UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10/A

Amendment No. 3

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934

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

(Do not check if a smaller reporting company)

As of August 7, 2015, there were 45,102,642 shares of the registrant’s common stock outstanding.

FTE Networks, Inc.

Table of Contents

EXPLANATORY NOTE

We are filing this Amendment No. 3 to the initial Registration Statement on Form 10 that we filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2015 (the “Initial Form 10”), to include our financial statements for the six months ended March 31, 2015 and March 31, 2014, and to reflect the revision of the Company’s financial statements for the years ended September 30, 2014 and 2013 (see “Revision of Financial Statements”, below, and Note 2 of the related Notes to Consolidated Financial Statements.),

The principal items amended and supplemented are as follows:

Unless otherwise noted, references in this registration statement to "FTE," the "Company," "we," "our" or "us" means FTE Networks, Inc. and its subsidiaries.

REVISION OF FINANCIAL STATEMENTS

Prior to the Beacon Merger (see “Corporate History”, below), on September 5, 2012 Beacon Enterprise Solutions Group, Inc. (“Beacon”) sold its operating assets to MDT Labor, LLC (“MDT”) in exchange for MDT’s assumption of certain liabilities and the potential for earn-out payments from MDT (the “Asset Sale”). Beacon ceased its business operations, in order to meet its financial obligations and avoid bankruptcy, but maintained its public company “shell” status. Because limited staff remained at Beacon, approximately $744,000 of liabilities which had been assumed by MDT in the Asset Sale were not identified and removed from Beacon’s books as of September 30, 2012, and remained on Beacon’s books at the time of the Merger. Similarly, on June 19, 2013, the Company assigned certain accounts payable to a third party in connection with the sale of its discontinued operations. Approximately $1,092,000 of these accounts payable were not properly removed from the Company’s books. The principal adjustments made in revising the Company’s financial statements include adjustments to correct the overstatement of accounts payable at September 30, 2013 and 2014 and to correct the amount reported for the gain on sale of discontinued operations during the year ended September 30, 2013.

Management has evaluated the effect of the error and determined that it is qualitatively immaterial to the Company’s financial position and results of operations for the years ended September 30, 2014 and 2013. However, if the adjustments to correct the cumulative errors had been recorded in the first quarter of 2015, we believe the impact would have been significant to the first quarter and would impact comparisons to prior periods. In accordance with guidelines issued in Staff Accounting Bulletin No. 108, we have revised the financial statements included therein and recorded adjustments to current liabilities, gain on sale of discontinued operations and accumulated deficit accounts to correct this error. The impact of the revision adjustments on the Company’s Consolidated Balance Sheets, Statements of Operations and Statements of Cash Flows is illustrated on a condensed basis below. Also see Note 2 of Notes to Consolidated Financial Statements. The amounts previously reported are derived from the Company’s report on Form 10/A filed with the SEC on May 6, 2015.

FORWARD LOOKING STATEMENTS

Some of the statements in this Registration Statement may be “forward-looking statements.” Forward-looking statements are not historical facts but 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 Registration Statement 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:

All written and oral forward-looking statements made in connection with this Registration Statement that are attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Any forward looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Registration Statement. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

ITEM 1. BUSINESS OVERVIEW

FTE Networks, Inc., and subsidiaries, is a provider of international and regional telecommunications and technology systems and infrastructure services. FTE also offers managed information technology, telecommunications services, subscriber based services and staffing solutions through its wholly-owned subsidiaries: 

CORPORATE HISTORY

Prior to Beacon Merger

Beacon Enterprise Solutions Group

Beacon Enterprise Solutions Group, Inc. (“Beacon”) was incorporated in the state of Nevada on December 30, 2007. Beacon was formed for the purpose of acquiring and consolidating regional telecommunications businesses and service platforms into an integrated, national provider of high quality voice, data and VOIP communications to small and medium-sized business enterprises (the “SME Market”). On September 5, 2012 Beacon sold its operating assets to MDT Labor, LLC (“MDT”) in exchange for MDT’s assumption of certain liabilities and the potential for earn-out payments from MDT. Beacon ceased its business operations, in order to meet its financial obligations and avoid bankruptcy, but maintained its public company “shell” status.

Focus Venture Partners, Inc.

Focus Venture Partners (“Focus”) was incorporated in the state of Nevada on March 26, 2012 as a holding company 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:

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 and 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 (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 JusCom Inc. dba FTE Network Services as our primary line of business. JusCom is headquartered in Naples, Florida specializing in the design, engineering, installation, construction and maintenance of telecommunications and technology networks and infrastructure.

Following the Beacon Merger, on March 13, 2014, Beacon changed its name to “FTE Networks, Inc.” (“FTE” or the “Company”). JusCom was consolidated under the name FTE Network Services (“FTE Network Services”) – a turn-key infrastructure services company. Focus Venture Partners changed its name to FVP Worx, Inc., offering full service staffing solutions. Optos Capital Partners remains as a non-operating shell held for the purpose of future diversification opportunities. The following graphic depicts our organization following the Beacon Merger and the organizational changes described above.

The Revocation of the Registration of Our Securities

Prior to September 12, 2014 (the “Revocation Date”), our Common Stock was registered under Section 12(g) of 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, and current reports on Form 8-K, and 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.

After Beacon ceased its business operations and became a public company “shell,” and prior to the Beacon Merger, Beacon fell behind on the compilation of its books and records, due to challenges related to staffing, access to historical data and insufficient funding. Consequently, Beacon failed to comply with the reporting requirements of Regulation 13(a) of the Exchange Act. Further, subsequent to the Beacon Merger, the Company underestimated the time that it would take for the registrant to access and analyze the historical data to enable it to become current in its financial reporting. As a result, on August 20, 2014, the U.S. Securities and Exchange Commission (the “SEC”), via Release No. 72872, ordered the commencement of an Administrative Proceeding (File No. 3-16024) with respect to 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 filed 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.

Subsequently, on September 8, 2014, the Company entered into an Offer 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) 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, as stated in the Explanatory Note to this Registration Statement on Form 10, we are filing this registration statement to once again register our Common Stock pursuant to Section 12(g) of the Exchange Act.   Once this registration statement is deemed effective, we will again be subject to the requirements of Regulation 13(a) of the Exchange Act, which will require 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 will be 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.  

Assignment & Purchase Agreement

On June 19, 2013, Focus and 5G Investments, LLC (“5G”) entered into a securities purchase agreement (the “Purchase Agreement”) that provided for the purchase by 5G of up to $3,500,000 of shares of Focus Preferred B Shares, which would be exchanged for the Company’s Series D Preferred stock at a price equivalent to $4.00 per Series D share upon the consummation of the Beacon Merger. On June 19, 2013, 5G purchased 30,000 Focus Preferred B Shares at a price of $50.00 per share, for an aggregate purchase price of approximately $1,500,000, which were exchanged for 375,000 Series D Preferred shares (at a price equivalent to $4.00 per Series D share) in connection with the Beacon Merger. On June 19, 2013, FTE, 5G and Focus executed an Assignment and Consent to Assignment Agreement (the “Assignment”) which provided for the assignment of the Purchase Agreement by Focus to FTE. During the year ended September 30, 2014 and the six months ended March 31, 2015, 5G purchased an additional 414,800 shares and 195,918 shares of Series D preferred stock, respectively, at $4.00 per share, pursuant to the Purchase Agreement.

Collateral and Guarantee

On June 19, 2013, as a condition to the effectiveness of the Merger, Beacon, the legal acquirer, guaranteed the outstanding indebtedness owed by the subsidiaries of Focus, the accounting acquirer, under a credit agreement involving Atalaya Administrative LLC, as Administrative Agent (“Atalaya”) by entering into an Amended and Restated Guarantee and Collateral Agreement (the “Guarantee Agreement”) by and among FTE, Focus, Optos, JusCom, Inc., Focus Fiber Solutions, LLC, Focus Wireless LLC and Atalaya. Pursuant to the Guarantee Agreement, we granted a security interest in all of our assets to Atalaya to secure its guaranty. Pursuant to the Guarantee Agreement, Atalaya agreed not to exercise any of its remedies against us until October 31, 2013.

On October 11, 2013, Atalaya sold and assigned the credit facility to an independent third party (“the Assignee”). On December 31, 2013, we entered into a settlement agreement with the Assignee, whereby we and the Assignee agreed to settle the remaining debt under the credit agreement for $250,000. As a result of this settlement, we recognized a gain on forgiveness of debt of $2,748,158 during the year ended September 30, 2014.

Ferguson Agreement

On June 19, 2013, FTE, Focus and Christopher Ferguson (“Ferguson”) entered into an agreement (the “Ferguson Agreement”) pursuant to which Focus agreed to exercise its commercially reasonable efforts to cause the permanent removal and release of Ferguson and certain related parties from certain personal guarantees executed by him for indebtedness of Focus (the “Released Obligations”), including, but not limited to, promissory notes, credit cards, credit facilities, equipment leases, capital leases, bonds, licenses, permits and insurance policies. In addition, Focus agreed to hold harmless and indemnify Ferguson against certain expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him in connection with certain claims or proceedings arising out of or related to the Released Obligations. All obligations were subsequently paid in full, removing any exposure to the Company.

Expansion of Board of Directors; Management

In connection with the Merger, on June 19, 2013, all of the members of Beacon’s board of directors (the “Board”) except for Bruce Widener resigned and we appointed Richard Coyle to our Board. Richard Coyle and Bruce Widener resigned as a members of the Board effective July 28, 2013 and December 11, 2013, respectively.

