accepted Mr. Palleschi’s resignation from the Board, without compensation and without a release, and terminated his employment as the Company’s CEO on August 20, 2014,May 13, 2019.

On January 19, 2019, Anthony Sirotka, the Company’s former Chief Administrative Officer, was appointed as the Company’s Interim CEO. On June 27, 2019, Mr. Sirotka was placed on administrative leave. Mr. Sirotka resigned on October 2, 2019.

On March 11, 2019, David Lethem, the former CFO, resigned from the Company, effective March 11, 2019.

Non-Reliance on Previously Issued Financial Statements

The Company announced on April 2, 2019 that the Audit Committee (“Audit Committee”) of FTE, following a communication by Marcum, LLP, the Company’s former registered independent public accounting firm, concluded that previously issued audited financial statements as of and for the year ended December 31, 2017, and interim reviews of the financial statements for the periods ended March 31, June 30, and September 30, 2018 and 2017, should no longer be relied upon. The conclusion to prevent future reliance on the aforementioned financial statements resulted from the determination that such financial statements failed to properly account for certain convertible notes and other potentially dilutive securities. Specifically, the Company identified a potential issue related to the accounting related to certain convertible notes and other potentially dilutive securities the Company issued in 2017, 2018, and during January of 2019.

On June 11, 2019, the Audit Committee, following a communication by Marcum, concluded that the Company’s previously issued audited financial statements as of and for the years ended December 31, 2017 and 2016 and completed interim reviews for the periods ended March 31, June 30, and September 30, 2018, 2017 and 2016 should no longer be relied upon. The conclusion on June 11, 2019 to add the aforementioned 2016 financial statements to those statements which should no longer be relied upon resulted from determinations made as part of the Company’s ongoing restatement effort that certain items, including revenues originally recognized in 2016, should no longer be recognized.

Amendment No. 4 to Lateral Credit Agreement

On February 12, 2019, the Company and certain of its wholly-owned subsidiaries entered into Amendment No. 4 (the “Fourth Amendment”) to the credit agreement dated October 28, 2015, by and among Jus-Com, Inc., certain other Company subsidiaries, Lateral Juscom Feeder LLC (“Lateral”) and several lenders party thereto (together with Lateral, the “Lenders”) (as amended, the “Credit Agreement”). The Fourth Amendment provided for, among other things, $12,632,000 in delayed draw loans (the “Delayed Draw Term Loans”). The Delayed Draw Term Loans had a maturity date of March 31, 2019, and an interest rate of 12% and 4% of paid in kind interest, payable quarterly in arrears according to the terms of the Credit Agreement. In addition, the Company and the Lenders agreed to enter into a restructuring services agreement, in form and substance acceptable to the Lenders in their sole discretion, on or prior to February 28, 2019, which date was extended on several occasions by the parties. Lateral is controlled by Richard de Silva, who joined the Company’s Board of Directors on October 18, 2019.

The Fourth Amendment also provided for (i) amendments to the employment agreements between Benchmark, our former principal operating subsidiary, and Fred Sacramone and Brian McMahon, the founders of Benchmark who sold Benchmark to the Company in April of 2017 (the “Benchmark Sellers”); (ii) the issuance of a promissory note to Fred Sacramone for cash received in the principal amount of $1,000,000 (the “Sacramone Bridge Note”), which note originally matured on March 31, 2019, and was subsequently amended and restated on July 2, 2020 to extend the maturity date to September 30, 2020, and for which Mr. Sacramone was issued 356,513 shares of the Company’s common stock; (iii) the appointment of a finance transformation officer (who was acting in the capacity of Chief Financial Officer from January 23, 2019 through July 15, 2019); and (iv) the issuance of an aggregate of 1,698,580 shares of the Company’s common stock to the Lenders.

Restructuring of Lateral Credit Agreement and Designation of Series H Preferred Stock

On July 2, 2019, the Company completed the debt restructuring contemplated under the Fourth Amendment by entering into an amended and restated credit agreement (the “Amended and Restated Credit Agreement”) among the Company, Lateral and several Lenders. The Company also amended and restated the Series A convertible notes (as amended, the “Series A Notes”), Series B promissory notes (as amended, the “Series B Notes”) issued to the Benchmark Sellers, and the Sacramone Bridge Note (together with the Series A Notes and the Series B Notes, the “Benchmark Notes”).

Amended and Restated Credit Agreement Summary

Pursuant to the Amended and Restated Credit Agreement, the Delayed Draw Term Loans, which were continued as super senior term loans with an aggregate outstanding balance of $12,900,000 (the “Super Senior Term Loans”) were amended to: (i) extend the maturity to September 30, 2020; (ii) amend the interest rate to 12% per annum payable in cash; (iii) add a 4% extension fee to the principal amount (subject to reduction); and (iv) provide for monthly amortization payments based on available cash flow. In addition, the existing term loans under the Credit Agreement, with an aggregate balance of approximately $37,900,000 (“Lateral’s Existing Term Loans”) were amended to: (i) extend the maturity to April 30, 2021; (ii) amend the interest rate to 12% per annum payable in cash; (iii) add a 4% extension fee to the principal amount thereof (subject to reduction); and (iv) include monthly amortization payments based on available cash flow.

As consideration for the Amended and Restated Credit Amendment, the Company issued to the Lenders 1,500,000 shares of the Company’s common stock and warrants (the “Warrants”) exercisable to purchase 3,173,731 shares of the Company’s common stock (collectively, the “Lender Securities”) with an initial exercise price of $3.00 per share. Pursuant to the terms of the Warrants, in the event the Super Senior Term Loans were not paid and satisfied by October 31, 2019, the exercise per share of half of the Warrants would be automatically reset to $0.01 and in the event the Super Senior Term Loans were not paid by December 31, 2019, the exercise per share of the other half of the Warrants would be automatically reset to $0.01. The Company also agreed that on December 31, 2019, the aggregate number of shares of the Company’s common stock issuable upon exercise of the Warrants would be automatically adjusted on December 31, 2019 such that that Lateral and its affiliates would beneficially own, in the aggregate, inclusive of all shares of the Company’s common stock previously issued, 25% of the outstanding shares of the Company’s common stock on a fully-diluted basis, subject to certain exceptions.

As additional consideration for the Amended and Restated Credit Agreement, the Company and Lateral entered into a registration rights agreement (the “Registration Rights Agreement”) whereby the Company agreed to register the Company’s common stock issued to Lateral. The Company and Lateral also entered into an investor rights agreement (the “Investor Rights Agreement”) whereby the Company agreed that within sixty days of its execution, the Company would set the number of directors on its Board of Directors at seven and Lateral would be entitled to nominate one of such seven directors.

Series A Notes and Series B Notes & Designation of Series H Preferred Stock

The Series A Notes and Series B Notes were also amended to extend the maturity date to July 30, 2021 and to amend the interest rate to 8% per annum to be paid in kind until the borrowings under the Amended and Restated Credit Agreement were repaid in full. The Sacramone Bridge Note was amended to extend the maturity date to September 30, 2020, to capitalize the accrued interest as of July 2, 2019 and to provide for monthly cash interest payments. Additionally, all of the foregoing notes were amended to provide for monthly amortization payments based on available cash flow.

As consideration for amending and restating the Benchmark Notes, the Company entered into subscription agreements (the “Subscription Agreements”) pursuant to which it issued to the Benchmark Sellers an aggregate of 1,951 shares of the Company’s Series A Preferred Stock and 296 shares of the Company’s Series A-1 Preferred Stock (collectively, the “Series A Preferred”), which the Benchmark Sellers immediately exchanged, pursuant to exchange agreements (the “Exchange Agreements”), for an aggregate of 100 shares of a new series of preferred stock (the “Series H Preferred,” and together with the Series A Preferred, the “Preferred Stock”). The Series H Preferred had no dividend rights, no liquidation preference, was not convertible and had perpetual voting rights equivalent to 51% of the total number of votes that could be cast by all outstanding shares of capital stock of the Company.

Foreclosure by Senior Secured Lenders

During July 2019, the Company was notified that judgments had been entered against the Company in favor of six holders of the Company’s convertible notes in the state of New York. Certain of these convertible noteholders sought to levy against the bank account of the Company’s former subsidiary, Benchmark, and filed an order directing the Company to turn over all of the Company’s assets. The Company’s failure to satisfy, vacate or stay these judgments constituted an event of default under the Credit Agreement.

As a result, onOctober 10, 2019, the Company consented to a Proposal for Surrender of Collateral and Strict Foreclosure (the “Foreclosure Proposal”), from Lateral, Lateral Builders LLC (“Lateral Builders”) and Benchmark Holdings, LLC (“Benchmark Holdings” and together with Lateral Recovery LLC (“Lateral Recovery”), the (“Foreclosing Lenders”)), pursuant to which the Lenders took possession and ownership of the Subject Collateral (see below) by means of a strict foreclosure by the Foreclosing Lenders (the “Benchmark Foreclosure”).

Pursuant to the Foreclosure Proposal, the Company transferred; (i) to Benchmark Holdings all of its (a) equity interests in Benchmark, the Company’s principal operating subsidiary, and (b) cash on hand in excess of levels specified in the Foreclosure Proposal; and (ii) to Lateral Recovery, all of the Credit Parties’ interests in certain commercial tort litigation claims, fraud claims, and insurance claims as specified in the Foreclosure Proposal (collectively, the “Subject Collateral”).

Also pursuant to the Foreclosure Proposal, Benchmark transferred $3,000,000 of cash to the Company. Additionally, Benchmark agreed to make a monthly cash payment to the Company, in the amount of $300,000 per month (the “Working Capital Cash Payments”), for purposes of funding certain of the Company’s remaining obligations related to accounts payable, indebtedness for borrowed money, convertible note obligations and other matters specified in the Foreclosure Proposal (the “Remainder Obligations”). Working Capital Cash Payments were to continue until the earlier of (i) October 10, 2021, (ii) the repayment in full of the Remainder Obligations or (iii) the occurrence of a Working Capital Termination Event (as defined in the Foreclosure Proposal). The cash infusion and Working Capital Cash Payments provided the opportunity for the Company to receive total cash payments of up to $10,200,000 over the next 24 months.Benchmark made a total of two Working Capital Cash Payments to the Company—one in each of the months of November and December of 2019—for aggregate Working Capital Cash Payments of $600,000.

Benchmark Holdings, as the holder of the following of the Company’s obligations, absolutely and unconditionally released and forever discharged the Company and the other Credit Parties from certain indebtedness previously held by Niagara Nominee L.P. totaling $4,900,000, Lateral’s Existing Term Loans totaling $42,300,000 and the Super Senior Term Loans totaling $13,500,000 as each such term is defined in the Credit Agreement. Accordingly, Lateral’s Existing Term Loans and the Super Senior Term Loans were deemed fully paid and satisfied.

Additionally, pursuant to an Agreement Regarding Debt and Series H Preferred Stock (the “Debt and Series H Agreement”), dated October 10, 2019, entered into between the Company and Fred Sacramone and Brian McMahon, Messrs. Sacramone and McMahon released the Company and its affiliates from (i) all obligations represented by the Sacramone Bridge Note per the Credit Agreement, which had an outstanding amount equal to approximately $1,030,000 and (ii) indebtedness represented by the Series B Notes in the amount of $19,000,000. As a result, the total amount remaining outstanding under the Series A Notes and Series B Notes was $28,000,000 (the “Remaining Indebtedness”) with a due date of December 31, 2019.

The total debt relief provided pursuant to the Foreclosure Proposal and the related agreements and arrangements equaled an aggregate of $80,700,000.

In accordance with the Debt and Series H Agreement, the Remaining Indebtedness was to be automatically released and discharged as of December 31, 2019 unless (i) on or before November 10, 2019, the Company entered into a business combination transaction that enabled the Company’s common stock to remain listed on the NYSE American Exchange or any other U.S. national securities exchange and (ii) such business combination transaction was consummated on or before December 31, 2019 (such transaction, a “Qualified Business Combination”). Additionally, the Debt and Series H Agreement also required Messrs. Sacramone and McMahon to sell their shares of Series H Preferred Stock to the Company for a nominal price in the event an agreement for a Qualified Business Combination was entered into on or before November 10, 2019, and such Qualified Business Combination was consummated on or before December 31, 2019.