Effective December 11, 2013, the Board appointed Theresa Carlise as Chief Financial Officer, Secretary, Treasurer and a member of the Board. On January 7, 2014, the Board appointed Michael Palleschi to the position of Chief Executive Officer, Chief Operating Officer and Director, and elected Michael Palleschi to our Board. On May 14, 2014, the Board of Directors accepted the amicable resignation of Theresa Carlise as Chief Financial Officer, Treasurer and Secretary and Member of the Board. Ms. Carlise remained with us under the terms of her existing employment contract as a Financial Advisor until February 28, 2015.  On June 2, 2014, the Board appointed David Lethem to the position of Chief Financial Officer. On June 2, 2014, the Board unanimously voted to elect Mr. John Klumpp to serve as a director, and on October 6, 2014, Mr. Klumpp was also appointed Chief Strategy Officer. The Board further elected and made the following appointments:

All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the Board.

Segment Reporting

We operate in the telecommunications infrastructure services industry and, effective May 8, 2014, entered the staffing industry. The following tables summarize financial information about the Company’s business segments for the three and six months ended March 31, 2015. The staffing segment was in the development stage during the year ended September 30, 2014 and only generated negligible revenues and expenses during that period.

TELECOMMUNICATIONS INFRASTRUCTURE SERVICES INDUSTRY

FTE Network Services provides comprehensive telecommunications solutions to Fortune 500 customers in the wireline and wireless telecommunications industry. Services performed by FTE include the design, engineering, installation, repair and maintenance 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’s 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 into 2015 and beyond. 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 Networks 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 highly 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 if 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.

During the years ended September 30, 2014 and 2013, and during the six months ended March 31, 2015 and 2014, the Company’s largest customers included a telecommunications company providing fiber optic based network solutions (“Customer A”), a leading provider of wireless infrastructure solutions (“Customer B”), a multinational provider of communications technology and services (“Customer C”), a leading provider of fiber-based bandwidth infrastructure services (”Customer D”) and “Customer E”, a corporate staffing customer within the Company’s staffing segment.

The Company’s sales from Customer A for the years ending September 30, 2014 and 2013 were $12.2 and $8.6 million, respectively. Revenues from Customer A were $3.0 million and $4.8 million, respectively during the three and six months ended March 31, 2014. The Company ceased doing business with Customer A in July 2014 and therefore the Company had no sales revenue from Customer A for the three months or six months ended March 31, 2015.

At the same time the contracted work of Customer A was coming to a close (June and July 2014), the sales revenue of Customer C was increasing. During the year ended September 30, 2014, the sales revenue of Customer C was $515,771 (less than 3.0% of total revenue), increasing to $1.4 million (41% of total revenue) and $4.0 (63% of total revenue) million for the three months and six months ending March 31, 2015. Similarly, during the year ended September 30, 2013, the Company ceased doing business with Customer D and had no sales revenue in the following year ended September 30, 2014, or during the period ended March 31, 2015.

As of March 31, 2015, the Company’s two largest customers, Customer C and Customer A, represented 31% and 22% of accounts receivable, respectively. As of September 30, 2014 our three largest customers, consisting of Customer A, Customer B and Customer C represented 41%, 18% and 13% of accounts receivable, respectively. As of September 30, 2013 our two largest customers, Customer A and Customer C, represented 49% and 17% of accounts receivable, respectively.  Any remaining balance of remaining accounts receivable from Customer D at June 19, 2013, were sold in conjunction with the Focus Fiber Solutions asset sale of the same date.

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:

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 second 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 second or third 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 operate 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. FVP Worx is growing its leadership position in the staffing industry serving a base of clients ranging from the Fortune 500 to medium-sized businesses and entrepreneurial start-ups. FVP Worx provides direct staffing, interim staffing, consulting services and outsourcing services. Through key service offerings in IT consulting and staff augmentation, we deliver measureable results that drive positive financial outcomes. We focus on strong ROI and technology solutions, which are vital in today’s hyper competitive environment.

We offer complete staff augmentation services including temporary, temporary-to-hire, and full-time permanent placement. Our services include all of the following:

The temporary staffing industry evolved out of the need for a flexible workforce to minimize the cost and effort of hiring and administering permanent employees in order to rapidly respond to changes in business conditions and to temporarily replace absent employees. Competitive pressures have forced businesses to focus on reducing costs, including converting fixed or permanent labor costs to variable or flexible costs. The temporary staffing industry includes a number of markets focusing on business needs that vary widely in duration of assignment and level of technical specialization. We operate within the telecommunications staffing market of the temporary staffing industry.

Temporary staffing companies act as intermediaries in matching available temporary workers to employer assignments. Staffing companies compete both to recruit and retain a supply of temporary workers and to attract and retain customers to employ these workers. An important aspect in the selection of temporary workers for an assignment is the ability to identify the skills, knowledge, abilities of a temporary worker and match their competencies or capabilities to an employer’s requirements. Methods used to sell temporary staffing services to customers vary depending on the customer’s need for temporary staffing services, the local labor supply, the length of assignment, the number of workers and skills required. We are a business-to-business sales provider. Our sales process takes place at the customer’s location. Success is often based on the experience and skill of the sales person and the strength of relationship with the customer. Retention of customers, exclusive of economic conditions, is dependent on the strength of our relationship with the customer, the skill, quality and tenure of temporary workers, and customer service skills.

The temporary staffing industry is large and highly fragmented with many competing companies. No single company has a dominant share of the temporary staffing industry. Customer demand for temporary staffing services is dependent on the overall strength of the labor market and trends toward greater workforce flexibility.

The staffing industry is cyclical based on overall economic conditions. Historically, in periods of economic growth, the number of companies providing temporary staffing services has increased due to low barriers to entry and during recessionary periods the number of companies has decreased through consolidation, bankruptcies, or other events. The temporary staffing industry experienced increased volatility during the most recent recession in comparison with past economic cycles. This is largely due to the severity of the recession which resulted in a dramatic drop in the use of temporary staffing as companies aggressively reduced the size of their workforce. However, in the post recessionary environment, the temporary staffing industry is experiencing increased demand in relation to total job growth as customers have placed a greater priority on maintaining a more flexible workforce.

Customers

Our customer mix consists primarily of small and medium sized businesses. We also serve larger national customers. Our full range of temporary staffing services enables us to meet all of the staffing needs of our customers.

Competition

We compete in the temporary staffing industry by offering a full range of staffing services. The temporary staffing industry is large and fragmented, comprised of thousands of companies employing millions of people and generating billions of dollars in annual revenues.

We experience competition in attracting customers as well as qualified employment candidates. The staffing business is highly competitive with limited barriers to entry, with a number of firms offering services similar to those provided by us on a national, regional, or local basis. We compete with several multi-national full-service and specialized temporary staffing companies, as well as a multitude of local companies. In most geographic areas, no single company has a dominant share of the market. The majority of temporary staffing companies serving the staffing market are locally owned businesses. In many areas the local companies are the strongest competitors, largely due to their longevity in the market and the strength of their customer relationships.

Competitive forces have historically limited our ability to raise our prices to immediately and fully offset increased costs of doing business; some of which include increased temporary worker wages, costs for workers’ compensation, and unemployment insurance.

The most significant competitive factors in the staffing business are price, ability to promptly fill customer orders, success in meeting customers’ quality expectations of temporary workers, and appropriately addressing customer service issues. We believe we derive a competitive advantage from our service history and commitment to the temporary employment market and our specialized approach in serving the industries of our customers. Also, we believe that our national presence and proprietary systems and programs including worker safety, risk management, and legal and regulatory compliance are key differentiators from many of our competitors.

EMPLOYEES

As of August 7, 2015, we, together with our subsidiaries, employ 277 full-time employees. None of our employees are represented by local collective bargaining units. The number of our employees varies according to the level of our work in progress. We maintain a nucleus of technical and managerial personnel to supervise all projects and add employees as needed to complete specific projects.

ACQUISITION STRATEGY

With respect to its acquisition strategy, FTE intends to pursue a clearly defined telecommunications niche but may, in its discretion, pursue acquisitions outside of this niche although this will not be our focus. We selectively pursue acquisitions when we believe doing so is operationally and financially beneficial to our existing operations, although we do not rely solely on acquisitions for growth. In particular, we may pursue those acquisitions that we believe will provide us with incremental revenue and geographic diversification while complementing our existing operations. We generally target companies for acquisition that have defensible leadership positions in their market niches, EBITDA positive which meets or exceeds industry averages, proven operating histories, sound management, and certain clearly identifiable cost synergies.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Registration Statement, before making an investment decision, and you should only consider an investment in our common stock if you can afford to sustain the loss of your entire investment. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Corporate Risks

The Company may not be able to continue as a going concern.

Our audited consolidated financial statements for the fiscal years ended September 30, 2014 and 2013 were prepared on a going concern basis in accordance with United States Generally Accepted Accounting Principles (USGAAP). As of March 31, 2015, we had a working capital deficiency of $9.4 million. Negative net operating cash flows of $2.1 million and $6.6 million for the twelve months ended September 30, 2014 and 2013, respectively, raise substantial doubt about our ability to continue as a going concern. This may hinder our future ability to obtain financing, or may force us to obtain financing on less favorable terms than would otherwise be available.

We depend upon key personnel and need additional personnel.

Our success depends on the continuing services of the executive team. Additionally, the success of our operations will largely depend upon our ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guaranty that we will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for us. Our inability to attract and retain key personnel may materially and adversely affect our business operations.

FTE’s operation as a public company subjects it to extensive corporate governance and disclosure regulations that may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company, FTE incurs significant legal and accounting expenses associated with its public company reporting requirements. In addition, like many smaller public companies, FTE faces a significant impact from required compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires management of public companies to evaluate the effectiveness of internal control over financial reporting. The SEC has adopted rules implementing Section 404 for public companies as well as disclosure requirements. Any failure to implement effective or improved internal controls, or to resolve difficulties encountered in their implementation, could harm FTE’s operating results, or cause a failure to meet reporting obligations or result in management assessing internal control over financial reporting as not sufficient. Further, we have, in the past, failed to comply with our reporting obligations, which resulted in the revocation of the registration of our Securities (see “The Revocation of the Registration of Our Securities,” beginning on page 5 above). Upon the effectiveness of this registration statement, we are once again subject to the reporting requirements of Regulation 13(a) of the Exchange Act. Any failure to implement effective internal controls, or to meet our reporting obligations could cause investors to lose confidence in FTE’s reported financial information, which could have a material adverse effect on its stock price.

Risks Associated with the Telecommunications Industry

We possess a significant amount of accounts receivable and if we are unable to collect account receivables in a timely manner or at all our cash flow and profitability will be negative impacted, which such risk is heighted during unstable economic periods.

We extend credit to our customers as a result of performing work under contract prior to billing our customers for that work. These customers include telephone companies, cable television multiple system operators and others. We had accounts receivable of approximately $2.0 million at September 30, 2014 and $0.9 million at September 30, 2013. We periodically assess the credit risk of our customers and continuously monitor the timeliness of payments. Slowdowns in the industries we serve may impair the financial condition of one or more of our customers and hinder their ability to pay us on a timely basis or at all. Further bankruptcies or financial difficulties within the telecommunications sector could hinder the ability of our customers to pay us on a timely basis or at all, reducing our cash flows and adversely impacting our liquidity and profitability. Additionally, we could incur losses in excess of current bad debt allowances. The company recognized approximately $0.3 million and $0.2 million in bad debt expense in the years ended September 30, 2014 and 2013 respectively.

We must effectively manage the growth of our operations and effectively integrate acquisitions, or our company will suffer.

To manage our growth and effectively integrate acquisitions, we believe we must continue to implement and improve our operations. We may not have adequately evaluated the costs and risks associated with this expansion, and our systems, procedures, and controls may not be adequate to support our operations. In addition, our management may not be able to achieve the rapid execution necessary to successfully offer our products and services and implement our business plan on a profitable basis. The success of our future operating activities will also depend upon our ability to expand our support system to meet the demands of our growing business. Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations.

We derive a significant portion of our revenues from a limited number of customers, and the loss of one or more of these customers could adversely impact our revenues and profitability.

Our customer base is highly concentrated. As of March 31, 2015, the Company’s two largest customers, Customer C and Customer A, represented 31% and 22% of accounts receivable, respectively. As of September 30, 2014 our three largest customers represented 41%, 18% and 13% of accounts receivable for Customer A, Customer B and Customer C, respectively. As of September 30, 2013 our two largest customers represented 49% and 17% of accounts receivable, for Customer A and Customer C, respectively.

For the three months ended March 31, 2015, the Company’s two largest customers, Customer C and Customer E, represented 41% and 43%, respectively, of the Company’s revenues. Customer C and Customer E represented 63% and 23% of revenues for the six months ended March 31, 2015. For the three and six months ended March 31, 2014, Company’s largest customer, Customer A, represented approximately 80% and 72% of revenues, respectively. For the year ended September 30, 2014, the Company’s largest customer, Customer A, represented approximately 72% of revenues. For the year ended September 30, 2013, our two largest customers (Customer D and Customer A) represented approximately 64% and 25% of revenues, respectively. 

Our revenue may significantly decline if we were to lose one or more of our significant customers. In addition, revenues under our contracts with significant customers may vary from period to period depending on the timing and volume of work which those customers order or perform with their in-house service organizations. Additionally, consolidations, mergers and acquisitions in the telecommunications and staffing industries have occurred in the past and may occur in the future. The consolidation, merger or acquisition of an existing customer may result in a change in procurement strategies by the surviving entity. Reduced demand for our services or a change in procurement strategy of a significant customer could adversely affect our results of operations, cash flows and liquidity.

There is competition for those private companies suitable for a merger transaction of the type contemplated by management.

We are in a highly competitive market for a small number of telecommunications business opportunities which could reduce the likelihood of implementing our acquisition strategy. We are and will continue to be an insignificant participant in the business of seeking acquisitions in the telecommunications space. A large number of established and well financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of implementing our business strategy.

Failure to integrate future acquisitions successfully could adversely affect our business and results of operations.

As part of our growth strategy, we may acquire companies that expand, complement, or diversify our business. We regularly review various opportunities and periodically engage in discussions regarding possible acquisitions. Future acquisitions may expose us to operational challenges and risks, including the diversion of management’s attention from our existing business, the failure to retain key personnel or customers of an acquired business, the assumption of unknown liabilities of the acquired business for which there are inadequate reserves and the potential impairment of acquired intangible assets. Our ability to sustain our growth and maintain our competitive position may be affected by our ability to successfully integrate any businesses acquired.

Service level agreements in our customer agreements could subject us to liability or the loss of revenue.

Our contracts with customers typically contain service guarantees and service delivery date targets, which if not met by us, enable customers to claim credits against their payments to us and, under certain conditions, terminate their agreements. Our inability to meet our service level guarantees could adversely affect our revenue and cash flow. While we typically have carve-outs for force majeure events, many events, such as fiber cuts, equipment failure and third-party vendors being unable to meet their underlying commitments or service level agreements with us, could impact our ability to meet our service level agreements and are potentially out of our control.

Our backlog is subject to reduction and/or cancellation.   

Our backlog consists of the uncompleted portion of services to be performed under job-specific contracts and the estimated value of future services that we expect to provide under master service agreements and other long-term requirements contracts. Many of our contracts are multi-year agreements, and we include in our backlog the amount of services projected to be performed over the terms of the contracts based on our historical experience with customers and, more generally our experience in procurements of this type. In many instances, our customers are not contractually committed to procure specific volumes of services under a contract. Our estimates of a customer’s requirements during a particular future period may not prove to be accurate, particularly in light of the current economic conditions and the uncertainty that imposes on changes in our customer’s requirements for our services. If our estimated backlog is significantly inaccurate or does not result in future profits, this could adversely affect our future growth and the price of our common stock.

Legislative actions and initiatives relating to telecommunications may not result in an increase in demand for our services. 

The American Recovery and Reinvestment Act of 2009 (“ARRA”) originally allocated $7.2 billion in funding to accelerate broadband deployment in rural areas of the country that have been without high-speed infrastructure. However, we cannot predict the actual benefits to us from the implementation of ARRA programs. For example, significant additional contracts resulting from investments for rural broadband deployment under the ARRA may not be awarded to us.

If we do not adapt to swift changes in the telecommunications industry, we could lose customers or market share.

The telecommunications industry is characterized by rapidly changing technology, evolving industry standards, frequent new service introductions, shifting distribution channels and changing customer demands. We may not be able to adequately adapt our services or acquire new services that can compete successfully. Our failure to obtain and integrate new technologies and applications could impact the breadth of our service portfolio resulting in service gaps, a less differentiated service suite and a less compelling offering to customers. We risks losing customers to our competitors if we are unable to adapt to this rapidly evolving marketplace.

In addition, the introduction of new services or technologies, as the well as the further development of existing services and technologies, may reduce the cost or increase the supply of certain services similar to those that we provide. As a result, our most significant competitors in the future may be new entrants to the telecommunications industry. These new entrants may not be burdened by an installed base of outdated equipment or obsolete technology. Our future success depends, in part, on our ability to anticipate and adapt in a timely manner to technological changes. Failure to do so could have a material adverse effect on our business.

Any failure of our physical infrastructure or services could lead to significant costs and disruptions that could reduce our revenues, harm our business reputation, and have a material adverse effect on our financial results.

Our business depends on providing customers with highly reliable service. The services we provide are subject to failure resulting from numerous factors, including:

 Problems within our network, whether or not within our control, could result in service interruptions or equipment damage. In the past we have at times experienced instability in our equipment attributed to equipment failure and power outages. Although such disruptions have been remedied and the network has been stabilized, there can be no assurance that similar disruptions will not occur in the future. We have service level commitment obligations with substantially all of our customers. As a result, service interruptions or equipment damage could result in credits for service interruptions to these customers. We have at times in the past given credits to our customers as a result of service interruptions due to equipment failures. We cannot assume that our customers will accept these credits as compensation in the future. Also, service interruptions and equipment failures may expose us to additional legal liability.

We are subject to significant regulation that could change or otherwise impact us in an adverse manner.

Our operations are subject to various federal, state and local 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.

Risks Associated with the Staffing Industry

Our staffing business is significantly affected by fluctuations in general economic conditions.

The demand for our staffing services is highly dependent upon the state of the economy and upon staffing needs of our customers. Any variation in the economic condition or unemployment levels of the United States or in the economic condition of any region or telecommunications industry in which we have a significant presence may severely reduce the demand for our services and thereby significantly decrease our revenues and profits.

Our staffing business is subject to extensive government regulation and a failure to comply with regulations could materially harm our business.

Our business is subject to extensive regulation. The cost to comply, and any inability to comply, with government regulation could materially harm our business. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially harm our business.

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Care Reform Laws”) include various health-related provisions to take effect through 2014, including requiring most individuals to have health insurance and establishing new regulations on health plans. Although the Health Care Reform Laws do not mandate that employers offer health insurance, beginning in 2014 penalties will be assessed on certain employers who do not offer health insurance that meets certain affordability or benefit requirements. Unless modified by regulations or subsequent legislation, providing such additional health insurance benefits to our temporary workers, or the payment of penalties if such coverage is not provided, would increase our costs. If we are unable to raise the rates that we charge our customers to cover these costs, such increases in costs could materially harm our business.