On November 8, 2019, the Company and Messrs. Sacramone and McMahon entered into an amendment to the Debt and Series H Agreement, pursuant to which the parties agreed to extend the date by which an agreement for a Qualified Business Combination must be entered into from November 10, 2019 to December 31, 2019 and to extend the date by which a Qualified Business Combination must close from December 31, 2019 to February 28, 2020.

On December 23, 2019, the Company entered into a separate agreement with Messrs. Sacramone and McMahon pursuant to which the Company repurchased all outstanding shares of its Series H Preferred Stock from Messrs. Sacramone and McMahon for a payment of $1.00 per share, as a result of which no shares of Series H Preferred Stock remain outstanding.

The Remaining Indebtedness remains an unpaid and outstanding Company liability. As of December 31, 2019, the outstanding balance of the Remaining Indebtedness was $28,280,465, including principal of $28,000,000 and paid in kind interest of $280,465 (subject to the adjustment described below).

In order to facilitate the continued inflow of additional cash infusions from Benchmark and other agreements pertaining to the Remaining Indebtedness, the Board also determined that, as result of the completion of the Vision Transaction, Benchmark would no longer be obligated to continue making Working Capital Cash Payments to the Company. On January 10, 2020, Benchmark loaned $300,000 to the Company with a maturity date of October 1, 2020 and an annual interest rate of 10%. Furthermore, on January 27, 2020, the Company issued two senior promissory notes to Benchmark, one in the principal amount of $4,129,000 and the other in the principal amount of $600,000 (collectively, the “Senior Notes”), each such note secured by all of the Company’s non-real estate assets. The $4,129,000 note, which matures on December 1, 2020 and has an interest rate of 10%, obligates the Company to repay all monies previously paid or transferred to the Company pursuant to the Foreclosure Proposal, including (i) $3,000,000 in cash; (ii) two Working Capital Cash Payments totaling $600,000; and (iii) approximately $500,000 in cash remaining in a Benchmark bank account, was issued in consideration of a $6,000,000 reduction to the $28,000,000 Remaining Indebtedness. The $600,000 note, which matures on December 1, 2020 and has an interest rate of 10%, was issued to evidence the loan received by Benchmark on January 10, 2020 in the principal amount of $300,000 and an additional $300,000 loan from Benchmark received on January 27, 2020. As of the date of this filing the Remaining Indebtedness is $22,228,356 which includes $22,000,000 of principal, $155,106 of paid in kind interest and accrued interest of $73,250.

On May 1, 2020, the parties entered into a second amendment to the Debt and Series H Agreement (the “Second Amendment”) pursuant to which Messrs. Sacramone and McMahon agreed to release and forever discharge the Remaining Indebtedness on the date on which the NYSE American Exchange files a Form 25 with the Securities and Exchange Commission (the “SEC”), via Release No. 72872, ordereddelisting the commencement of an Administrative Proceeding (File No. 3-16024) with respect toCompany’s common stock (the “Termination Date”), provided that in no event shall the Company. The SEC observed and asserted that the Company had failed to comply with its obligations under Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder because the Company had not filedTermination Date be any periodic reports with the SEC since the period ended June 30, 2012. Also on August 20, 2014, in connection with the foregoing, the SEC announced the temporary suspension of trading in the securities of the Company.sooner than July 1, 2020 or any later than October 1, 2020.

Subsequently, on September 8, 2014, the Company entered into an OfferAppointment of Settlement with the SEC regarding the Administrative Proceeding (File No. 3-16024) whereby, in part, the Company consented to the entry of an Order by the SEC containing the findings that: (1) the Company was a Nevada corporation located in Naples, Florida with a class of securities registered with the Commission under Exchange Act Section 12(g)New Board and as of August 18, 2014, the common stock of the Company (symbol FTNW) was quoted on OTC Link (formerly “Pink Sheets”) operated by OTC Markets Inc., had ten market makers, and was eligible for the “piggyback” exception of Exchange Act Rule15c2-11(f)(3); (2) the Company had failed to comply with Exchange Act Section 13(a) and Rules 13a-1 and 13a-13 thereunder because it had not filed any periodic reports with the SEC since the period ended June 30, 2012; and that on the basis of the foregoing (3) pursuant to Section 12(j) of the Exchange Act, registration of each class of the Company’s securities registered pursuant to Exchange Act Section 12 be revoked.

As such, on the Revocation Date, via Release No. 73085, the SEC ordered that, effective immediately pursuant to Section 12(j) of the Exchange Act, the registration of each class of the Company’s securities registered pursuant to Exchange Act Section 12 be revoked.

Following the above described revocation of registration, on March 17, 2015 we filed a registration statement on Form 10, to once again register our Common Stock pursuant to Section 12(g) of the Exchange Act. On May 16, 2015, the registration statement became effective, and we are again subject to the requirements of Regulation 13(a) of the Exchange Act, which requires us to file, in part, annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we are required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act.

On December 10, 2015, our common stock resumed trading on the OTC Pink marketplace. As of December 31, 2016, our common stock is trading on the OTCQX marketplace.Committee Members

On April 1, 2019, James E. Shiah was appointed to the Board, effective April 15, 2019. Mr. Shiah joined then-directors Luisa Ingargiola, Christopher Ferguson, Patrick O’Hare, Brad Mitchell, and Fred Sacramone.

On May 29, 2019, Ms. Ingargiola and Messrs. Ferguson, O’Hare, and Mitchell resigned from the Board.

Jeanne Kingsley and Stephen Berini were appointed to the Board, effective June 10, 2019. Ms. Kingsley and Mr. James Shiah were appointed to the Audit Committee, which committee Mr. Shiah chaired. Mr. Shiah was also appointed to the Company’s Compensation Committee and its Nominating and Corporate Governance Committee. On June 24, 2019, Richard Omanoff was appointed to the Board and to be chair of the Nominating and Corporate Governance Committee. Mr. Omanoff was joined by Irving Rothman, who was appointed to the Board, effective June 25, 2019 and was appointed to the Company’s Audit, Compensation, and Nominating and Corporate Governance Committee.

On September 16, 2019, Irving Rothman resigned from the Board, followed by James Shiah, Jeanne Kingsley, and Stephen Berini who all resigned from the Board effective October 9, 2019.

On October 18, 2019, concurrent with the resignation of Fred Sacramone and Richard Omanoff, the Board appointed Michael P. Beys, Joseph F. Cunningham, Jr., Richard de Silva and Peter Ghishan as directors. The Board determined that each of Messrs. Beys, Cunningham and Ghishan is “independent” under NYSE American listing standards and other governing laws and applicable regulations, including Rule 10A-3 under the Securities Exchange Act of 1934, as amended. Accordingly,Messrs. Cunningham and Ghishan were appointed to serve on the Audit Committee. Mr. Cunningham was appointed to serve as the chair of the Audit Committee and the Board determined that he was financially sophisticated as defined in the NYSE American governance standards. Messrs. Beys and Cunningham were appointed to serve on the Compensation Committee and Messrs. Beys and Ghishan were appointed to serve on the Nominating and Corporate Governance Committee.

AuthorizationAppointment of Series F Preferred StockInterim CEO

On June 13, 2019, the Board of Directors appointed Fred Sacramone as the Company’s Co-Interim Chief Executive Officer. On June 27, 2019, the Board of Directors appointed Mr. Sacramone as the Company’s Interim Chief Executive Officer. Mr. Sacramone resigned on October 21, 2019, concurrent with the appointment of Stephen M. Goodwin.

Appointment of Interim CEO

On October 21, 2019, the Board of Directors appointed Stephen M. Goodwin as the Company’s Interim Chief Executive Officer. Mr. Goodwin replaced Fred Sacramone, who resigned concurrent with Mr. Goodwin’s appointment.

Appointment of Interim CEO

On December 11, 2019, the Board of Directors appointedMichael P. Beys as the Company’s Interim Chief Executive Officer. Mr. Beys replaced Stephen M. Goodwin, who resigned concurrent with Mr. Beys appointment. The Board of Directors of the Company authorized the designation of a new series of preferred stock, the Series F Stock (“Series F Stock”), out of its available “blank check preferred stock” and authorized the issuance of up to 1,980,000 shares of the Series F Stock. A Certificate of Designation was filed with the Secretary of State of the State of Nevada on November 2, 2015. The Series F Stock has various rights, privileges and preferences, including: (i) a stated value of $4.00 per share; (ii) conversion into 20 shares of Common Stock (subject to adjustments) upon the filing of an amendment toappointed Mr. Goodwin as the Company’s ArticlesExecutive Vice President of Incorporation incorporating a reverse stock split;Operations. Upon Mr. Beys’ appointment as Interim Chief Executive Officer, the Board of Directors determined that he no longer qualified as “independent” under NYSE American listing standards and (iii) a liquidation preference inapplicable regulations, including Rule 10A-3 under the amountSecurities Exchange Act of 1934, as amended. Accordingly, the stated value.Board of Directors replaced Mr. Beys on the Compensation Committee with Mr. Ghishan and replaced Mr. Beys on the Nominating and Corporate Governance Committee with Mr. Cunningham.

Entry into a Credit Facility and RepaymentSuspension of Senior Secured Notes

On November 3, 2015, the Company entered into a credit agreement (the “Agreement”) pursuant to which the Company received $8 million in term loans from Lateral Investment Management (“Lateral”). A portion of the proceeds was used to extinguish an aggregate principal amount of approximately $3.4 million of Senior Secured Promissory Notes, pursuant to a tender offer. The noteholders who tendered their notes received the tender offer consideration of $0.50 per $1 principal amount of the Notes from the proceeds from the term loan, and all interest payable on the notes was forgiven. The Company recognized approximately a $3.4 million gain related to the extinguishment of the Senior Secured Promissory Notes.

In connection with the agreement, the Company issued 555,344 shares of preferred stock to Lateral, 163,441 designated as Series D preferred stock and 391,903 designated as Series F preferred stock. Upon the approval of the reverse split of common stock on or about May 26, 2016, these preferred shares mandatorily converted to 11,106,880 shares of common stock, based upon their 1 for 20 conversion rate. The Company and Lateral also entered into a registration rights agreement (“Registration Rights Agreement”) in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares. Lateral may request redemption of some or all of its shares any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis. The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral shares outstanding. In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. On April 5, 2016, the Company entered into an amendment agreement to its existing credit facility with Lateral, amending the original credit agreement signed October 28, 2015. The agreement amends select provisions of the original credit agreement, including equity raises and changes to certain financial and operational covenants. On September 30, 2016, the Company entered into a second amendment agreement to its existing credit facility, maturing October 28, 2017, amending the original credit agreement signed October 28, 2015. The agreement was amended solely to consolidate a series of short term bridge loans granted to the company from time to time during the second and third quarter of 2016 into a 2.5 million loan, which matures on April 30, 2017. The second amendment also amended the covenants related to consolidated EBITDA, consolidated leverage, consolidated debt service, selling, general, and administrative expenses, and compensation expense. On April 20, 2017, in conjunction with the acquisition of Benchmark Builders Inc, Lateral amended the original credit agreement to provide for approximately $10.1 million towards the cash purchase price of the Benchmark acquisition, refinancing this new advance with the existing debt, extending the maturity date of the facility to March 31, 2019.