We may incur employment related and other claims that could materially harm our business.

We employ individuals on a temporary basis and places them in our customers' workplaces. We have minimal control over our customers' workplace environments. As the employer of record of these temporary workers, we incur a risk of liability for various workplace events, including claims for personal injury, wage and hour requirements, discrimination or harassment, and other actions or inactions of our temporary workers. In addition, some or all of these claims may give rise to litigation including class action litigation. Although we currently believe resolving all of these matters, individually or in the aggregate, will not have a material adverse impact on our financial statements, the litigation and other claims are subject to inherent uncertainties and our view of these matters may change in the future. A material adverse impact on our financial statements also could occur for the period in which the effect of an unfavorable final outcome becomes probable and can be reasonably estimated.

We cannot be certain that our insurance will be sufficient in amount or scope to cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material effect on our business. We cannot be certain we will be able to obtain appropriate types or levels of insurance in the future, that adequate replacement policies will be available on acceptable terms, if at all, or that the companies from which we have obtained insurance will be able to pay claims we make under such policies.

We are dependent on workers' compensation insurance coverage at commercially reasonable terms.

We provides workers' compensation insurance for our temporary workers. Our workers' compensation insurance policies are renewed annually. We cannot be certain that we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms, if at all. The loss of our workers' compensation insurance coverage would prevent us from doing business in the majority of our markets. Further, we cannot be certain that our current and former insurance carriers will be able to pay claims that we make under such policies. These additional sources of capital may not be available on commercially reasonable terms, or at all.

We operate in a highly competitive business and may be unable to retain customers or market share

The staffing services business is highly competitive and the barriers to entry are low. There are new competitors entering the market which may increase pricing pressures. In addition, long-term contracts form only a small portion of our revenue. Therefore, there can be no assurance that we will be able to retain customers or market share in the future. Nor can there be any assurance that we will, in light of competitive pressures, be able to remain profitable or, if profitable, maintain our current profit margins.

Our results of operations could materially deteriorate if we fail to attract, develop and retain qualified employees.

Our performance is dependent on attracting and retaining qualified employees who are able to meet the needs of our customers. We believe our competitive advantage is providing unique solutions for each individual customer, which requires us to have highly trained and engaged employees. Our success depends upon our ability to attract, develop and retain a sufficient number of qualified employees, including management, sales, recruiting, service and administrative personnel. The turnover rate in the staffing industry is high, and qualified individuals of the requisite caliber and number needed to fill these positions may be in short supply. Our inability to recruit a sufficient number of qualified individuals may delay or affect the speed of our planned growth or strategy change. Delayed expansion, significant increases in employee turnover rates or significant increases in labor costs could have a material adverse effect on our business, financial condition and results of operations.

We may be unable to attract and retain sufficient qualified temporary workers.

We compete with other temporary staffing companies to meet our customer needs and we must continually attract qualified temporary workers to fill positions. We have experienced worker shortages in the past and we may experience such shortages in the future. Further, if there is a shortage of temporary workers, the cost to employ these individuals could increase. If we are unable to pass those costs through to our customers, it could materially and adversely affect our business.

Risks Associated with our Securities

A significant number of additional shares of our common stock may be issued upon the exercise or conversion of existing securities, which issuances would substantially dilute existing stockholders and may depress the market price of our common stock.

As of August 7, 2015, we had outstanding shares of Series A, Series A-1, and Series D preferred stock convertible into an aggregate 767,020,414 shares of common stock, outstanding warrants for the purchase of 744,999 shares of common stock, and a note payable convertible into 200,000 shares of common stock. The Series D shares are convertible at a rate of 400 shares of common stock on a pre-reverse-split basis (the equivalent of 20 shares of common stock after the effect of the 1-for-20 reverse stock split) for each preferred stock only upon (a) a sufficient increase in the authorized common shares and (b) the implementation of a 1-for-20 reverse split of the common shares. The issuance of these shares of common stock would substantially dilute the proportionate ownership and voting power of existing stockholders, and their issuance, or the possibility of their issuance, may depress the market price of our common stock.

Our common stock is not listed on a national stock exchange or quoted on an interdealer quotation system and the trading market in our common stock is limited. The foregoing may make transactions in our stock cumbersome and negatively impact the liquidity of our stock which may reduce the value of an investment therein.

On August 20, 2014, the SEC announced that trading in our common stock would be temporarily suspended due to our failure to file periodic reports with the SEC since the period ended June 30, 2012. Prior to the suspension, our common stock was not listed on a national stock exchange but was quoted on the OTC Markets – Pink Sheets. Currently, our common stock is not listed, traded or quoted on any national stock exchange or on the OTC Markets. Since there is no established trading market for our stock, bid, ask and other trading data are currently unavailable for our common stock. In addition, since our securities are not traded or quoted on an exchange or interdealer quotation system, investor’s bids and offers are not collected in a central place so there is diminished market transparency and execution of orders may be difficult. These factors may negatively impact the liquidity of our common stock.

ITEM 2. FINANCIAL INFORMATION

The following data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and our consolidated financial statements and related notes thereto included elsewhere in this registration statement.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a U.S. based provider of international and regional telecommunications and technology systems, specializing in the design, engineering, installation, construction and maintenance of telecommunications and technology networks and infrastructure. We also offer managed information technology, telecommunications services, subscriber based services and staffing solutions through our wholly owned subsidiaries:

Beacon Merger

On June 19, 2013, we consummated the Beacon Merger, pursuant to the Merger Agreement. Following the Beacon Merger, we changed our name to “FTE Networks, Inc.” For accounting purposes the Beacon Merger has been treated as an acquisition of Beacon and a recapitalization of the Company. The historical consolidated financial statements prior to June 19, 2013, are ours. In connection with the Beacon Merger, we have restated our statement of stockholders’ deficiency on a recapitalization basis so that all equity accounts are now presented as if the recapitalization had occurred as of the beginning of the earliest period presented.

Pursuant to the terms of Merger Agreement, our former stockholders were issued an aggregate of 1,250,011 shares of Beacon Series D Preferred Stock in exchange for their shares of Focus common stock and Series B preferred stock; all outstanding Focus Series A preferred stock were converted to an aggregate number of 1,000,000 Beacon Series E preferred 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.

Recent Business Developments

On May 12, 2014, the Company entered into an exclusive Factoring Agreement ("the AmeriFactors Agreement") with AmeriFactors Financial Group, LLC (AmeriFactors). The one year agreement between the Company and AmeriFactors provides for AmeriFactors to purchase up to $7,000,000 the Company's qualified net accounts receivable on a recourse basis during the term of the AmeriFactors Agreement, and is renewable on a year to year basis. Unpaid accounts receivable purchased by AmeriFactors cannot exceed $3,000,000 at any time. Under the terms of the AmeriFactors Agreement, the Company receives 85% of the net sale amount up front, plus additional conditional consideration upon the collection of the receivable. The AmeriFactors Agreement will automatically renew on May 12, 2015, unless proper notice of cancellation is given by either party. As of March 31, 2015 and September 30, 2014 under the AmeriFactors Agreement, the Company had factored receivables in the amount of $940,731and $1,162,062, respectively and recorded a liability of $799,674 and $984,236, respectively, which is included as a component of accrued expenses and other current liabilities on the accompanying consolidated balance sheets. Discounts provided and interest charged related to factoring of the accounts receivable have been expensed on the accompanying combined statements of operations as interest expense.

October 6, 2014, the Company entered into an exclusive Factoring Agreement ("the Gibraltar Agreement") with Gibraltar Business Capital, LLC (Gibraltar). The initial term of the Gibraltar Agreement is one year, and is renewable on a year to year basis. Unpaid accounts receivable purchased by Gibraltar cannot exceed $250,000 at any time. Under the terms of the Gibraltar Agreement, the Company receives on a recourse basis advances of up to 85% of the net sale amount. The Company has no factored receivables, or liabilities related to the Gibralter Agreement as of March 31, 2015.

During the period ended March 31, 2015, FTE Networks began the formation of its Business Development team with the addition of Carli Ancor as Chief Marketing Officer. The efforts of the business development team have added new clients and business to the work mix, providing client diversification and opening up new geographies domestically.

Our staffing segment began generating revenues during the six months ended March 31, 2015, and continues to add new revenue with steady growth.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. Our most significant estimates relate to our allowances for receivables, taxes and equity issuances.

Revenue and Cost of Goods Sold Recognition

Generally, including the staffing business, revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the price to the buyer is fixed or determinable, and (4) collectability is reasonably assured.

Due to the short term nature of our construction contracts, revenue is recognized once 100% of a contract segment is completed. A contract may have many segments, of which, once a segment is completed; the revenue for the segment is recognized and no further obligation exists. The Network’s construction contracts or segments of contracts typically can range from several days to two to four months. Contract costs may be billed as incurred. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools and repairs. Selling, general and administrative costs are charged to expense as incurred. We begin recognizing revenue on a project as project costs are incurred and revenue recognition criteria are met.

Provisions for losses on uncompleted contracts are made in the period such losses are known. Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions, changes in raw materials costs, and final contract settlements may result in revisions to revenue, costs and income and are recognized in the period in which the revisions are determined.

Valuation of Long-lived Assets

We evaluate our long-lived assets for impairment in accordance with related accounting standards. Assets to be held and used (including projects under development as well as property and equipment), are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we first group our assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the “asset group”). Secondly, we estimate the undiscounted future cash flows that are directly associated with and expected to arise from the completion, use and eventual disposition of such asset group. We estimate the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. There were no impairments during the periods presented.