Reverse SplitTrading of Common Stock

During March 2019, the Company received a series of letters from the NYSE American concerning its failure to comply with various continued listing requirements under the NYSE American Company Guide. On December 17, 2019, the Company received a letter from the staff of NYSE Regulation (the “Staff”), on behalf of the Exchange, stating that it had determined to commence proceedings to delist the Company’s common stock from the Exchange because, according to the Exchange, the Company or its management had engaged in operations that, in the opinion of the Exchange, were contrary to the public interest. On December 17, 2019 at market close, the Company’s common stock was suspended from trading on the NYSE American Market. The Company appealed this determination to the NYSE Listing Qualifications Panel (the “Panel”) of the Exchange’s Committee for Review, and a hearing regarding the Company’s continued listing was held on February 13, 2020. On March 9, 2020, the NYSE Office of General Counsel notified the Company that the Panel had determined to affirm the Staff’s decision to delist the Company’s shares from NYSE. The Company has since initiated steps to seek review of and/or appeal the Panel’s determination.

As of the date of the filing of this report, the Company’s common stock was listed on the NYSE American Market under the symbol FTNW but continued to be suspended from trading. In the event the common stock is delisted from the NYSE American Market, the Company intends to pursue other opportunities to have the common stock traded on a stock market, which may include one of the trading platforms operated by OTC Markets Group or another stock market.

Acquisition of Vision Property Assets

On December 23, 2015,20, 2019, the Board unanimously authorizedCompany entered into a purchase agreement (the “Vision Purchase Agreement”) with (i) US Home Rentals LLC, a Delaware limited liability company and approved an amendment to our Articlesdirect wholly owned subsidiary of Incorporation to effectFTE (“Acquisition Sub”), (ii) the holders (the “Equity Sellers”) of 100% of the equity interests in entities owned by the Equity Sellers that collectively hold a reverse stock splitreal estate asset portfolio consisting of our Common Stock at3,184 rental homes located across the United States (the “Entities”), (iii) Vision Property Management, LLC, a 1-for-20 ratioSouth Carolina limited liability company (“Vision” and together with the Equity Sellers, the “Sellers”), and (iv) Alexander Szkaradek, in his capacity as the representative of the Sellers (the “Reverse Split”“Sellers’ Representative”). On December 30, 2015, stockholders holding a majority2019, the parties amended the Vision Purchase Agreement (the “Amendment”) in order to address certain changes to the Vision Purchase Agreement, including, among other things, to allow the $9,750,000 balance of our voting power approved by written consent the amendmentcash portion of the purchase price to our Articles of Incorporation, which would affect the Reverse Split. The Reverse Split willbe paid in cash or short-term promissory notes, and to reduce the numberSellers’ indemnification deductible to $100,000. On December 30, 2019, the Company completed the acquisition of the Entities pursuant to the Vision Purchase Agreement, as amended.

Pursuant to the Vision Purchase Agreement, as amended, Acquisition Sub purchased (a) all of the equity interests in the Entities and (b) all of Vision’s assets that are related to its business, including certain assumed contracts and assumed intellectual property, excluding certain specified assets for aggregate consideration of $350,000,000, consisting of (i) $250,000 of cash; (ii) $9,750,000 in promissory notes payable on or before March 31, 2020 as extended by the forbearance period; (iii) the amount of outstanding indebtedness of the Entities, which is approximately $80,000,000; (iv) 4,222,474 shares of our Common Stock by reclassifyingthe Company’s common stock, par value $0.001, which the parties valued at $32,000,000; and converting all outstanding(v) shares of our Commona newly designated Series I Non-Convertible Preferred Stock into a proportionately fewer number of shares of Common Stock. On March 9, 2016, the Company filed a Form Pre-14C with the SEC concerning the 1 for 20 reverse stock split and the increase of the authorized shares of common stock from 70,000,000having an aggregate stated value equal to 200,000,000. On April 18, 2016, the Company filed its Definitive Form 14-C with the SEC. On May 25, 2016 “FINRA” approved the Reverse Split,$228,000,000, which was effectuated on May 26, 2016. All share and share information in this transitional report have been retroactively restated for the reverse split.is subject to adjustment.

Officer/Strategic Board AppointmentsDivestiture of CrossLayer, Inc.

On January 16, 2020, the Company entered into an asset purchase agreement (the “CrossLayer Purchase Agreement”) with CBFA Corporation, pursuant to which CBFA acquired approximately $73,000 in accounts payable and approximately $100,000 in long-term supplier contracts.

Appointment of Interim CFO

On July 28, 2016,May 5, 2020, the Board of Directors of FTE Networks, Inc. (the “Company”) approved the appointment of Michael Bonewitzformally appointed Ernest J. Scheidemann as the Company’s Chief Technology Officer commencinginterim CFO and principal financial officer. In connection with his formal appointment, Mr. Scheidemann and the Company intend on August 24, 2016entering into an Interim CFO Services Agreement. Mr. Scheidemann is a Certified Public Accountant. He holds a Certified Global Management Accountant and has replaced Carlie Ancor who will transition intoCertified Financial Forensics designation issued from the American Institute of CPAs. Mr. Scheidemann received a new role supporting the Company’s major account sales strategy. Mr. Bonewitz has over 20 years of senior management experience in communications network engineering and information technology industries developing cutting edge capabilities via advanced IT automation and data analytics driving operational and financial performance. Prior to FTE, he was VP of Strategy and Product Development for Cloud services, Fiber engineering and construction at Nexius where he developed and launched the company’s first fiber deployment program supporting multiple Tier 1 service providers in the US. He also led the company strategy and participation into Open Compute Project (OCP) as a Platinum member and as an original member of Facebook’s Telcom Infra Project (TIP). He has held previous technology and engineering leadership positions with Ericsson, Zayo and Level 3.

On September 27, 2016, the Board of Directors appointed Mr. Lynn Martin as Chief Operating Officer. As COO, Mr. Martin will be responsible for the prioritization and alignment of company initiatives overseeing, developing, and setting the strategic direction for the day-to-day operations of FTE Networks and ensuring operational excellence across the company. Prior to joining FTE, Mr Martin was head of the communications, software, and technology division of Nexius where he was responsible for growing the business by delivering end-to-end network solutions for emerging technologies, such as Open Source/NFV/SDN and infrastructure services that provided relevant value to customers and helped them to optimize their businesses. In addition to leading the software and technology teams, he created several new business offerings in Engineering, Fiber and Open Source development where he joined efforts with Open Compute Project and Telecom Infra Project communities both founded by Facebook to provide new network architectures and solutions with greater simplicity and efficiency. Before Nexius, Mr. Martin served as Executive Director of Telcordia Technologies, where he ran the company’s next generation software product line, was a senior strategist in Accenture’s Network Practice, and spent over a decade at Level 3 Communications as VP of Operational Integration and Process Management.

On December 7, 2016, a Strategic Advisory Board was created to provide senior counsel to the company on opportunities to evolve and advance the deployment of its disruptive multi-edge computing services. External members of FTE Networks’ Multi-Edge Computing Strategic Advisory Board are:

John Morgan. Mr. Morgan is currently working with operators to improve network coverage and capacity to make the world more open and connected. Morgan has over twenty-five years in the Communications and IT Industries and is currently supporting operators with the adoption of open source hardware and software in their networks through the Open Compute Project (OCP) and Telecom Infrastructure Project (TIP) initiatives. Prior to his current work, Morgan was global technical lead for legacy network migrations at Accenture where he worked with operators on product rationalization and simplification, copper to fiber migration platform implementations, and decommissioning strategies for copper and central office equipment. Prior to Accenture, he held executive positions with several software start-up firms in the communications industry, as well as with leading operators, such as Verizon, Level 3 Communications, and Genuity. His background includes work in network planning and engineering, product management, OSS/BSS development, finance, and operations. He completed his undergraduate workBA in Accounting at the College offrom William Paterson University and MaryMBA in Finance and received his MS in Information and Telecommunications SystemsInternational Business from the Johns HopkinsSeton Hall University.

David Kalinske. Mr. Kalinske is the Chief of Staff for A3 by Airbus Group and former Aide to two U.S. Presidents, President George W. Bush and President Barack Obama. In his previous role, he was the recipient of the Defense Superior Service Medal for superior meritorious service in the position of significant national responsibility as Aide to the President of the United States. He also served as a research engineering leader with Lockheed Martin Aeronautics supporting Advanced Development programs, also known as The Skunk Works, and founded Global Hybrid Company, an airborne logistics provider utilizing the revolutionary Hybrid Airship. A TOPGUN graduate and a Marine Corps fighter squadron Commanding Officer (CO), he was selected via scholarship into the Harvard University, Kennedy School of Government, National Security Fellow program with a focus in the study of cybersecurity policy.

Eric Salzman. Mr. Salzman has 20 years of experience working with communications and software companies with a focus on driving operational and financial excellence. He is currently a Senior Managing Director at Monarch Capital Group, LLC, a boutique investment bank and money management firm and serves as an independent director on several public and private technology company boards including 8x8, Inc., ASG Technologies, Sorenson Communications and FragranceNet.com. Prior to 2011, Mr. Salzman spent eight years at Lehman Brothers as a Managing Director in the Private Equity and Principal Investing Group, as well as a Managing Director in the Global Trading Strategies Division, including three years managing the operational and financial restructuring of dozens of companies within the Lehman Bankruptcy. Prior to Lehman Brothers, Mr. Salzman was a senior investment professional focused on the technology and communications industry at a multi-strategy hedge fund and at two growth-oriented private equity funds. Mr. Salzman began his career in the M&A Group at CS First Boston. Mr. Salzman graduated with a B.A. Honors from the University of Michigan and received his MBA from Harvard University.

TELECOMMUNICATIONS INFRASTRUCTURE SERVICES INDUSTRYEmployees

FTE Network Services provides comprehensive telecommunications solutions to Fortune 500 and other customers in the wireline and wireless telecommunications industry. Services performed by FTE include the design, engineering, installation, repair and maintenanceAs of fiber optic, copper and coaxial cable networks used for video, data and voice transmission. In the wireless space, FTE provides engineering, design, installation and upgrade of wireless communications networks, including infrastructure, antennas, switching systems, and backhaul links from wireless systems to voice, data and video networks. FTE also provides emergency restoration services, including the repair of telecommunications infrastructure damaged by inclement weather. We also provide premise wiring where we install, repair, and maintain the telecommunications structure within improved structures.

FTE Network Services’ success in these technology spaces is the result of experienced management and leadership, purchasing relationships and logistics, project planning, project management disciplines, training, quality control and top down commitment to customer satisfaction.

We believe that certain provisions of the American Recovery and Reinvestment Act of 2009 (“ARRA”) will continue to create additional demand for our services. Specifically, the ARRA includes federal stimulus funding for the deployment of broadband services to underserved areas that lack sufficient bandwidth to adequately support economic development. We also expect many customers who received stimulus funds to continue to expand their networks even though stimulus funding may no longer be available.

The combination of a growing North American wireless subscriber base, greater use of wireless data for consumer and enterprise applications and services, and the development of innovative consumer wireless data products has led to a significant increase in the amount of wireless data traffic on wireless networks. As a result, the traditional backhaul infrastructure that has historically linked wireless cell sites to broader voice, data and video networks is reaching capacity. To handle current and future wireless data traffic demands and to improve wireless network quality and reliability, wireless carriers are implementing plans to replace their legacy backhaul networks based on T-1 lines and circuit switching applications with fiber optic networks, typically referred to as “fiber to the cell site” initiatives. We believe these initiatives will continue several more years before the backhaul system upgrade is completed, resulting in additional opportunities to assist our wireless customers in their fiber to the cell site initiatives.

We anticipate increased long-term opportunities arising from plans by a number of wireless companies to deploy and implement 4G and LTE (Long Term Evolution) and XLTE (Extended Long Term Evolution) technology and networks throughout North America. These technologies are being deployed in the United States using a new spectrum, which effectively requires an entirely new network to be built. As a result, we expect significant capital expenditures will be made over a relatively long period of time as wireless carriers build out their 4G and LTE networks and then augment and optimize their networks for reliability and network quality. We believe wireless carriers are in the very early stages of their 4G and LTE network deployment plans.