Income Taxes

We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Fair Value of Financial Instruments

We base our fair value determinations of the carrying value of financial assets and liabilities on an evaluation of their particular facts and circumstances and valuation techniques that require judgments and estimates. Valuation techniques used to measure fair value maximize the use of relevant observable inputs and minimize the use of unobservable inputs. The fair value hierarchy gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the valuation technique.

The carrying amounts reflected in the combined balance sheets for cash, accounts receivable, accounts payable and accrued liabilities, and promissory notes approximate the respective fair value due to the short maturities of these items.

Segment Reporting

We operate in the telecommunications infrastructure services industry and, effective May 8, 2014, entered the staffing industry. The following table summarizes financial information regarding our business segments during three and six months ended March 31, 2015. The staffing segment was in the development stage during the year ended September 30, 2014 and generated negligible revenues and expenses during that period.

Discussion of Operation Results for the Three Months ended March 31, 2015 and 2014

Overview

We reported a consolidated net loss attributable to common shareholders of $749,188 and $282,450 during the three months ended March 31, 2015 and 2014, respectively, reflecting an increase in net loss of $466,738, primarily related to a decrease in gross profit of $360,232 and increases in operating expenses of $40,165.

Revenues and Gross Profit

We had overall revenues of $3,347,814 for the three months ended March 31, 2015, as compared to revenues of $3,782,821 for the three months ended March 31, 2014, resulting in a decrease of $435,007 or 11% The revenues related to our staffing segment of approximately $1,438,000 since January 2015 partially offset the reduced revenue streams from the telecommunications segment. Due to the fact that the majority of our telecommunications revenues are non-recurring, project-based revenues, it is not unusual for there to be significant period-to-period shifts in revenues and customer concentrations. (See “Customer Relationships” on page 12, above.) Revenues generated by the staffing segment were negligible during the three months ended March 31, 2014, since the staffing segment was in the development stage during this period.

The $360,232 or 37% decrease in gross profit in the current quarter from the prior year comparative quarter resulted from reduced revenues and a shift in revenue mix from the telecommunications segment to the staffing segment, which generates lower margins.

Operating Expenses

We reported operating expenses of $1,117,208 and $1,077,043 for the three months ended March 31, 2015 and 2014, respectively, representing an increase of $40,165 or 4%. Compensation expense in the quarter ended March 31, 2015 decreased from the comparable quarter in 2014 by $374,435 or 46%, resulting from workforce level reductions period over period. Conversely, selling, general, and administrative expenses increased $360,193 or 217%, due to incremental expenses incurred for a complete two-year audit and the preparation of the Form 10, as well as increased selling and business development costs in the current period related to the formation of a business development team focused entirely on business development with significant activity, resulting in new clients, new business and new markets. (See Recent Business Developments on page 26, above).

Operating Income

Operating losses increased by $400,397, from a loss of $100,367 for the three months ended March 31, 2014 to a loss of $500,764 for the three months ended March 31, 2015. The reduction in gross revenues and increase in operating expenses described above, combined with the shift in business to our staffing segment, which generates lower margins, resulted in the increase in operating losses. 

Other Income and Expense

Interest expense, net, increased to $233,507 during the three months ended March 31, 2015, from $162,192 during the same period of the previous year. The increase of $71,315, or 44%, resulted primarily from an increase in factor fees.

Discussion of Operation Results for the Six Months ended March 31, 2015 and 2014

Overview

We reported consolidated net loss attributable to common shareholders of $549,423 for the six months ended March 31, 2015, compared to net income of $1,866,269 for the six months ended March 31, 2014. The increase in gross profit of $232,333 and decrease in compensation expense of $195,862 was offset by an increase in selling, general, and administrative costs of $556,522 as described below. Further, we reported $2,748,158 of other income related to forgiveness of debt during the six months ended March 31, 2014 related to the cancelation of a term loan agreement, which did not recur in 2015.

Revenues and Gross Profit

We had overall revenues of $6,291,849 for the six months ended March 31, 2015, as compared to revenues of $6,657,946 for the six months ended March 31, 2014, resulting in a decrease of $366,097 or 5%. Significant new telecom opportunities were not pursued during the 2015 period as the Company continued to work through multiple options for new debt and equity financing to fund the startup of such opportunities. During the same period, the Company increased staffing revenues to maintain a relatively flat revenue stream.

Our gross margin during the six months ended March 31, 2015 increased by $232,333, or 14% from the same period of the prior year, despite a $366,097 revenue decline, as a result improved margins in our telecommunications segment related to a change in customer mix during the first quarter of our fiscal year. The improved margins were primarily due to the loss of a major low margin customer and the addition of customers yielding higher margins.

Operating Expenses

We reported operating expenses of $1,868,150 during the six months ended March 31, 2015, as compared to $1,493,213 for the six months ended March 31, 2014, reflecting an increase of $374,937 or 25%. The increase in operating expenses was due to an increase in selling, general, and administrative costs of $556,522 or 169%, due to extraordinary expenses incurred for a complete two-year audit and the preparation of the Form 10, as well as increased selling and business development costs in the current period related to the Company’s increased focus on business development with significant activity, resulting in new clients, new business and new markets. (See Recent Business Developments on page 26, above). The increase in selling, general and administrative expenses was partially offset by a decrease in compensation costs of $195,862 or 21% as a result of workforce reductions.

Operating Income

Operating income decreased by $142,604, from income of $116,695 for the six months ended March 31, 2014 to a loss of $25,909 for the six months ended March 31, 2015. The increase in gross margin as described above was offset by an increase in operating expenses as previously described, resulting in decreased operating income. 

Other Income and Expense

For the six months ended March 31, 2015, interest expense decreased $462,099, or 48%, from the six months ended March 31, 2014 resulting from a decrease in debt balances, and the amortization of debt discounts during 2014.

During the six months ended March 31, 2014, we recorded a one-time gain on the forgiveness of debt of $2,748,158 related to the cancelation of a term loan agreement, which did not recur in 2015.

Discussion of Operation Results, years ended September 30, 2014 and 2013.

Overview

We reported consolidated net income attributable to common shareholders of $435,957 for the year ended September 30, 2014, as compared to a net loss attributable to common shareholders of $5,991,228 for the year ended September 30, 2013 reflecting a change of $6,427,185 or 107%. The decrease in gross margin from 2013 to 2014 of $3,553,493, resulting from the loss of a major client, was offset by $4,316,710 of decreases in operating expenses as described below, $2,748,158 income from forgiveness of debt during 2014, decreases in interest expense of $1,258,474 resulting from a decrease in debt balances and factor fees during 2014, and a decrease of $2,125,537 resulting from other financing fees in 2013, and decreases in losses from discontinued operations of $575,641, resulting from certain dispositions during 2013.

Revenues

We had overall revenues of $16,932,031 for the year ended September 30, 2014, as compared to revenues of $33,914,555 for the year ended September 30, 2013, resulting in a decrease of $16,982,524 or 50%. The decrease was primarily related to the loss of our largest low margin customer which provided revenues of approximately $21 million during 2013, partially offset by increases in revenues provided by several of our smaller higher margin customers. 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. (See “Customer Relationships” on page 11, above.)

Operating Expenses

We reported operating expenses of $5,258,549 and $9,575,259 for the years ended September 30, 2014 and 2013, respectively, reflecting a decrease of $4,316,710 or 45%. The decrease in operating expenses was primarily due to, (i) a 2013 loss on the disposal of those assets during 2013 of $1,476,783, (ii) $969,917 or 83% decrease in occupancy costs related to the reduction of leased property locations during 2014 (iii) $52,823 or 17% reduction in transaction expense related to the reverse merger in 2013; (iv) $737,369 (73%) decrease in travel expenses, and (v) a $1,049,039 or 47% decrease in general and administrative expense resulting from (a) decreases in depreciation and amortization of $351,359 or 90%, resulting from the disposition of assets in 2013, as well as a significant decrease in number of field employees and the scaling back of operations after the loss of a major client in 2013.

Operating Loss

Our gross profit decreased by $3,553,493, from $7,964,342 for the year ended September 30, 2013 to $4,410,849 for the year ended September 30, 2014, due to the loss of a major customer. This decrease was partially offset by a decrease in operational expenses of $4,316,710 as discussed above, resulting in a 47% decrease in operating loss from $1,610,917 to $847,700 for the years ended September 30, 2014 and 2013, respectively.

Discontinued Operations

On June 19, 2013, the Company sold its entire member interest in MDT. Under the terms of the agreement the Company (through its wholly owned subsidiary, Optos), received total consideration of approximately $15.0 million, consisting of the assumption of approximately $14.2 million of debt and related interest as well as the relinquishment of the buyers’ shares of interest in Focus with a carrying value of $841,320.

The Company recorded a gain on the sale of MDT of $4,475,250 which is reflected in the accompanying consolidated statement of operations for the year ended September 30, 2013.

On June 19, 2013, the Company (through its wholly owned subsidiary Focus Fiber Solutions) also sold principally all of the assets and liabilities, including but not limited to the accounts receivable, customer contracts, accounts payable, and other liabilities relating to the operations of a large customer to a third party, which accounted for principally all of the subsidiary operations. The terms of the Asset Purchase Agreement (the “APA”) provided the conveyance of assets by Focus Fiber in the amount of $3,916,713 and the assumption of certain accounts payable and other obligations in the amount of $5,395,194, resulting in a gain on the disposition of this portion of the Company operations which it discontinued of $1,478,481.

The Company has accrued liabilities related to the APA totaling $1,278,226 for legal claims against the Company for the non-payment of certain unrecorded obligations and uncollected accounts receivable conveyed to or assumed by the third party. These claims reduced the gain on disposition to $200,255 (from the original gain of $1,478,481).

The gain of $200,255 on the disposition of this portion of the Company operations is reflected in the accompanying consolidated statement of operations for the year ended September 30, 2013.

The Company also discontinued the insignificant operations of Townsend Careers, LLC and CMK Resources Group, Inc. during the year ending September 30, 2013, without any sale or conveyance to a third party. As there were no assets or liabilities in these companies, no gain or loss is reflected within the consolidated statement of operations for the year ended September 30, 2013.

Liquidity and Capital Resources

Overview

For the fiscal years ended September 30, 2014 and 2013 the Company incurred negative cash flows from operations of approximately $2.1 million and $6.6 million, respectively. In addition, the Company has a working capital deficiency of $9.4 million as of March 31, 2015. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amount and classification of recorded assets and liabilities should the Company be unable to continue operations.

Management's plans are to continue to raise additional funds through the sales of debt. Specifically, management plans to increase liquidity and enhance capital resources by attempting to complete negotiations for a $6 million asset-based line of credit and by attempting to complete the refinancing of $3.5 million of senior secured notes.

There is no assurance that additional financing will be available when needed or that management will be able to obtain and close financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful.

Accounts Receivable Considerations

Accounts receivable billed to customers for construction contracts are generally billed based upon the terms of a master services agreement or similar agreement (the “MSA”), which allows the customer to award a large construction contract, which can span a period of several years, in segments (or subprojects), with each segment representing a portion of the project that can be started and completed within a several weeks or less. The MSA may contain provisions for retention to allow for the payment of a portion of billings to be withheld by the customer until the entire construction project has been completed and all necessary approvals are obtained. The related receivable is known as a Retainage Receivable. Retainage Receivables represent the portion of revenues earned by us for work performed, but held for payment by our customer as a form of security until other portions of the related contracts have received final acceptance and approval.

During 2014, the average collection period for our accounts receivable increased, as we lengthened payment terms, by granting payment terms of up to 60 to 75 days for our largest customers, and due to the increase in Retainage Receivables from $427,867 at September 30, 2013 to $1,053,451 at September 30, 2014 and at March 31, 2015. Retainage balances are generally collected within three to nine months after the related contracts have received final acceptance and approval, depending on the time required for the customer to process the final project documentation. Our allowance for uncollectible receivables is management’s best estimate of uncollectible amounts; further, the allowance for uncollectible receivables at September 30, 2014 and 2013 was established with the benefit of hindsight and a retrospective review by management after the first quarter of the following year, and uncollectible accounts which would have previously been reserved for were written off.

Notes Payable Considerations

The Company has suspended payments to the Senior Secured Note holders pending the completion of the anticipated refinancing described in the first paragraph of this section. The holders of an aggregate $3.5 million of Senior Secured Notes (the “Senior Secured Noteholders”) entered into forbearance agreements (the “Forbearance Agreements”) in April 2013 that allowed the Company to temporarily suspend debt service payments (no required payments of principal or interest), and to obtain the Senior Secured Noteholders’ waiver of any “Event of Default” arising out of the Company’s failure to make payments originally scheduled under the terms of the notes. The Forbearance Agreements do not subordinate the senior secured status of the notes to any lender, current or future, except to those notes that specifically refinance all or a portion of the Senior Secured Notes. In January 2015, the Forbearance Agreements were amended to provide additional time to comply with the terms of those agreements in exchange for the issuance of common stock of FTE Networks, Inc. During April 2015, the Company granted 5,115,562 shares of its common stock to the Senior Secured Noteholders as an incentive for executing the Amended Forbearance Agreements on their respective notes. Pursuant to the terms of the Amended Forbearance Agreements, a portion of the proceeds of the contemplated financing is expected to be used to make principal payments to the Noteholders. All Senior Secured Note holders have executed the aforementioned Amended Forbearance Agreements.

The Company suspended payments to two non-senior secured note holders pending the completion of the anticipated refinancing described within the first paragraph of this section. The holders of these notes, totaling $709,000, entered into forbearance and modification agreements substantially the same as the agreements and amendments with the Senior Secured Noteholders.

The Company suspended payments on all unsecured notes payable totaling $734,574 pending the completion of the refinancing described within the first paragraph of this section. The Company’s inability to service these debts and the default arising out of the Company’s failure to make payments originally scheduled under the terms of these notes has had no material impact on the operations of the Company. To date, the unsecured note holders have not taken any action to demand payment; however, there can be no assurance that these note holders will not take action for immediate payment of these notes in the future.

The Company has continued to service those notes payable that are secured by specific assets under the financing agreements entered into by the Company at the time those specific assets were purchased.

Cash Flows for the Six Months ended March 31, 2015 and 2014

Cash Used by Operating Activities

Net cash provided by operating activities was $13,099 during the six months ended March 31, 2015 as compared to cash used in operating activities of $811,035 during the six months ended March 31, 2014. For the six months ended March 31, 2015, cash used by operating activities was primarily attributable to a net loss of $509,642 adjusted for non-cash activities of $81,043, offset by $441,698 cash used by changes in the levels of operating assets and liabilities. For the six months ended March 31, 2014, cash used in operating activities of $811,035 was primarily attributable to net income of $1,906,050 adjusted for non-cash expenses of $489,943 and reduced for non-cash income for gain on forgiveness of debt of $2,748,158 as well as $458,870 of cash used by changes in the levels of operating assets and liabilities.

Cash Used by Investing Activities

We used $70,725 cash in investing activities during the six months ended March 31, 2015, as compared to cash provided from $2,235 in net cash proceeds from equipment sales during the prior year quarter. Cash used in investing activities was primarily related to purchases of property and equipment.

Cash Provided by Financing Activities

Cash provided by financing activities was $205,136 during the six months ended March 31, 2015, as compared to $776,030 during the six months ended March 31, 2014, representing a decrease of $570,894. During the six months ended March 31, 2015, cash provided by financing activities consisted principally of proceeds from the issuance of preferred stock of $600,000, offset by payments (net) on our factor lines of credit and payments on related party notes payable of $210,302. During the six months ended March 31, 2014, cash proceeds were derived from the issuance of notes payable of $697,051 and proceeds from repayment of subscriptions receivable for preferred stock of $96,752, offset by payments on related party notes payable of $17,773.

Cash Flows for the years ended September 30, 2014 and 2013

Cash Used by Operating Activities

Net cash used by operating activities was approximately $2.1 million during the year ended September 30, 2014 as compared to approximately $6.6 million during the year ended September 30, 2013. For the year ended September 30, 2014, cash used by operating activities was primarily attributable to net income of $515,518 adjusted for non-cash items of $907,850 and reduced for non-cash income for gain on forgiveness of debt of $2,748,158, offset by $769,205 of cash used by changes in the levels of operating assets and liabilities. For the year ended September 30, 2013, cash used in operating activities was primarily attributable to the net loss of $5,863,412 adjusted for non-cash expenses of $2,838,703 and reduced for non-cash income for gain on the sale of discontinued operations of $4,675,505 as well as $1,142,959 of cash used by changes in the levels of operating assets and liabilities.

Cash Used by Investing Activities

We used $0.02 million cash in investing activities during the year ended September 30, 2014, as compared to $3.9 million cash in investing activities during the prior year. We used $0.02 million and $0.9 million related to purchases of property and equipment in the years ended September 30, 2014 and 2013 respectively. During the year ended September 30, 2013, we used approximately $3.0 million of cash related to the acquisition of MDT.

Cash Provided by Financing Activities

Cash provided by financing activities was approximately $2.1 million during the year ended September 30, 2014, as compared to approximately $9.9 million during the year ended September 30, 2013, representing a decrease of $7.8 million. During the year ended September 30, 2014, we received cash proceeds of $0.9 million from the issuance of notes payable, and $0.6 million in connection with the sale of preferred stock, partially offset by payments on notes payable of $0.4 million. During the year ended September 30, 2013, we received approximately $10.5 million from the issuance of notes payable, net of payments thereon, and approximately $1.1 million proceeds from the sale of preferred stock, partially offset by payments on factor lines of credit of approximately $1.7 million.

Off Balance Sheet Arrangements

None.

ITEM 3. PROPERTIES

Our executive offices are located at 5495 Bryson Drive, Suite 423, Naples, Florida, 34109 and our telephone numbers is (877) 878-8136. Our subsidiaries lease one additional office/warehouse facility, as well as two additional office locations throughout the United States and Ireland. Our website is www.fte.net. Our subsidiaries each maintain separate websites including www.ftenetworkservices.com and www.fvpworx.com. The table below summarizes our leased properties:

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of August 7, 2015, certain information concerning beneficial ownership of shares of our common stock with respect to (i) each person known to us to own 5% or more of the outstanding shares of our common stock, (ii) each director of our company, (iii) the executive officers of our company, and (iv) all directors and officers of our company as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of Common Stock that are currently exercisable or exercisable within 60 days hereof are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

The following table sets for information regarding the members of our Board and our executive officers.

Set forth below is a biographical description of each of our directors and senior executive officers based on information supplied by each of them. There are no family relationships between any of our directors or executive officers.

Michael Palleschi, Chief Executive Officer; Chairman of the Board of Directors

Mr. Michael Palleschi currently serves as the Chief Executive Officer and Chairman of the Board of Directors of FTE Networks since being appointed in January 2014. Mr. Palleschi has over 16 years of experience in the telecom industry and in his current position as CEO, he is taking a hands on approach of overseeing day-to-day operation for all core business structures. Responsibilities include supervising the managerial team, ensuring project efficiency from on-boarding to completion, maintaining corporate communication, new business development, office advancement, vendor and client relations, corporate compliance continuance, procurement and contracts, and operations budget management.