Fiber to the X (“FTTx”) comprises the many variants of fiber optic access infrastructure. These include fiber to the home (“FTTH”), fiber to the premise (“FTTP”), fiber to the building (“FTTB”), fiber to the node (“FTTN”), and fiber to the curb or cabinet (“FTTC”). GIA announces the release of a comprehensive global report on Fiber Optic Components market. Global market for Fiber Optic Components is projected to reach US$42 billion by the year 2017. Growth will be driven by the continuously growing demand for bandwidth and the ensuing need for fiber-based broadband, robust growth in mobile internet, and stronger FTTx related deployments.

Outside Plant Operations

Outside Plant Operations (OSP) includes all forms and methods of connecting the nation’s telecommunications infrastructure. Historically this work has been with copper and then coax. Today, it is predominately aerial and buried fiber. FTE builds outside plant for large corporate customers, government entities and private investors.

FTE Network Services has scaled to approximately 200+ concurrent crews in multiple geographies representing multiple customers and multiple projects. FTE Network Services’ success is based on several factors:

Inside Plant Operations

Inside Plant Operations (ISP) are services provided to major telecommunications services providers in their switching and processing facilities. The scope of services includes the following:

Each major telecommunications client has their own build and quality standards. FTE trains its technicians in each specific protocol and has quality standards that it maintains on each and every project. FTE has the capability to engineer, build, turn up, test and manage every component in a client’s facility. The facilities that we work in performing ISP work are secure, highly available and mission critical to the countries telecommunications infrastructure. The client facilities that FTE works inside of touches everything from Wall Street trading floors to the video, telephone and data services used every day by the typical family and individual. This critical infrastructure connects corporate land based services, mobile data services, on-demand video, TV and cable broadcast, internet, public networks, private networks and telephone. The quality of the work product from engineering to construction in this work is critical.

Our clients engage us with confidence as is shown by our solid, standing relationships and repeat business opportunities that have been tested and forged over time.

Project Estimating and Feasibility Studies

Our subsidiaries share an estimating department that provides all cost needs, both internal and external, as a value-added service to telecommunications clients. For extremely difficult builds, we use a “boots on the ground” approach, ready with someone to look at the project up close, typically within 24 hours. For the bid process, the following steps are followed:

Customer Relationships

Our current customers include, in part, multiple Fortune 500 telecommunications and technology providers and integrators. We also provide telecommunications engineering, construction, installation and maintenance services to a number of cable television multiple system operators. Premise wiring services are provided to various corporations and state and local governments.

Our customer base is concentrated. Due to the fact that the majority of our revenues are non-recurring, project-based revenues, it is not unusual for there to be significant period-to-period shifts in customer concentrations. Revenue may significantly decline ifDecember 31, 2018, the Company, were to lose one or more of its significant customers, or if the Company were not able to obtain new customers upon the completion of significant contract. The Company’s strategy for the future includes customer and service diversification reducing the customer revenue concentration to less than 15% for any single customer.

For the year ended September 30, 2015, the Company’s largest customers included a telecommunications company providing fiber optic based network solutions, (Customer C), and a corporate staffing customer within the Company’s staffing segment, (Customer D). During the transitional three months ended December 31, 2015, the Company’s largest customers included a multinational provider of communications technology and services, (Customer I) and a corporate staffing customer within the Company’s staffing segment, (Customer D). For the year ended December 31, 2016, the Company’s largest customers included multinational telecommunications conglomerate (Customer M) and leader service provider in network managed and professional services, (Customer J).

The following tables set forth our revenues and accounts receivable balances for the periods indicated:

Competition

The markets in which we operate are highly competitive. We compete with other contractors in most of the geographic markets in which we operate, and several of our competitors are large companies that have significant financial, technical and marketing resources. In addition, there are relatively few barriers to entry into some of the industries in which we operate and, as a result, any organization that has adequate financial resources and access to technical expertise may become a competitor. A significant portion of our revenues is currently derived from unit price or fixed price agreements, and price is often an important factor in the award of such agreements. Accordingly, we could be underbid by our competitors in an effort by them to procure such business. Economic conditions have increased the impacts of competitive pricing in certain of the markets that we serve. We believe that customers consider other factors in choosing a service provider, including technical expertise and experience, financial and operational resources, nationwide presence, industry reputation and dependability, which we expect to benefit larger contractors such as us. In addition, competition may lessen as industry resources, such as labor supplies, approach capacity. There can be no assurance, however, that our competitors will not develop the expertise, experience and resources to provide services that are superior in both price and quality to our services, or that we will be able to maintain or enhance our competitive position. We also face competition from the in-house service organizations of our existing or prospective customers, including telecommunications and engineering companies, which employ personnel who perform some of the same types of services as those provided by us. Although a significant portion of these services is currently outsourced by many of our customers, there can be no assurance that our existing or prospective customers will continue to outsource services in the future.

Regulation

Our operations are subject to various federal, state, local and international laws and regulations including:

We believe that we have all the licenses required to conduct our operations and that we are in substantial compliance with applicable regulatory requirements. Our failure to comply with applicable regulations could result in substantial fines or revocation of our operating licenses, as well as give rise to termination or cancellation rights under our contracts or disqualify us from future bidding opportunities.

Safety and Risk Management

We are committed to ensuring that our employees perform their work safely and we regularly communicate with our employees to reinforce that commitment and instill safe work habits. We review accidents and claims for our operations, examine trends and implement changes in procedures to address safety issues. Claims arising in our business generally include workers’ compensation claims, various general liability and damage claims, and claims related to vehicle accidents, including personal injury and property damage. We insure against the risk of loss arising from our operations up to certain deductible limits in substantially all of the states in which we operate. In addition, we retain risk of loss, up to certain limits, under our employee group health plan.

We carefully monitor claims and actively participate with our insurers in determining claims estimates and adjustments. The estimated costs of claims are accrued as liabilities, including estimates for claims incurred but not reported. Due to fluctuations in our loss experience from year to year, insurance accruals have varied and can affect the consistency of operating margins. If we experience insurance claims in excess of our umbrella coverage limit, our business could be materially and adversely affected.

Seasonality

Our revenues are affected by seasonality as a significant portion of the work we perform is outdoors. Consequently, our operations are impacted by extended periods of inclement weather. Generally, inclement weather is more likely to occur during the winter season, which falls during our first and fourth fiscal quarters. Also, a disproportionate percentage of total paid holidays fall within our fourth quarter, which decreases the number of available workdays. Additionally, our customer premise equipment installation activities for cable providers historically decrease around calendar year-end holidays as their customers generally require less activity during this period. As a result, we may experience reduced revenue in the first or fourth quarters of our fiscal years.

Environmental Matters

A significant portion of our work is performed underground. As a result, we are potentially subject to material liabilities related to encountering underground objects which may cause the release of hazardous materials or substances. Additionally, the environmental laws and regulations which relate to our business include those regarding the removal and remediation of hazardous substances and waste. These laws and regulations can impose significant fines and criminal sanctions for violations. Costs associated with the discharge of hazardous materials or substances may include clean-up costs and related damages or liabilities. These costs could be significant and could adversely affect our results of operations and cash flows.

STAFFING INDUSTRY

Effective May 8, 2014, we began operations for a temporary and permanent staffing agency providing full service human capital solutions specializing in telecommunications, construction, engineering and technology through our wholly owned subsidiary, FVP Worx. On December 31, 2016, a strategic decision was made to continue operating the staffing segment but at a reduced scale of operations in order to fully deploy our management’s focus and working capital to our higher margin business in the OSP and ISP segments.

Segment Reporting

We operate in the telecommunications infrastructure services industry and, effective May 8, 2014, entered the staffing industry. For the year ended December 31, 2016, our staffing business generated $108,057 in revenues and $126,087 in expenses. For reporting purposes, the Company will continue to report the staff business as a separate segment from the telecommunications services business. We reported segment results pursuant to ASC 280-10 “Segment Reporting” for the year ended December 31, 2016, transitional three months ended December 31, 2015, and the year ended September 30, 2015.

EMPLOYEES

As of May 1, 2017, we, together with ourits subsidiaries, employ 136employed 289 full-time employees and 1 part-time employee. None of our employees are represented by local collective bargaining units.employees. The number of our employees variesvaried according to the level of ourthe Company’s work in progress. We maintainThe Company maintained a nucleus of technical and managerial personnel to supervise all projects and addadded employees as needed to complete specific projects.

ACQUISITION STRATEGYAs of May 1, 2020, the Company, together with its subsidiaries, has 44 full-time employees and contractor staff and no part-time employees. The number of employees and job-site contractors varies according to the level of the Company’s work in progress. The Company maintains a nucleus of technical and managerial personnel to supervise all projects and adds employees and job-site contractors as needed to complete specific projects.

Intellectual Property

With respect

The Company has trademarks, trade names and licenses that it believes are necessary for the operation of its business as it is currently conducted. The Company does not consider its trademarks, trade names or licenses to our acquisition strategy, FTE intendsbe material to pursue a clearly defined telecommunications niche, butthe operation of the business.

Available Information

The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the Exchange Act). Accordingly, the Company files periodic reports, proxy statements and other information with the SEC. These reports, proxy statements and other information may inbe obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330.

The Company makes available, free of charge on its discretion, pursue acquisitions outsidewebsite, the Company’s Annual Report on Form 10-K, Quarterly Reports on Forms 10-Q, Current Reports on Forms 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as practicable after we electronically file these documents with, or furnish them to, the SEC. These documents may be accessed through the Company’s website atwww.ftenetwork.com under “Investor Relations.” The information posted or linked on the website is not part of this niche, although this will not be our focus. We selectively pursue acquisitions when we believe doing so is operationallyreport. The Company also makes its Annual Report available in printed form upon request at no charge. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and financially beneficial to our existing operations, although we do not rely solelyinformation statements and other information regarding FTE Networks and other issuers that file electronically with the SEC.

The Company also makes available on acquisitionsits website, as noted above, or in printed form free of charge upon request, the Company’s Code of Ethics and the charters for growth. In particular, we may pursue those acquisitions that we believe will provide us with incremental revenuethe Audit, Compensation, and geographic diversification while complementing our existing operations. We generally target companies for acquisition that have defensible leadership positions in their market niches, are EBITDA positive, which meet or exceed industry averages,Nominating and have proven operating histories, sound management, and certain clearly identifiable cost synergies. On October 28, 2016, the Company signed a non-binding letter of intent (the “LOI”) with Benchmark Builders, Inc. (“Benchmark”) which summarized the principal terms of a possible acquisition of Benchmark, a privately held corporation. On March 9, 2017, the Company, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with (i) Benchmark, and (ii) each of Benchmark’s stockholders. On April 20, 2017, the Company closed on the Purchase Agreement, acquiring 100%Corporate Governance committees of the outstanding sharesBoard of Benchmark stock. On April 20, 2017,Directors.

ITEM 1A. RISK FACTORS.

The following discussion identifies the most significant risks or uncertainties that could (i) materially and adversely affect our business, financial condition, results of operations, liquidity or prospects or (ii) cause our actual results to differ materially from our anticipated results or other expectations. The following information should be read in conjunction with the acquisitionother portions of this report, including “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. Please note that the following discussion is not intended to comprehensively list all risks or uncertainties faced by us. Our operations or actual results could also be similarly impacted by additional risks and uncertainties that are not currently known to us, that we currently deem to be immaterial, that may arise in the future or that are not specific to us, such as general economic conditions. If any of the events or circumstances described in the following risks occurs, our business, financial condition or results of operations could be materially adversely affected.

Risks Related to Our Financial Results, Financing Plans and Indebtedness

We have limited capital resources and business operations, and we will need additional funds in order to continue as a viable enterprise. There is no guarantee that we will be able to generate those funds from our limited business operations.

As previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2019, the Company accepted a foreclosure proposal by the Company’s lenders under that certain Amended and Restated Credit Agreement, dated as of July 2, 2019, which proposal included the strict foreclosure by the lenders of all of the Company’s equity interests in Benchmark, which was our primary operating subsidiary, and certain other assets of the Company.

At December 31, 2018, the Company had $95,502,000 in negative working capital and $12,170,000 in cash and cash equivalents. Following the foreclosure, the Company has very limited capital resources and limited business operations, which only include our subsidiaries Jus-Com, Inc. and US Home Rentals LLC.

As of the date of this filing, our cash and cash equivalents are insufficient to sustain operations in the near term. We have substantial cash requirements, which consist of payment obligations under existing indebtedness, settlement agreements for indebtedness incurred by former management, payroll and other corporate expenses. Currently, our primary sources of cash have been from short-term borrowings and financings, which prospects have been hampered as a result of the uncertainty as to the severity and duration of the COVID-19 pandemic (which has led to disruption and volatility in the financial and real estate markets). And even though we have already taken measures to mitigate the effect of COVID-19 on our business, including negotiating extensions or deferrals on outstanding debt and placing certain employees in impacted markets on furlough, there is no assurance that these efforts will be enough to support our daily operations in the near term without additional financing.

In addition to the above-mentioned mitigating strategies, we are considering and actively pursuing various types of financing alternatives, including financings that leverage unencumbered properties in our real estate portfolio and have applied for a loan under the Paycheck Protection Program (“PPP”) and the Economic Injury Disaster Loan Program (“EIDL”) pursuant to the recently enacted CARES Act through the U.S. Small Business Association programs. However, there is no assurance that we will be able to obtain PPP or EIDL proceeds as a result of program limitations, our credit profile or other factors or that we will be able to secure additional financing on terms that are favorable to us, or at all. We believe our debt and equity financing prospects will improve once we are current in our Exchange Act filings and we are able to resume trading on a national stock exchange or on an over-the-counter market, although no assurances can be provided in that regard either. And while we believe in the viability of our strategy to increase revenues and raise additional funds, we are unable to predict the impact of COVID-19 on our operations and liquidity, and depending on the magnitude and duration of the COVID-19 pandemic, such impact may be material.

Our failure to successfully implement our growth plan may adversely affect our financial performance.

We are prone to all of the risks inherent in growing a business. You should consider the likelihood of our future success to be highly speculative in light of the limited resources, problems, expenses, risks and complications frequently encountered by entities at our current stage of development. As our growth plan is pursued, we may encounter difficulties expanding and improving our operating and financial systems to maintain pace with the increased complexity of the expanded operations and management responsibilities.

To address these risks, we must, among other things:

We may not be successful in addressing these risks and if we do not, our business prospects, financial condition and results of operations would be materially adversely affected.

Debt financing agreements we enter into may contain a number of restrictive covenants which will limit our ability to finance future operations, acquisitions or capital needs or engage in other business activities that may be in our interest.

If the Company has the need for additional liquidity through debt financing, any related credit arrangements and indentures may contain a number of significant covenants that could impose operating and other restrictions on us and our subsidiaries. Such restrictions could affect, and in many respects could limit or prohibit, among other things, our ability and the ability of some of our subsidiaries to:

These restrictions could limit our ability to plan for or react to market or economic conditions or meet capital needs or otherwise restrict our activities or business plans, and could adversely affect our ability to finance our operations, acquisitions, investments or strategic alliances or other capital needs or to engage in other business activities that would be in our interest.

If we are required to repay our outstanding notes, we would need to raise additional funds. Failure to repay our notes could subject us to legal action, including, but not limited to, judgements being entered against us.

We entered into settlement agreements with certain holders of convertible notes, whose notes were deemed to have been issued without the requisite corporate authorization following the findings of our independent investigation announced on June 13, 2019 (See Item 1 Business, Recent Development “Internal Investigation”). Of the noteholders with whom we were unable to reach settlement terms, six filed purported confessions of judgment. We have since entered into settlement agreements with all holders of judgments previously entered against us, which require us to make monthly payments in accordance with respective payout schedules. To date, we have requested and received several forbearances/deferrals on certain of the monthly payments owed in connection with these settlements and may have to request additional forbearances and/or deferrals in the future. As of the date of this filing, there is an aggregate balance owing of approximately $4,471,000 to these noteholders, exclusive of the convertible redeemable note in the amount of $1,800,000 to GS Capital Partners, LLC (“GS Capital”) issued on March 10, 2020. If we were unable to repay these notes when required, the noteholders could commence legal action against us to recover the amounts due, including possibly filing confessions of judgment. Any such action would have an adverse effect on our financial condition and results of operations.Additionally, we issued $9,750,000 of promissory notes as part of the of the purchase consideration for the Vision Transaction, which notes were payable in full on March 31, 2020 (the “Vision Notes”). As of the date of this filing, we have made partial payments against the Vision Notes but we were unable to repay the Vision Notes by their stated maturity date. We are currently negotiating forbearance agreements and are actively pursuing multiple potential sources of additional debt and equity capital to fund repayment of the Vision Notes. There is, however, no assurance that we will be successful in obtaining forbearance agreements or securing suitable financing. If we are not able to obtain forbearance agreements and/or do not succeed in raising additional capital in a timely fashion, the Vision noteholders may seek to enforce their rights under the Vision Notes through the judicial process, which could result in a material adverse effect on our results of operations and financial condition.

Risks Related to Ownership of Our Common Stock

Our insiders and affiliated parties beneficially own a significant portion of the aggregate voting power of our capital stock.

As of the date of hereof, our executive officers, directors, their affiliated parties and holders of 10% or more of our common stock beneficially own approximately 41.1% of our common stock. As a result, our officers, directors, their affiliated parties and holders of 10% or more of our common stock will have a controlling interest and the ability to:

Affiliated party stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempt to obtain control of us, which in turn could reduce the price of our common stock or prevent our stockholders from realizing any gains from our common stock. In addition, any sale of a significant amount of our common stock held by our directors, executive officers, and affiliated parties, or the possibility of such sales, could adversely affect the market price of our common stock.

The market for our common stock is limited and you may not be able to sell your common stock.

Our common stock is currently listed on the New York Stock Exchange. The NYSE American has suspended the trading of our common stock and commenced delisting proceedings of our common stock. We are appealing the NYSE American delisting proceedings, but there can be no assurance our common stock will resume trading or that our common stock will continue to be listed. If we are unsuccessful in our appeal of the NYSE American hearing panel’s decision to delist our common stock, or if our appeal is successful and thereafter we are unable to meet the NYSE American continued listing requirements, the NYSE American may delist our common stock, which could have an adverse impact on us and the liquidity and market price of our stock. Even if we remain listed and trading of our common stock resumes, we expect the market for purchases and sales of our common stock will be limited and therefore the sale of a relatively small number of shares could cause the price to fall sharply. Accordingly, it may be difficult to sell shares quickly without significantly depressing the value of our common stock. Unless we are successful in developing continued investor interest in our common stock, sales of our common stock could result in major fluctuations in the price of our common stock.

The price of our common stock is likely to be volatile and subject to fluctuations.

If our revenues do not grow or grow more slowly than we anticipate, or, if operating or capital expenditures exceed our expectations and cannot be adjusted accordingly, or if some other event adversely affects us, the market price of our common stock could decline. Fluctuations in our stock price may be influenced by, among other things, general economic and market conditions, conditions or trends in our industry, changes in the market valuations of other telecommunications companies, announcements by us or our competitors of significant acquisitions, strategic partnerships or other strategic initiatives, and trading volumes. Many of these factors are beyond our control but may cause the market price of our common stock to decline, regardless of our operating performance. Moreover, if the stock market in general experiences a loss in investor confidence or otherwise fails, the market price of our common stock could fall for reasons unrelated to our business, results of operations and financial condition. The market price of our common stock also might decline in reaction to events that affect other companies in our industry even if these events do not directly affect us.

Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our common stock.

In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of common stock may create downward pressure on the trading price of the common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts.

Stockholders who hold unregistered shares of our common stock may be subject to resale restrictions pursuant to Rule 144, due to the fact that we are deemed to be a former “shell company.”

Pursuant to Rule 144 of the Securities Act (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations and either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. While we do not believe that we are currently a “shell company,” we were previously a “shell company” and are deemed to be a former “shell company” pursuant to Rule 144, and as such, sales of our securities pursuant to Rule 144 may not be able to be made unless we continue to be subject to Section 13 or 15(d) of the Exchange Act, and have filed all of our required periodic reports for at least the previous one year period prior to any sale pursuant to Rule 144. As a result, it may be harder for us to fund our operations and pay our consultants with our securities instead of cash. Our status as a former “shell company” could prevent us from raising additional funds, engaging consultants, and using our securities to pay for any acquisitions.

If we are unsuccessful in our appeal of the NYSE American decision to delist our common stock, or if our appeal is successful and we are thereafter unable to meet the NYSE American continued listing standards, our common stock may be delisted from the NYSE American equities market, which would likely cause the liquidity and market price of our common stock to decline.

Our common stock is currently listed on the NYSE American. The NYSE American has suspended the trading of our common stock and is engaged in delisting proceedings of our common stock. We are appealing the NYSE American hearing panel’s determination to delist our common stock, but there can be no assurance that our appeal will be successful, that our common stock will resume trading or that our common stock will continue to be listed. If we are unsuccessful in our appeal of the NYSE American hearing panel’s decision to delist our common stock, or if our appeal is successful and thereafter if we cannot meet the NYSE American continued listing requirements, the NYSE American may delist our common stock, which could have an adverse impact on us and the liquidity and market price of our stock.

Our business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit and capital markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as our performance, could impact our market capitalization, revenue and operating results, which, in turn, could affect our of the NYSE American hearing panel’s decision to delist our common stock or, if our appeal is successful, our ability to meet the NYSE American’s listing standards. The NYSE American has the ability to suspend trading in our common stock or remove our common stock from listing on the NYSE American if in the opinion of the exchange: (a) the financial condition and/or operating results of the Company appear to be unsatisfactory; or (b) it appears that the extent of public distribution or the aggregate market value of our common stock has become so reduced as to make further dealings on the exchange inadvisable; or (c) we have sold or otherwise disposed of our principal operating assets, or have ceased to be an operating company; or (d) we have failed to comply with our listing agreements with the exchange (which include that we receive additional listing approval from the exchange prior to us issuing any shares of common stock, something we have inadvertently failed to comply with in the past); or (e) any other event shall occur or any condition shall exist which makes further dealings on the exchange unwarranted.

Commencing in March 2019, we received a series of letters from the NYSE American concerning the failure to comply with various continued listing requirements. On December 17, 2019, we received a letter from the NYSE American stating that it had determined to commence proceedings to delist the Company’s common stock from the Exchange, and our common stock was suspended from trading on NYSE American at market close on the same date. Additionally, we were out of compliance with the NYSE American’s continued listing requirements under the timely filing criteria outlined in Section 1007 of the NYSE American Listed Company Guide as a result of our failure to timely file our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Additionally, in the past we have been out of compliance with the NYSE American’s continued listing standards when, on each of October 9, 2019 and May 30, 2019, certain members of the Board of Directors resigned and we received notification from the NYSE American that (1) the Company’s Audit Committee was no longer compliant with Section 803B(2)(c) and Section 803B(2)(a)(iii) of the Company Guide as it was no longer composed of two independent members and did not have a financially sophisticated audit committee member and (2) and the Company’s Compensation Committee was no longer compliant with the requirements set forth in Section 805(a) of the Company Guide. On May 30, 2019, we also received notification that the Company’s Nominating Committee was no longer compliant with the requirements set forth in Section 804 of the Company Guide. In each instance, in order to regain compliance with these listing requirements, the Board appointed additional members and made appropriate committee appointments.

A delisting of our common stock could negatively impact us by, among other things, reducing the liquidity and market price of our common stock and reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing. In addition, delisting from the NYSE American might negatively impact our reputation and, as a consequence, our business. Additionally, if we were delisted from the NYSE American and we are not able to list our common stock on another national exchange we will no longer be eligible to use Form S-3 registration statements and will instead be required to file a Form S-1 registration statement for any primary or secondary offerings of our common stock, which would delay our ability to raise funds in the future, may limit the type of offerings of common stock we could undertake, and would increase the expenses of any offering, as, among other things, registration statements on Form S-1 are subject to SEC review and comments whereas take downs pursuant to a previously filed Form S-3 are not. Because of the lateness of certain of our filings with the SEC, we are not currently eligible to use Form S-3, but if we file our periodic reports with the SEC in a timely manner for 12 months and otherwise satisfy the eligibility requirements, we will be eligible to use Form S-3 for public offerings of our common stock.

If shares of our common stock cease to be listed on a national exchange they may become subject to the “penny stock” rules of the SEC and the trading market in our securities may become limited, which will make transactions in our stock cumbersome and may reduce the value of an investment in the stock.

If shares of our common stock cease to be listed on the NYSE American or another national exchange, they may be subject to regulation as a “penny stock” under Rule 15g-9 under the Exchange Act. That rule establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that is no longer trading on a national exchange and has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person’s account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (a) obtain financial information and investment experience objectives of the person and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) confirms that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker or dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our common stock.

If shares of our common stock cease to be listed on a national exchange our securities will not be eligible for federal preemption rights and be subject to state “blue sky” laws which may affect our capabilities of raising capital.

Each state has its own securities laws, often called “blue sky” laws, which (i) limit sales of securities to a state’s residents unless the securities are registered in that state or qualify for an exemption from registration, and (ii) govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or the transaction must be exempt from registration. The applicable broker must be registered in that state. We do not know whether securities will be registered or exempt from registration under the laws of any state. If our securities cease to be listed on the national exchange, a determination regarding registration will be made by those broker-dealers, if any, who agree to serve as the market-makers for our common stock. Registering or qualifying shares with states can be time consuming. Compliance and regulatory costs may vary from state to state and may adversely affect future financings and our ability to raise capital.

If our common stock is delisted from a national exchange some institutional investors may not be allowed to purchase our shares and may be required to liquidate their current positions in our stock which could negatively affect the price and volatility of our shares.

Institutional investors may be restricted by their investment policies from investing in shares of companies that are not listed on a national exchange and may be required to liquidate their positions if our securities are delisted from a national exchange. Liquidations, should they occur, may increase volatility and cause wide fluctuations and further declines in the prices of our securities.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our common stock adversely, our share price and trading volume could decline.

The trading market for our shares of common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our common stock adversely, or provide more favorable relative recommendations about our competitors, our share price would likely decline. If any analyst who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

We have not paid dividends in the past and do not expect to pay dividends for the foreseeable future, and any return on investment may be limited to potential future appreciation on the value of our common stock.

We currently intend to retain any future earnings to support the development and expansion of our business and do not anticipate paying cash dividends on our shares of common stock in the foreseeable future. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including without limitation, our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements or other debt instruments that we may be a party to at the time. To the extent we do not pay dividends, our shares of common stock may be less valuable because a return on investment will only occur if and to the extent our stock price appreciates, which may never occur. In addition, investors must rely on sales of their common stock after price appreciation as the only way to realize their investment, and if the price of our common stock does not appreciate, then there will be no return on investment. Investors seeking cash dividends should not purchase our common stock.

Risks Related to Our Industry and Business

The current pandemic of the novel coronavirus, or COVID-19, and the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.

Since being reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.

The COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and financial markets. The outbreak of COVID-19 in many countries has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

Certain states and cities, including where we own rental homes, have also reacted by instituting quarantines, restrictions on travel, “shelter in place” rules, restrictions on types of business that may continue to operate. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly. We expect that a significant number of our tenants will suffer economic dislocation, such as through job furloughs or job loss, which will adversely impact their ability to pay rent to the Company. Some of our tenants have already requested rent deferral or rent abatement during this pandemic. Many experts predict that the outbreak will trigger, or even has already triggered, a period of global economic slowdown or a global recession, which would further adversely impact the ability of our tenants to pay rent to the Company. The COVID-19 pandemic, or a future pandemic, could have material and adverse effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, among other factors:

The extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. The inability of our tenants rent to us, and early terminations by our tenants of their leases, could reduce our cash flows, which could have a material adverse impact on our performance, financial condition, results of operations, cash flows and performance. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our performance, financial condition, results of operations, cash flows and performance.

Our results of operations will likely be diminished as a result of the foreclosure on the equity of Benchmark Builders, Inc, Lateral amendedInc., down-sizing of Jus-Com and divestiture of CrossLayer as well as our reliance on other operating subsidiaries. We may not be able to effectively manage the original credit agreement to provide for approximately $10.1 million towards the cash purchase pricetransition of the Benchmark acquisition, refinancing this new advance with the existing debt, extending the maturity date of the facility to March 31, 2019. See Item 8.

ITEM 1A. RISK FACTORS.our business.

As discussed above, our lenders previously foreclosed on the equity in Benchmark, previously our primary operating subsidiary, as well as other assets. Additionally, the Company restructured and down-sized the Jus-Com businesses in 2019, completed the acquisition of entities that collectively hold a “smaller reporting company”real estate asset portfolio consisting of 3,184 rental homes located across the United States (the “Vision Properties”), and completed the divestiture of CrossLayer in January 2020. Due to the Benchmark foreclosure, the down-sizing of the Jus-Com businesses and the divestiture of CrossLayer, the Company is now reliant on the businesses of our remaining operating subsidiaries, primarily the U.S. Home Rental properties.

Moreover, whereas our Historical Businesses operated in the construction management and general contracting industry and telecommunications industry, our primary current business operates in the single-family residential property industry. As we are transitioning our business to focus primarily on single-family residential properties, this business model transition may lead to fluctuations in revenue that will make it more difficult to accurately project our operating results or plan for future growth. If we are unable to effectively manage these changes, our growth and ability to achieve long-term projections may be negatively impacted, and our business and operating results will be adversely affected.

Our integration of the operations of Vision Properties may be more difficult, costly or time-consuming than expected, and the anticipated benefits and cost savings of these acquisitions by the Company may not be realized.

During 2019, pursuant to the Vision Purchase Agreement, as definedamended, we completed the acquisition of the Vision Properties. The acquisition of the Vision Properties represented the Company’s pivot to owning and managing a portfolio of single-family residential properties. The success of the acquisition, including anticipated benefits, will depend, in part, on the Company’s ability to successfully combine and integrate the businesses within the Company’s projected timeframe in a manner that permits growth opportunities. A number of factors could affect the Company’s ability to successfully combine its business with acquired businesses, including the following:

If the Company encounters significant difficulties in the integration process, the anticipated benefits of the acquisition may not be realized fully, or at all, or may take longer to realize than expected. Failure to achieve the anticipated benefits of the acquisition in the timeframe projected by Item 10the Company could result in increased costs and decreased revenues. This could have a dilutive effect on the Company’s earnings per share. If the Company is unable to successfully integrate the business it acquired, the Company’s business, financial condition and results of Regulation S-K,operations may be materially adversely affected.

Liabilities and obligations assumed in connection with our acquisition of Vision Properties may result in a material adverse effect to our business and financial condition.

Uncertainty of Common Stock Value.Our common stock, par value $0.001 (the “Common Stock”) was suspended from trading on the NYSE American exchange effective December 17, 2019 and continues to be suspended from trading as of the date of the filing of the Form 10-K. As a result, there is currently no public market for our Common Stock and investors in our Common Stock have limited liquidity. The aggregate value of the Common Stock Consideration issuable pursuant to the Amended Purchase Agreement was determined through negotiations between the Company and the Sellers based on a number of factors, including the estimated book value of the Company after giving effect to the Transaction. Due to its limited liquidity and lack of a current active trading market, the fair value of our Common Stock is uncertain and may not be equal to the agreed-upon valuation of the Common Stock Consideration. Although the Company is appealing its suspension from trading on the NYSE American exchange, there can be no assurance that its appeal will be successful.

Risk of Default under Entities’ Indebtedness.The entities that we acquired in the Vision Properties transaction, which own all of the properties that were subject to the acquisition, are subject to substantial indebtedness (the “Entities’ Indebtedness”), as described in “Item 1. Business – Recent Developments.” The Entities’ Indebtedness is subject to certain conditions and covenants, including the requirement that the Entities obtain the consent of the lender before taking certain actions. Any failure to comply with the conditions and covenants in the financing agreements governing the Entities’ Indebtedness that is not consented to or waived by the lender or otherwise cured could lead to a termination of such debt facilities, acceleration of all amounts due under such debt facilities, or other actions by the lender. The consent of the lender may have been required with respect to the Transaction, and although the Sellers have engaged in negotiations with the lender seeking to obtain such consent prior to the Closing, such consent has not been obtained as of the date of filing of this Form 10-K. While the Company intends to continue to seek to obtain the consent from the lender regarding the Transaction, we cannot guarantee that such consent will be received.

Existing Default under Purchase Price Promissory Notes. The $9,750,000 of promissory notes issued as part of the purchase consideration in the Vision Properties acquisition were payable in full on March 31, 2020, and while partial payments have been made against the notes, we were unable to pay the notes in full by the maturity date. We are currently negotiating forbearance agreements and are actively pursuing multiple potential sources of additional debt and equity capital to fund repayment of the amounts due pursuant to the Notes and our ongoing operating expenses. We may not be successful in obtaining forbearance agreements or securing suitable financing in the time period required. If we are not requiredable to provide information required by this Itemobtain forbearance agreements and/or do not succeed in raising additional capital in a timely fashion, our resources will not be sufficient to fund the repayment of the notes. The noteholders may seek to enforce their rights under the promissory notes through the judicial process, which could result in a material adverse effect on our results of operations and financial condition.

We could be harmed by security breaches or other significant disruptions or failures of networks, information technology infrastructure or related systems owned or installed by us.

We are materially reliant upon our networks, information technology infrastructure and related technology systems (including our billing and provisioning systems) to manage our operations and affairs. We face the risk, as does any company, of a security breach or significant disruption of our information technology infrastructure and related systems. Moreover, in connection with processing and storing sensitive and confidential data on our networks, we face a risk that a security breach or disruption could result in unauthorized access to our customers’ or their customers’ proprietary information.

We strive to maintain the security and integrity of information and systems under our control and maintain contingency plans in the event of security breaches or other system disruptions. Nonetheless, we cannot assure you that our security efforts and measures will prevent unauthorized access to our systems, loss or destruction of data (including confidential customer information), account takeovers, unavailability of service, computer viruses, malware, ransomware, distributed denial-of-service attacks, or other forms of cyber-attacks or similar events. These threats may derive from human error, hardware or software vulnerabilities, aging equipment or accidental technological failure. These threats may also stem from fraud, malice or sabotage on the part of employees, third parties or foreign nations, including attempts by outside parties to fraudulently induce our employees or customers to disclose or grant access to our data or our customers’ data, potentially including information subject to stringent domestic and foreign data protection laws governing personally identifiable information, protected health information or other similar types of sensitive data. These threats may also arise from failure or breaches of systems owned, operated or controlled by other unaffiliated operators to the extent we rely on such other systems to deliver services to our customers. Each of these risks could further intensify to the extent we maintain information in digital form stored on servers connected to the Internet.

Additional risks to our network, infrastructure and related systems include, among others:

Due to these factors, from time to time in the ordinary course of our business we experience disruptions in our service and could experience more significant disruptions in the future.

Disruptions, security breaches and other significant failures of the above-described networks and systems could:

Any or all of the foregoing developments could have a negative impact on our business, results of operations, financial condition and cash flows.

Our results of operations could be adversely affected by economic conditions and the effects of these conditions on our customers’ businesses.

Adverse changes in economic conditions have in the past resulted and may in the future result in lower spending among our customers and contribute to decreased sales. Further, our business may be adversely affected by factors such as downturns in economic activity in specific geographic areas or in the telecommunications industry; social, political or labor conditions; trade restrictions such as tariffs or changes imposed on international trade agreements; or adverse changes in the availability and cost of capital, interest rates, tax rates, or regulations. These factors are beyond our control, but may result in decreases in spending among customers and softening demand for our products and services. Declines in demand for our products and services will adversely affect our sales. Further, challenging economic conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, our cash flow may be negatively impacted and our allowance for doubtful accounts and write-offs of accounts receivable may increase.