As customer focused and results driven executive, he has a proven talent for harnessing cutting-edge technology to strengthen corporate systems and maximize operations. He is an established business cultivator that has aggressive experience in managing small to large firms, through the period of company launch to multi-million dollar success and has done so in highly technical fields. With his expert knowledge in developing and delivering communications networks, he has maintained a reputable record of aligning corporate processes with the company growth strategy.  His core competency is based on streamlining operations, improving service-delivery efficiency and enhancing the bottom line. Being a decisive, results-driven project and program leader he has remained committed to reducing costs and increasing ROI through constant technical innovation.

Mr. Palleschi joined FTE Networks in October, 2010 where he served as COO of Focus Venture Partners, which featured investments in growing telecom companies including Focus Fiber Solutions, JusCom and Townsend Careers. Prior to Focus Venture Partners, from June 2007 until 2010, he was the Director of Infrastructure Services for South Florida facilities based Telecommunications Company start up. From 2000 to 2007, he held several Senior Management roles at Level 3 Communications in New York and Georgia. Prior to that, Mr. Palleschi held several Sr. Management/Executive roles at major telecommunications companies such as Qwest Communications and MCI. Mr. Palleschi holds multiple degrees in both Engineering and Business Management. Mr. Palleschi also holds several professional and technical certifications.

David Lethem, Chief Financial Officer

Mr. David Lethem was named Chief Financial Officer of FTE in June 2014.  He is responsible for the financial management of the Company.  Mr. Lethem was originally hired by FTE in April 2014 as VP of Corporate Compliance.

Prior to joining FTE, Mr. Lethem was the Director of Finance and Audit for Audit Management Solutions, Incorporated since November of 2007.  He was directly responsible for the financial, operational, and audit management of both public and private companies during that time, working the banking, telecommunications, mobile marketing, manufacturing, and finance sectors.  Additionally, his experience during that time involved reverse mergers, SEC compliance, international operations, and technical accounting matters.

Mr. Lethem earned his Bachelor of Arts degree at the University of Dubuque, his MBA from California Coast University, and holds his CIA and CRMA from the Institute of Internal Auditors.

John Klumpp, Chief Strategy Officer

Mr. John Klumpp joined FTE Networks as a board member in June 2014 and subsequently joined in an executive role on September 2014 as the Chief Strategy Officer of FTE Networks. Previously Mr. Klumpp served in management roles in operations and technology in the banking industry.   From August 2008 to March 2010, Mr. Klumpp held the position of Chief Information Officer and SVP at Bank of Florida. In this role, Mr. Klumpp led the development of a premier Treasury Management product solution and deliver platform, managed the three bank holding company IT assets and staff, and led the adoption and implementation of cutting edge technologies including VOIP and virtualization. From March 2010 to June 2012 Mr. Klumpp was IT Director and a senior vice president at Florida Community Bank where he led development and integration teams that successfully merged and integrated eight separate bank acquisitions into a single consolidated banking platform in south Florida. From June 2012 to June 2014 Mr. Klumpp was Chief Information Officer and a senior vice present at First Southern Bank, where he led re-engineering efforts for back office operations, architected and implemented upgraded technology platforms, charted and chaired the Information Technology Steering Committee, and championed multiple product enhancements and deployments. His success has been in aligning the corporate strategy with technology and implementing the solutions and platforms that reduce the cost of IT while significantly improving the functionality and reliability of those systems.  Mr. Klumpp has consistently led and managed the implementation of technology infrastructure and front end delivery systems that met all regulatory guidelines, security standards and satisfied customer needs on time and on budget.

Mr. Klumpp’s career in the Florida community banking market is marked by rapid expansion through merger and acquisition activity, process re-engineering, staff leadership, core systems conversions, network design and build out, large scale systems deployments and early adopter in cloud technology. Mr. Klumpp’s success in the corporate environment is his ability to communicate strategy and vision.

Mr. Klumpp received his BA in Finance from the University of Alabama, Birmingham, in 1984 and continued his education at LSU Graduate School of Banking. He was a past board member of the American Diabetes Association, Loan Executive with the United Way and participant in Habitats for Humanity. He currently resides in Naples, FL.

John Wood, Chief Operating Officer; President FTE Network Services

Mr. Wood has served as President of FTE Network Services from October 2013 to present.  Mr. Wood assumed the duties of Chief Operating Officer in December of 2014. With 37 years of experience in the telecom industry, Mr. Wood in using his strong background in communication construction, project management, engineering, and customer relations, has worked with customers to bring cost effective and quality solutions to their business needs. Strong communication skills and personal attention to detail has enabled John to maintain positive relationships with customers and foster growth opportunities. Corporate responsibilities include maintaining profitability, compliance to industry standards and practices, employee retention and training, and organic growth of customer base. Prior to FTE Network Services, Mr. Wood served as Senior Vice President of ID Consulting Solutions, LLC from August 2012 to October 2013. From October 2010 to August 2012, Mr. Wood served as the National Director of Operations for Focus Fiber Solutions, LLC, which became a subsidiary of FTE Networks during his tenure. Prior to that, Mr. Wood served as the Vice President of Construction for JDH Construction from 2008-2010.

Mr. Wood served in the Marine Corps as a Warrant Officer prior to beginning his telecommunications career.

Carlie Ancor, Chief Marketing Officer

Carlie Ancor began his tenure as the Chief Marketing Officer for FTE Networks Inc. in January 2015.  He is responsible for global marketing, product management and the customer experience.

From 2008-2014, Mr. Ancor was managing director at Emerge Technology Solutions for Europe, the Middle East and Africa based in the United Arab Emirates where he was responsible for business development and growth, technology optimization, operational execution and quality of customer experience.  Prior to that, Mr. Ancor was an Executive Vice President for core IP and optical network development at Level 3 Communications in North America and Western Europe.

Board and Board Committees

Our business, property and affairs are managed by or under the direction of the Board of Directors (the “Board”). There are currently two members of the Board: Michael Palleschi (Chairman) and John Klumpp.

The Board has formed the following committees: audit, compensation, and nomination/corporate governance. The Board has adopted charters for all of the committees. All of the members of the Board serve on each of the committees. Currently, the Company has no independent directors.

Code of Ethics

We have adopted a code of ethics to apply to our principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. Our code of ethics is attached via reference as set forth under Item 15 herein.

ITEM 6. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets for information regarding compensation earned by our named executive officers:

Outstanding Equity Awards at Fiscal Year End

As of September 30, 2014, we did not have any equity incentive plan awards outstanding.

Employment Agreements

On February 11, 2013, FTE Networks entered into an Employment Agreement with Theresa Carlise whereby Ms. Carlise agreed to serve as the Chief Financial Officer at an annual salary of $120,000 per year. Ms. Carlise resigned from the Company on May 14, 2014. The Company extended an agreement with Ms. Carlise to provide additional support on a contract basis through February 28, 2015.

On October 14, 2013, FTE Networks entered into an employment agreement with John Wood whereby Mr. Wood agreed to serve as our Chief Operating Officer and President of our subsidiary FTE Network Services in consideration of a salary of $162,500 per year, with standard employee insurance and other benefits.  The employment agreement commenced on October 14, 2013 and ends on October 14, 2016, after which it is renewable on a year to year basis, until terminated by either party with 30 days written notice.

On June 2, 2014, FTE Networks entered into an employment agreement with David Lethem whereby Mr. Lethem agreed to serve as our Chief Financial Officer in consideration of a salary of $120,000 per year, with standard employee insurance and other benefits.  The employment agreement commenced on June 2, 2014 and ends on June 2, 2016, after which it is renewable on a year to year basis, until terminated by either party with 30 days written notice.

On June 2, 2014, FTE Networks entered into an employment agreement with John Klumpp whereby Mr. Klumpp agreed to serve as a member of the Board of Directors, and subsequently our Chief Strategy Officer in consideration of a salary of $180,000 per year, with standard employee insurance and other benefits.

On June 13, 2014, FTE Networks entered into an employment agreement with Michael Palleschi whereby Mr. Palleschi agreed to serve as our Chief Executive Officer in consideration of a salary of $250,000 per year, with standard employee insurance and other benefits.  The employment agreement commenced on June 13, 2014 and ends on June 13, 2017, after which it is renewable on a year to year basis, until terminated by either party with 30 days written notice.

Grants of Plan Based Awards

We did not make any plan based equity or non-equity awards grants to named executives during the years ended September 30, 2014 and 2013.

Option Exercises

There were no options exercised by our named officers during the years ended September 30, 2014 and 2013.

Compensation of Directors

Director Compensation

The following table sets forth a summary of the compensation earned by each director who served on the Board during the fiscal year ended December 31, 2014.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The following is a description of transactions during the years ended September 30, 2014 and 2013 in which the transaction involved a material dollar amount and in which any of our directors, executive officers or holders of more than 5% of our common stock and preferred stock on an as-converted basis had or will have a direct or indirect material interest, other than compensation which is described under "Executive Compensation." Management believes the terms obtained or consideration that was paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arms' length transactions:

On January 14, 2014, TBK327 Partners, LLC, an affiliate of FTE under the common control of one of our major shareholders, Christopher Ferguson, entered into a promissory note with us in the principal amount of $177,302. The note accrues interest at 6% per annum, and matures on October 1, 2016. The Company made principal payments of $10,000 during March 2014 and $10,000 during April 2014. No interest has been paid on this note. The outstanding principal balance as of August 7, 2015 is $157,302.

On May 16, 2014, TBK327 Partners, LLC entered into a promissory note with us in the principal amount of $80,000. The note accrues interest at 6% per annum and matures twelve months from the date of issuance. The Company has not made any principal or interest payments on this note to date. The outstanding principal balance on the note as of August 7, 2015 is $80,000.