The Company may experience interruptions to its business operations due to events beyond its control, and insurance may not cover the full extent of damages.

A catastrophic event beyond our control, such as a natural disaster, health pandemic, cyber-attack, adverse weather event or act of terrorism, that results in the destruction or disruption of any of our critical business systems or operations could harm its ability to conduct normal business operations and its operating results.

While we maintain business continuity plans that are intended to allow us to continue operations or mitigate the effects of events that could disrupt our business, we cannot provide assurances that our plans would fully protect us from all such events. In addition, insurance maintained by us to protect against property damage, loss of business and other related consequences resulting from catastrophic events is subject to coverage limitations, depending on the nature of the risk insured. This insurance may not be sufficient to cover all of our damages or damages to others in the event of a catastrophe. In addition, insurance related to these types of risks may not be available now or, if available, may not be available in the future at commercially reasonable rates.

Due to our size, we depend on key personnel and other skilled employees.

Our employees are key to the growth and success of our business and our continued success depends to a large extent on our ability to recruit, train, and retain skilled employees, particularly executive management and technical employees. If we are unable to attract and retain key personnel, our operating results could be adversely affected.

Additionally, the Company’s ability to retain skilled workforce and its success in attracting and hiring new skilled employees will be a critical factor in determining whether the Company will be successful in the future. The Company faces competition for qualified individuals and may be unable to attract and retain suitably qualified individuals. The Company’s failure to do so could have an adverse effect on its ability to implement the business plan.

Future litigation may impair our reputation or lead us to incur significant costs, and the costs of such litigation may exceed our insurance coverage.

We are currently party to several lawsuits and may become party to various lawsuits and claims arising in the normal course of business, which may include lawsuits or claims relating to contracts, third party contract manufacturers, intellectual property, product recalls, product liability, false or deceptive advertising, employment matters, environmental matters or other aspects of our business. Negative publicity resulting from allegations made in lawsuits or claims asserted against us, whether or not valid, may adversely affect our reputation. In addition, we may be required to pay damage awards or settlements or become subject to injunctions or other equitable remedies, which could have a material adverse effect on our financial condition, results of operations and cash flows. The outcome of litigation is often difficult to predict, and the outcome of pending or future litigation may have a material adverse effect on our business, financial condition, results of operations and cash flows.

We maintain general and excess liability, cyber security, workers’ compensation and medical insurance, all in amounts consistent with industry practice and as part of our overall risk management strategy. Further, our policies are held with financially stable coverage providers, often in a layered or quota share arrangement which reduces the likelihood of an interruption or impact to operations. Although we have various insurance programs in place, the potential liabilities associated with potential litigation matters, or those that could arise in the future, could be excluded from coverage or, if covered, could exceed the coverage provided by such programs. In addition, insurance carriers may seek to rescind or deny coverage with respect to pending or future claims or lawsuits. If we do not have sufficient coverage under our policies, or if coverage is denied, we may be required to make material payments to settle litigation or satisfy any judgment. Any of these consequences could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We are operating in an emerging industry, and the long-term viability of our investment strategy on an institutional scale is unproven.

Large-scale institutional investment in single-family residential (“SFR”) homes for rent is a relatively recent phenomenon that has emerged out of the mortgage and housing crisis that began in late 2007. Prior to that time, SFR homes were generally not viewed as viable assets for investment on a large scale by institutional investors. Consequently, the long-term viability of the SFR property investment strategy on an institutional scale has not yet been proven. As a participant in this emerging industry, we are subject to the risk that SFR properties may not prove to be a viable long-term investment strategy on an institutional scale for a permanent capital vehicle. If it turns out that this investment strategy is not a viable one, we would be materially and adversely affected, and we may not be able to sustain the growth of our assets and results from operations that we seek.

Our failure to effectively perform property management functions or to effectively manage our portfolio and operations could materially and adversely affect us.

We have direct responsibility for the management of the properties in our SFR portfolio, including, without limitation, renovations, maintenance and certain matters related to leasing, such as marketing and selection of tenants. If our internal property manager is unable to effectively perform property management services at the level and/or the cost that we expect or if we fail to allocate sufficient resources to meet our property management needs, it would adversely affect our performance. In addition, we will be responsible for ensuring the compliance of our internal property manager with governmental laws, regulations and covenants that are applicable to our homes, our tenants and our prospective tenants, including, without limitation, permitting, licensing and zoning requirements and tenant relief laws, such as laws regulating evictions, rent control laws and other regulations that limit our ability to increase rental rates.

Our ability to perform the property management services will be affected by various factors, including, among other things, our ability to maintain sufficient personnel and retain key personnel and the number of our SFR properties that we manage. No assurance can be made that we will continue to be successful in attracting and retaining skilled personnel or in integrating any new personnel into our organization.

Our future success will depend, in part, upon our ability to successfully monitor our operations, costs, regulatory compliance and service quality and maintain other necessary internal controls. Our inability to effectively perform the property management services on the properties managed by us, or to effectively manage our portfolio and operations could materially adversely affect our business, financial results and share price.

We may incur significant costs in renovating our properties or turning vacant properties, and we may underestimate the costs or amount of time necessary to complete restorations or unit turns.

While a substantial portion of the SFR properties we have acquired to date meet our rental specifications at the time of acquisition, properties frequently require additional renovations prior to renting. Beyond customary repairs, we may undertake improvements designed to optimize the overall property appeal and increase the value of the property. Though we endeavor to conduct property inspections and due diligence prior to acquiring new SFR portfolios, we expect that nearly all of our rental properties will require some level of renovation immediately upon their acquisition or in the future following expiration of a lease or otherwise. We may acquire properties that we plan to extensively renovate and restore. In addition, in order to reposition properties in the rental market, we will be required to make ongoing capital improvements and may need to perform significant renovations and repairs from time to time. Consequently, we are exposed to the risks inherent in property renovation, including potential cost overruns, increases in labor and materials costs, delays by contractors in completing work, delays in the timing of receiving necessary work permits and certificates of occupancy and poor workmanship. If our assumptions regarding the cost or timing of renovations across our properties prove to be materially inaccurate, it may be more costly or take significantly more time than anticipated to develop and grow our SFR portfolio, which could materially and adversely affect us.

In addition, we anticipate a minimum level of effort will be required to prepare a newly vacant property to be made ready for occupancy by a new tenant, and we are exposed to risks of cost overruns, increases in costs of materials or labor, delays in the completion of work and other factors. If we are unable to perform unit turns efficiently or in a timely manner, we would experience decreased revenue, increased expenses or both.

The availability of portfolios of single-family residential properties for purchase on favorable terms may decline as market conditions change, our industry matures and/or additional purchasers for such portfolios emerge, and the prices for such portfolios may increase, any of which could materially and adversely affect us.

In recent years, there has been an increase in supply of SFR property portfolios available for sale. Because we operate in an emerging industry, market conditions may be volatile, and the prices at which portfolios of SFR properties can be acquired may increase from time to time, or permanently, due to new market participants seeking such portfolios, a decrease in the supply of desirable portfolios or other adverse changes in the geographic areas that we may target from time to time. For these reasons, the supply of SFR properties that we may acquire may decline over time, which could materially and adversely affect us and our growth prospects.

Portfolios of properties that we have acquired or may acquire may include properties that do not fit our investment criteria, and divestiture of such properties may be costly or time consuming or both, which may adversely affect our operating results.

We have acquired, and expect to continue to acquire, portfolios of SFR properties, many of which are, or will be, subject to existing leases. We may be subject to a variety of risks, including risks relating to the condition of the properties, the credit quality and employment stability of the tenants and compliance with applicable laws, among others. In addition, financial and other information provided to us regarding such portfolios during our due diligence may be inaccurate, and we may not be able to obtain relief under contractual remedies, if any. If we conclude that certain properties acquired as part of a portfolio do not fit our investment criteria, we may decide to sell such properties and may be required to renovate the properties prior to sale, to hold the properties for an extended marketing period and/or sell the property at an unfavorable price, any of which could materially and adversely affect us.

Competition in identifying and acquiring residential rental assets could adversely affect our ability to implement our business strategy, which could materially and adversely affect us.

We face competition from various sources for investment opportunities, including REITs, hedge funds, private equity funds, partnerships, developers and others. Some third-party competitors have substantially greater financial resources and access to capital than we do and may be able to accept more risk than we can. Competition from these companies may reduce the number of attractive investment opportunities available to us or increase the bargaining power of asset owners seeking to sell, which would increase the prices of assets. If such events occur, our ability to implement our business strategy could be adversely affected, which could materially and adversely affect us. Given the existing competition, complexity of the market and requisite time needed to make such investments, no assurance can be given that we will be successful in acquiring investments that generate attractive risk-adjusted returns. Furthermore, there is no assurance that such investments, once acquired, will perform as expected.

We may be materially and adversely affected by risks affecting the single-family rental properties in which our investments may be concentrated at any given time as well as from unfavorable changes in the related geographic regions.

Our assets are not subject to any geographic diversification requirements or concentration limitations, and, as a result, circumstances or events that impact a geographic region in which we have a significant concentration of properties, including a downturn in regional economic conditions or natural disasters, could materially and adversely affect us. Entities that sell residential rental portfolios may group the portfolios by location or other metrics that could result in a concentration of our portfolio by geography, SFR property characteristics and/or tenant demographics. Such concentration could increase the risk of loss to us if the particular concentration in our portfolio is subject to greater risks or undergoing adverse developments. In addition, adverse conditions in the areas where our properties or tenants are located (including business layoffs or downsizing, industry slowdowns, changing demographics, oversupply, reduced demand and other factors) may have an adverse effect on the value of our investments. A material decline in the demand for single-family housing or rentals in the areas where we own assets may materially and adversely affect us. Lack of diversification can increase the correlation of non-performance and foreclosure risks among our investments.

Short-term leases of residential property expose us more quickly to the effects of declining market rents.

The majority of our leases to tenants of SFR properties will be for a term of one year. As these leases permit the residents to leave at the end of the lease term without penalty, we anticipate our rental revenues will be affected by declines in market rents more quickly than if our leases were for longer terms. Short-term leases may result in high turnover, resulting in additional cost to renovate and maintain the property and lower occupancy levels. Because we have a limited operating history, our tenant turnover rate and related cost estimates may be less accurate than if we had more operating data upon which to base these estimates.

We may be unable to secure funds for property restoration or other capital improvements, which could limit our ability to attract, retain or replace tenants.

When we acquire or otherwise take title to single-family properties or when tenants fail to renew their leases or otherwise vacate their space, we may be required to expend funds for property restoration and leasing commissions in order to lease the property. If we have not established reserves or set aside sufficient funds for such expenditures, we may have to obtain financing from other sources, as to which no assurance can be given. We may also have future financing needs for other capital improvements to restore our properties. If we need to secure financing for capital improvements in the future but are unable to secure such financing on favorable terms or at all, we may be unable or unwilling to make capital improvements or may choose to defer such improvements. If this happens, our properties may suffer from a greater risk of obsolescence or decreased marketability, a decline in value or decreased cash flow as a result of fewer potential tenants being attracted to the property or existing tenants not renewing their leases. If we do not have access to sufficient funding in the future, we may not be able to make necessary capital improvements to our properties, and our properties’ ability to generate revenue may be significantly impaired.

Our revenue and expenses are not directly correlated, and, because a large percentage of our costs and expenses are fixed and some variable expenses may not decrease over time, we may not be able to adapt our cost structure to offset any declines in our revenue.

Many of the expenses associated with our business, such as acquisition costs, restoration and maintenance costs, HOA fees, personal and real property taxes, insurance, compensation and other general expenses are fixed and would not necessarily decrease proportionally with any decrease in revenue. Our assets also will likely require a significant amount of ongoing capital expenditure. Our expenses, including capital expenditures, will be affected by, among other things, any inflationary increases, and cost increases may exceed the rate of inflation in any given period. Certain expenses, such as HOA fees, taxes, insurance and maintenance costs are recurring in nature and may not decrease on a per-unit basis as our portfolio grows through additional property acquisitions. By contrast, our revenue is affected by many factors beyond our control, such as the availability and price of alternative rental housing and economic conditions in our markets. As a result, we may not be able to fully, or even partially, offset any increase in our expenses with a corresponding increase in our revenues. In addition, state and local regulations may require us to maintain our properties, even if the cost of maintenance is greater than the potential benefit.

Competition could limit our ability to lease single-family rental properties or increase or maintain rents.

Our SFR properties compete with other housing alternatives to attract residents, including rental apartments, condominiums and other single- family homes available for rent as well as new and existing condominiums and single-family homes for sale. Our competitors’ properties may be of better quality, in a more desirable location or have leasing terms more favorable than we can provide. In addition, our ability to compete and generate favorable returns depends upon, among other factors, trends of the national and local economies, the financial condition and liquidity of current and prospective renters, availability and cost of capital, taxes and governmental regulations. Given significant competition, we cannot assure you that we will be successful in acquiring or managing SFR properties that generate favorable returns.

If rents in our markets do not increase sufficiently to keep pace with potential rising costs of operations, our operating results and cash available for distribution will decline.

The success of our business model will substantially depend on conditions in the SFR property market in our geographic markets. Our asset acquisitions are premised on assumptions about, among other things, occupancy and rent levels. If those assumptions prove to be inaccurate, our operating results and cash available for distribution will be lower than expected, potentially materially. Rental rates and occupancy levels have benefited in recent periods from macroeconomic trends affecting the U.S. economy and residential real estate and mortgage markets in particular, including a tightening of credit and increases in interest rates that has made it more difficult to finance a home purchase, combined with efforts by consumers generally to reduce their exposure to credit. A decrease in rental rates would have a material adverse effect on the performance of our SFR portfolio or could cause a default of our obligations under one or more financing agreements, and our business, results of operations and financial condition would therefore be materially harmed.

If the current trend favoring renting rather than homeownership reverses, the single-family rental market could decline.

The SFR market is currently significantly larger than in historical periods. We do not expect the favorable trends in the SFR market to continue indefinitely. Eventually, continued strengthening of the U.S. economy and job growth, together with the large supply of foreclosed SFR properties, the current availability of low residential mortgage rates and government sponsored programs promoting home ownership, may contribute to a stabilization or reversal of the current trend that favors renting rather than homeownership. In addition, we expect that as investors increasingly seek to capitalize on opportunities to purchase undervalued housing properties and convert them to productive uses, the supply of SFR properties will decrease and the competition for tenants will intensify. A softening of the rental property market in our markets would adversely affect our operating results and cash available for distribution, potentially materially.

Suboptimal tenant underwriting and defaults by our tenants may materially and adversely affect us.

Our success depends, in large part, upon our ability to attract and retain qualified tenants for our properties. This depends, in turn, upon our ability to screen applicants, identify good tenants and avoid tenants who may default. We may make mistakes in our selection of tenants, and we may rent to tenants whose default on our leases or failure to comply with the terms of the lease or HOA regulations could materially and adversely affect us. For example, tenants may default on payment of rent; make unreasonable and repeated demands for service or improvements; make unsupported or unjustified complaints to regulatory or political authorities; make use of our properties for illegal purposes; damage or make unauthorized structural changes to our properties that may not be fully covered by security deposits; refuse to leave the property when the lease is terminated; engage in domestic violence or similar disturbances; disturb nearby residents with noise, trash, odors or eyesores; fail to comply with HOA regulations; sub-let to less desirable individuals in violation of our leases or permit unauthorized persons to live with them. The process of evicting a defaulting tenant from a family residence can be adversarial, protracted and costly. Furthermore, some tenants facing eviction may damage or destroy the property. Damage to our properties may significantly delay re-leasing after eviction, necessitate expensive repairs, reduce the rental revenue generated by the property or impair its value. In addition, we will incur turnover costs associated with re-leasing the properties, such as marketing expenses and brokerage commissions, and will not collect revenue while the property is vacant. Although we will attempt to work with tenants to prevent such damage or destruction, there can be no assurance that we will be successful in all or most cases. Such tenants will not only cause us not to achieve our financial objectives for the properties in which they live, but may subject us to liability and may damage our reputation with our other tenants and in the communities where we do business.

A significant uninsured property or liability loss could have a material adverse effect on us.

We carry commercial general liability insurance and property insurance with respect to our SFR properties on terms we considered commercially reasonable. However, many of the policies covering casualty losses are subject to substantial deductibles and exclusions, and we will be self-insured up to the amount of the deductibles and exclusions. For example, we may not always be fully insured against losses arising from floods, windstorms, fires, earthquakes, acts of war or terrorism or civil unrest because they are either uninsurable or the cost of insurance makes it economically impractical. If an uninsured property loss or a property loss in excess of insured limits were to occur, we could lose our capital invested in a property or group of properties as well as the anticipated future revenues from affected SFR properties or groups of properties. Further, inflation, changes in building codes and ordinances, environmental considerations and other factors might also prevent us from using insurance proceeds to replace or renovate a property after it has been damaged or destroyed.

In the event that we incur a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenues in these properties and could potentially remain obligated under any recourse debt associated with the property. Further, if an uninsured liability to a third party were to occur, we would incur the cost of defense and settlement with or court ordered damages to that third party. A significant uninsured property or liability loss could adversely affect our financial condition, operating results, cash flows and ability to make distributions on our common stock.

We rely on information supplied by prospective tenants in managing our business.

We rely on information supplied to us by prospective tenants in their rental applications as part of our due diligence process to make leasing decisions, and we cannot be certain that this information is accurate. In particular, we rely on information submitted by prospective tenants regarding household income, tenure at current job, number of children and size of household. Moreover, these applications are submitted to us at the time we evaluate a prospective tenant, and we do not require tenants to provide us with updated information during the terms of their leases, notwithstanding the fact that this information can, and frequently does, change over time. Even though this information is not updated, we will use it to evaluate the overall average credit characteristics of our portfolio over time. If tenant-supplied information is inaccurate or our tenants’ creditworthiness declines over time, we may make poor leasing decisions, and our portfolio may contain more credit risk than we believe.

Our single-family residential properties are not liquid assets, which could limit our ability to vary our portfolio or to realize the value at which such assets are carried if we are required to dispose of them.

Our SFR properties are not liquid assets, which could limit our ability to vary our portfolio or to realize the value at which such assets are carried if we are required to dispose of them. Our inability to sell individual or portfolios of SFR properties on acceptable terms and/or in accordance with our anticipated timing could materially and adversely affect our financial condition.

Changes in global economic and capital market conditions, including periods of generally deteriorating occupancy and real estate industry fundamentals, may materially and adversely affect us.

There are risks to the ownership of real estate and real estate related assets, including decreases in residential property values, changes in global, national, regional or local economic, demographic and real estate market conditions as well as other factors particular to the locations of our investments. A prolonged recession and a slow recovery could materially and adversely affect us as a result of, among other items, the following:

These conditions could also adversely impact the financial condition and liquidity of the renters that will occupy our real estate properties and, as a result, their ability to pay rent to us.

Residential properties that are subject to eviction are subject to risks of theft, vandalism or other damage that could impair their value.

When a residential property is subject to an eviction, it is possible that the tenant may cease to maintain the property adequately or that the property may be abandoned by the tenant and become susceptible to theft or vandalism. Lack of maintenance, theft and vandalism can substantially impair the value of the property. To the extent we initiate eviction proceedings, some of our properties could be impaired.

Contingent or unknown liabilities associated with respect to our prior acquisitions of portfolios of properties could adversely affect our financial condition, cash flows and operating results.

Assets and entities that we have acquired in connection with prior SFR portfolio or operating entity acquisitions may be subject to unknown or contingent liabilities for which we may have limited or no recourse against the sellers. Unknown or contingent liabilities might include liabilities for or with respect to liens attached to properties; unpaid real estate tax, utilities or HOA charges for which a subsequent owner remains liable; clean-up or remediation of environmental conditions or code violations; claims of customers, vendors or other persons dealing with the acquired entities; or tax liabilities. Purchases of single-family properties in portfolio purchases typically involve limited representations or warranties with respect to the properties and may allow us limited or no recourse against the sellers. Such properties also often have unpaid tax, utility and HOA liabilities for which we may be obligated but fail to anticipate. As a result, the total amount of costs and expenses that we may incur with respect to liabilities associated with prior SFR property or entity acquisitions may exceed our expectations, which may adversely affect our operating results and financial condition. Additionally, such prior SFR property acquisitions may be subject to covenants, conditions or restrictions that restrict the use or ownership of such properties, including prohibitions on leasing. We may not have discovered such restrictions during the acquisition process, and such restrictions may adversely affect our ability to operate such properties as we intend.

The costs and amount of time necessary to secure possession and control of certain properties may exceed our assumptions, which would delay our receipt of revenue from, and return on, the property.

A majority of the SFR properties we have acquired have had an existing tenant at the time of acquisition. However, certain SFR properties require us to secure possession. In certain circumstances, we may have to evict occupants who are in unlawful possession before we can secure possession and control of the property. The holdover occupants may be the former owners or tenants of a property, or they may be squatters or others who are illegally in possession. Securing control and possession from these occupants can be both costly and time consuming. If these costs and delays exceed our expectations, our financial performance may suffer because of the increased expenses incurred or the unexpected delays in turning the properties into revenue-producing rental properties.

Eminent domain could lead to material losses on our investments.

It is possible that governmental authorities may exercise eminent domain to acquire land on which our properties are built in order to build roads or other infrastructure. Any such exercise of eminent domain would allow us to recover only the fair value of the affected properties, which we believe may be interpreted to be substantially less than the actual value of the property. Several cities are also exploring proposals to use eminent domain to acquire residential loans to assist borrowers to remain in their homes, potentially reducing the supply of single-family properties for sale in our markets. Any of these events can cause a material loss to us.

We likely will incur costs due to litigation, including but not limited to, class actions, tenant rights claims and consumer demands.

There are numerous tenants’ rights and consumer rights organizations throughout the country. As we grow in scale, we may attract attention from some of these organizations and become a target of legal demands or litigation. Many such consumer organizations have become more active and better funded in connection with mortgage foreclosure-related issues and displaced home ownership. Some of these organizations may shift their litigation, lobbying, fundraising and grass roots organizing activities to focus on landlord-tenant issues as more entities engage in the SFR property market. Additional actions that may be targeted at us include eviction proceedings and other landlord-tenant disputes, challenges to title and ownership rights (including actions brought by prior owners alleging wrongful foreclosure by their lender or servicer) and issues with local housing officials arising from the condition or maintenance of an SFR property. While we intend to conduct our rental business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one state or multiple states to attempt to bring claims against us on a class action basis for damages or injunctive relief. We cannot anticipate what form such legal actions might take or what remedies they may seek. Any of such claims may result in a finding of liability that may materially and adversely affect us.

Additionally, these organizations may lobby local county and municipal attorneys or state attorneys general to pursue enforcement or litigation against us or may lobby state and local legislatures to pass new laws and regulations to constrain our business operations. If they are successful in any such endeavors, they could directly limit and constrain our business operations and impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions. Any of the above-described occurrences may materially and adversely affect us.

ITEM 1B. Unresolved Staff Comments.

None.

ITEM 2. Properties.

On December 1, 2015,April 4, 2019, we moved our executive offices were relocatedcorporate headquarters to 999 Vanderbilt Beach Road,237 W. 35^th St., Suite 601, Naples, Florida, 34108 and our telephone number is (877) 878-8136. The old Naples, FL office lease expired on October 31, 2015.New York, NY 10001. Our current lease expires November 30, 2022on October 31, 2021 and the square footage increase from 3,310has 4,340 square feet to 5,377and is included in the 11,000 square feet.foot New York, NY office lease noted in the table below. Our subsidiaries leaseleased five additional office/warehouse facilities throughout the United States, which is summarized below.