On December 31, 2013 and May 16, 2014, TLP Investments, which is controlled by the spouse of our chief executive officer, entered into promissory notes with us in the principal amount of $195,500 (the “December Note”) and $50,000 (the “May Note”), respectively. The notes bear interest at 6% per annum and are due twelve months from the date of issuance. During 2014, the Company paid principal and interest on the December Note, in the aggregate, of $30,896 and $4,650, respectively, and paid $4,303 of principal on the May Note. The December Note and the May Note were paid in full during the second quarter of fiscal 2015; there is no principal balance outstanding on these notes as of August 7, 2015.

The Chief Executive Officer personally guaranteed several obligations of the Company during fiscal 2014 and during the first half of 2015. The CEO established a personal credit card account for the purchase of goods and services by FTE. While the credit card balances are reflected in the Company’s books and records, the CEO is personally liable for the payment of the entire amount of the open credit obligation, which has been as high as $75,000.  As of August 7, 2015 the outstanding balance on this account is approximately $50,000. Additionally, we have entered into several secured equipment financing arrangements in the first half of 2015 with total obligations of approximately $240,000. The financing terms of these arrangements required the guaranty of a company officer, which was provided by the CEO.

During 2014, the company entered into factoring agreements subject to and agreed-upon based, in part, on the guarantees of the Company, and its Chief Executive Officer and the President of FTE Network Services. Both officers provided the form of guaranty requested by the factoring company.

Director Independence

Our Board of Directors has undertaken a review of its composition and the independence of each director. Based on the review of each director's background, employment and affiliations, including family relationships, the Board of Directors has determined that there are no “independent directors” under the rules and regulations of the SEC. In making this determination, our Board of Directors considered the current and prior relationships that each non-employee director has with the Company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock. Michael. Palleschi and John Klumpp are not deemed independent as a result of their service as our Chief Executive Officer and Chief Strategy officer, respectively, as described in Item 5.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our Company during the last two fiscal years is or has been indebted to our Company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

ITEM 8. LEGAL PROCEEDINGS

The Company is involved in litigation claims arising in the ordinary course of business, including:

Michael Martin and Paris Arey vs. Beacon Enterprise Solutions Group, Inc. and MDT Labor, LLC, et al.

Complaint filed October 19, 2012 (amended November 6, 2013) in Jefferson Circuit County, Kentucky Circuit, Docket No. 12CI-05572.

Michael L. Martin and Paris G. Arey are plaintiffs. Beacon Enterprise Solutions Group, Inc. (“BESG”), MDT Labor, LLC d/b/a MDT Technical (“MDT”), Bruce Widener, and Michael Traina are defendants.

Plaintiffs Michael L. Martin and Paris G. Arey are former employees of Beacon Enterprise Solutions Group, Inc. and MDT Labor, LLC d/b/a MDT Technical. Bruce Widener, and Michael Traina, former officers of said companies, are also defendants. Plaintiffs’ claims are primarily for severance and change in control bonuses under certain employment agreements. The case is being defended by the Company’s D&O insurance carrier, with reservations.

Relief sought is approximately $570,000 ($190,000 under the severance claims and $380,000 under the change of control claims).

Roadsafe Traffic Systems, Inc. v. Focus Fiber Solutions, LLC, et al vs. Zayo Group.

Complaint filed February 10, 2014 in the State of Arizona, Maricopa County, Docket No.: CV2014-090231.

Plaintiff Roadsafe Traffic Systems, Inc., a services vendor, made breach of contract and other claims against defendants Focus Fiber Solutions, LLC, and Zayo Bandwidth, LLC.

Relief sought is approximately $139,932.

This claim is subject to indemnification from ProFiber Solutions, LLC and MDT Labor, LLC under the Asset Purchase Agreement and related documents dated June 19, 2013. See FTE Networks, Inc, et al v. ProFiber Solutions, LLC, MDT Labor, LLC et al.

FTE Networks, Inc, et al v. ProFiber Solutions, LLC, MDT Labor, LLC et al

Praecipe to Issue Writ of Summons filed June 18, 2015, Commonwealth of Pennsylvania, Philadelphia County, CCP June 2015 Term, Case No. 00255.

Plaintiffs FTE Networks, Inc., formerly d/b/a Beacon Enterprise Solutions Group, LLC, Focus Fiber Solutions, LLC, Jus-Com, Inc., Focus Wireless, LLC, Optos Capital Partners, LLC, and Focus Venture Partners, Inc. filed against ProFiber Solutions, LLC, MDT Labor, LLC, and others for various matters relating to indemnification.

No complaint has been filed and the relief sought has not been articulated at this time.

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our shares were quoted on the OTC Pink Sheets, under the symbol “BEAC” through March 17, 2014 and under the symbol “FTNW” thereafter, until August 20, 2014, when the U.S. Securities and Exchange Commission (the “SEC”) suspended trading of our securities, since we failed to comply with certain reporting requirements outlined in the Securities Exchange Act of 1934. Subsequently, the SEC issued an Order that the registration of each class of the Company’s securities registered pursuant to Exchange Act Section 12 be revoked pursuant to Section 12(j) of the Exchange Act, effective September 12, 2014. Subsequent to the foregoing, our common stock is not listed, traded or quoted on any national stock exchange or on the OTC Markets. Accordingly, as noted in the chart herein, bid and ask information is unavailable for the time period following August 20, 2014.

We have filed this Registration Statement on Form 10 with the Commission to satisfy the requirements related to reporting current and accurate information, in order to effectuate the registration of our common stock. It is our intention to upgrade our quotation to active status by causing this Form 10 to be made effective, and to allow our stock to resume trading and to be quoted on the OTC-Pink Sheets.

The following table sets for the range of high and low bid information for our common stock for the periods indicated. Such over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.

Note 1: Our common stock was not listed, traded or quoted on any national stock exchange during this period. Accordingly bid and ask prices of the common stock of the Company were not quoted during this period.

Stockholders

There were 211 holders of record of our common stock as of August 7, 2015.

Dividends

We have not declared or paid any dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. We plan to retain any future earnings for use in our business operations. Any decisions as to future payments of cash dividends will depend on our earnings and financial position and such other factors as the Board deems relevant.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.

Pursuant to the Merger Agreement, effective as of June 19, 2013, we issued 1,250,011 shares of Beacon Series D preferred stock to fifty-one (51) former shareholders of Focus as set forth below and 1,000,000 shares of Beacon Series E preferred stock to Christopher Ferguson, a former shareholder of Focus. The 1,000,000 Series E preferred stock shares were subsequently cancelled effective September 30, 2013.

On July 23, 2014, the Company granted (a) 12,500 shares of Series D preferred stock valued at $4.00 per share to David Laigle, an employee of the company, for services provided, (b) 2,500 shares of Series D preferred stock valued at $4.00 per share to One R. Varick Consulting in exchange for consulting services provided, and (c) 4,170 shares of Series D preferred stock valued at $4.00 per share to Maurice Mitts in exchange for legal services provided. On August 1, 2014, the Company granted 10,000 shares of Series D preferred stock valued at $4.00 per share to Vincente Ferrari in exchange for consulting services.

On September 30, 2014, the Company sold 414,800 shares of Series D preferred stock at approximately $4.00 per share, pursuant to an agreement with 5G Investments, LLC. On December 31, 2014, the Company sold an additional 195,918 shares of Series D preferred stock at approximately $4.00 per share to 5G Investments, LLC.

On January 16, 2015, the Company granted 12,500 shares of its Series D with a grant date value of $50,000, to Noteholder Julian Baker as incentive for forbearance on his note.

On April 17, 2015, the Company granted 5,115,562 shares of its common stock to eighty-two (82) Senior Secured Noteholders as an incentive for executing amended forbearance agreements on their respective notes.

The Beacon Series D preferred shares and the Beacon Series E preferred shares (together, the “Beacon Preferred Shares”) issued to fifty-two (52) former holders of capital stock of Focus in the Merger, and the Series D preferred shares and the common shares issued as described above were not registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon the exemption from registration provided by Section 4(2) of that Act and Regulation D promulgated thereunder, which exempts transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Certificates representing these securities contain a legend stating the same.

ITEM 11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED

Common Stock

We are presently authorized to issue up to 70,000,000 shares of common stock, $0.001 par value per share, of which 45,102,642 shares of common stock are presently issued and outstanding. The holders of our common stock are entitled to receive dividends equally when, as and if declared by the Board of Directors, out of funds legally available therefor.

The holders of our common stock have sole voting rights, one vote for each share held of record, and are entitled upon liquidation of the Company to share ratably in our net assets available for distribution after payment of all our obligations of the Company and after provision has been made with respect to each class of stock, if any, having preference over the common stock, currently including our preferred stock. Shares of our common stock do not have cumulative voting rights and vote together with our preferred stock on all matters requiring stockholder approval. Therefore, the holders of a majority of the voting rights (which will rest with the Series D Preferred shareholders immediately following the mandatory conversion of Series D Preferred shares) stock may elect all of the directors of the Company, control its affairs and day-to-day operations. The shares of common stock are not redeemable and have no preemptive or similar rights. All outstanding shares of our common stock are validly issued, fully paid for and non-assessable.

Since inception, the Company has not paid any cash dividends on its common stock.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our directors and executive officers are indemnified as provided by the Nevada law and our Bylaws. These provisions state that our directors may cause us to indemnify a director or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him as a result of him acting as a director. The indemnification of costs can include an amount paid to settle an action or satisfy a judgment. Such indemnification is at the discretion of our board of directors and is subject to the Securities and Exchange Commission’s policy regarding indemnification.

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise. We have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be included in this registration statement appear immediately following the signature page to this registration statement beginning on page F-1.

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS