UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

(Mark One)

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

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2015

OR

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

FOR THE TRANSITION PERIOD FROM__________ TO ____________

Commission file number: 000-31355

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

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports require to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ  Yes  ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§ 235.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þYes   o No

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

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 “larger accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

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

As of March 31, 2015, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was indeterminate because the Company’s common stock was not listed, traded or quoted on any national stock exchange during this period.

As of January 8, 2016, there were 46,386,220 shares of common stock outstanding.

FTE NETWORKS, INC.

FORM 10-K

TABLE OF CONTENTS

FISCAL YEAR ENDED SEPTEMBER 30, 2015

FORWARD-LOOKING STATEMENTS

Some of the statements in this Annual Report on Form 10-K 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 Annual Report on Form 10-K because they reflect our current beliefs with respect to future events and involve known and unknown risks, uncertainties and other factors affecting our operations, market growth, services, products and licenses. No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated events. Factors that may cause actual results, our performance or achievements, or industry results, to differ materially from those contemplated by such forward-looking statements include, without limitation:

All written and oral forward-looking statements made in connection with this Annual Report on Form 10-K 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 Annual Report on Form 10-K. Given the uncertainties that surround such statements, you are cautioned not to place undue reliance on such forward-looking statements.

PART I

Item 1. Business.

FTE Networks, Inc., (“FTE Networks, the “Company”, “we” or “us”) 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.  On September 5, 2012 Beacon sold its operating assets and 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, Inc. (“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 on a recapitalization basis so that all equity accounts are presented as if the recapitalization had occurred as of the beginning of the earliest period presented.

In connection with the Beacon Merger, the Board of Directors authorized the designation of a new series of preferred stock, the Beacon Series D Shares, out of its available “blank check preferred stock” and authorized the issuance of up to 2,000,000 Beacon Series D Shares. We filed a Certificate of Designation with the Secretary of State of the State of Nevada on June 17, 2013. Under the Certificate of Designation, each Beacon Series D Share has various rights, privileges and preferences, including: (i) a stated value of $4.00 per share; (ii) mandatory conversion into 20 shares of Common Stock (subject to adjustments) upon the filing of the amendment to our Articles of Incorporation after incorporating the 1 for 20 reverse stock split of the outstanding shares of common stock required by the Merger Agreement (and an effective increase in the Company’s authorized common stock); and (iii) a liquidation preference in the amount of the stated value.  To date, as a result of our non-compliance with our reporting obligations (see “The Registration and Trading of Our Securities,” on page 5 below), the Company has not been able to obtain the necessary approval from the Financial Industry Regulatory Authority (“FINRA”) for the 1-for-20 reverse stock split required by the Beacon Merger. We have begun the process to request approval for the 1-for-20 reverse stock split following the effectiveness of our registration statement on Form 10 and the resumption of trading in the securities of the Company, which will result in the mandatory conversion of the Series D preferred shares into post-split shares of common stock. 

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

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

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

Changes Resulting from the Merger

Our mission is to expand the operations of Jus-Com Inc. dba FTE Network Services as our primary line of business. Jus-Com is headquartered in Naples, Florida specializing in the design, engineering, installation, 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 began doing business as FTE Network Services (“FTE Network Services”) – a turn-key infrastructure services company. Focus Venture Partners began doing business as 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, and represents the current organization of the Company:

RECENT DEVELOPMENTS

The Registration and Trading of Our Securities

Prior to September 12, 2014 (the “Revocation Date”), our Common Stock was registered under Section 12(g) of the Exchange Act of 1934, as amended (the “Exchange Act”). Pursuant to such registration, the Company was subject to the requirements of Regulation 13(a) of the Exchange Act which required us to file with the SEC, in part, annual reports on Form 10-K, quarterly reports on Form 10-Q, 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 we ceased our business operations and became a public company “shell” on September 5, 2012, we fell behind on the compilation of our books and records, due to challenges related to staffing, access to historical data and insufficient funding. Consequently, we failed to comply with the reporting requirements of Regulation 13(a) of the Exchange Act. Further, 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, on March 17, 2015 we filed a registration statement on Form 10, to once again register our Common Stock pursuant to Section 12(g) of the Exchange Act.  On May 16, 2015, the registration statement became effective, and we are again subject to the requirements of Regulation 13(a) of the Exchange Act, which requires us to file, in part, annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we are required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act.  

On December 10, 2015, our common stock resumed trading on the OTC Pink marketplace.

Authorization of Series F Preferred Stock

The Board of Directors of the Company authorized the designation of a new series of preferred stock, the Series F Stock (“Series F Stock”), out of its available “blank check preferred stock” and authorized the issuance of up to 1,980,000 shares of the Series F Stock. A Certificate of Designation was filed with the Secretary of State of the State of Nevada on November 2, 2015. The Series F Stock has various rights, privileges and preferences, including: (i) a stated value of $4.00 per share; (ii) conversion into 20 shares of Common Stock (subject to adjustments) upon the filing of an amendment to the Company’s Articles of Incorporation incorporating a reverse stock split; and (iii) a liquidation preference in the amount of the stated value.

Entry into a Credit Facility and Repayment of Senior Secured Notes

On November 3, 2015, the Company entered into a credit agreement (the “Agreement”) pursuant to which the Company received $8 million in term loans from Lateral Investment Management (“Lateral”). A portion of the proceeds was used to extinguish an aggregate principal amount of approximately $3.5 million of Senior Secured Promissory Notes, pursuant to a tender offer. The noteholders who tendered their notes received the tender offer consideration of $0.50 per $1 principal amount of the Notes from the proceeds from the term loan, and all interest payable on the notes was forgiven. The Company expects to recognize approximately a $3.5 million gain related to the extinguishment of the Senior Secured Promissory Notes.

In connection with the agreement, the Company issued 555,344 shares of Series F preferred stock to Lateral. The Company and Lateral also entered into a registration rights agreement (“Registration Rights Agreement”) in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares. Lateral may request redemption of some or all of its Series F preferred stock any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis.  The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral Series F preferred stock shares outstanding.  In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. Furthermore, so long as Lateral maintains a fully-diluted ownership interest of 10% or more, the Company may not without Lateral’s consent (a) enter into new indebtedness exceeding $400,000; (b) undertake a Major Transaction Event (as defined); or (c) terminate or replace its Chief Executive Officer.

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

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

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

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

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

Outside Plant Operations

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

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

Inside Plant Operations

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

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

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

Project Estimating and Feasibility Studies

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

Customer Relationships

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

Our customer base is 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, 2015 and 2014, the Company’s largest customers included a leading service provider of dark fiber and advanced network services (“Customer A”), a leading provider of wireless infrastructure solutions (“Customer B”), a multinational provider of communications technology and services (“Customer C”), a corporate staffing customer within the Company’s staffing segment (“Customer D”), a provider of large scale fiber optic cables (“Customer E”) and a telecommunications company providing fiber optic based network solutions (“Customer F”).

The Company’s revenues from Customer F for the years ending September 30, 2015 and 2014 were $0 and $12.3 million, respectively. The Company ceased doing business with Customer F in July 2014 and, therefore, the Company had no revenues from Customer F for the year ended September 30, 2015.

At the same time the contracted work of Customer F was coming to a close, the revenues of Customer C were increasing. During the year ended September 30, 2015, the revenues of Customer C were $5,196,380 ( 36% of total revenues). During the year ended September 30, 2014, the revenues of Customer C were $516,771 (3% of total revenues). For the year ended September 30, 2015, Customer D had revenues of $5,324,866 or 37% of total revenues. During the year ended September 30, 2014, Customer D had no revenues.

As of September 30, 2015, Customer E and Customer B represented 47% and 12% of accounts receivable, respectively. As of September 30, 2014, Customer A, Customer B and Customer C represented 41%, 18% and 13% of accounts receivable, respectively.

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

Competition

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

Regulation

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

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

Safety and Risk Management

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

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

Seasonality

Our revenues are affected by seasonality as a significant portion of the work we perform is outdoors. Consequently, our operations are impacted by extended periods of inclement weather. Generally, inclement weather is more likely to occur during the winter season, which falls during our first and fourth fiscal quarters. Also, a disproportionate percentage of total paid holidays fall within our 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 measurable 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.

Segment Reporting

We operate in the telecommunications infrastructure services industry and, effective May 8, 2014, entered the staffing industry. For the year ended September 30, 2014, our staffing business was in the development stage and only generated negligible revenues and expenses. Consequently, we concluded that the staffing business did not qualify as a separate segment for the year ended September 30, 2014. We reported segment results pursuant to ASC 280-10 “Segment Reporting” for the year ended September 30, 2015.

EMPLOYEES

As of January 8, 2016, we, together with our subsidiaries, employ 232 full-time employees and 8 part-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 our 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, are EBITDA positive, which meet or exceed industry averages, and have 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 Annual Report on Form 10-K, 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 maintain sufficient liquidity.

In the year ended September 30, 2015, we recorded a net loss of $3,554,914 and we used $64,392 of cash in operating activities.  As of September 30, 2015, we have a working capital deficiency of $6.4 million, which includes $1.8 million of unpaid payroll tax liabilities associated with our staffing segment, plus related penalties and interest.  If we don’t satisfy the payroll tax obligation as planned, it is possible that we could be subject to additional fines and penalties. Subsequent to September 30, 2015, we closed on an $8 million credit facility, of which (a) $1.8 million was used to extinguish $3.5 million of senior secured notes and $1.8 million of related accrued interest; and (b) $3.0 million was deposited into a restricted Company bank account which requires the credit provider’s approval to utilize.  The Company will need to continue to monitor its liquidity and many need to raise additional funds until it begins to generate cash from operating activities.

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 effective. 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 Registration and Trading of Our Securities,” beginning on page 5 above). Now that our common stock is registered again, we are 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 our 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 heightened 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 net accounts receivable of approximately $1.2 million at September 30, 2015 and $1.9 million at September 30, 2014. 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 $0.4 million and $0.3 million in bad debt expense in the years ended September 30, 2015 and 2014, 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 September 30, 2015, Customer E and Customer B represented 47% and 12% of accounts receivable, respectively. As of September 30, 2014, Customer A, Customer B and Customer C represented 41%, 18% and 13% of accounts receivable, respectively.

For the year ended September 30, 2015, Customer D represented approximately 37% of revenues and Customer C represented approximately 36% of revenues. For the year ended September 30, 2014, Customer F represented approximately 72% of revenues.

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 risk 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.

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 September 30, 2015, we had outstanding shares of Series A, Series A-1, and Series D preferred stock convertible into an aggregate of 733,364,414 shares of common stock, outstanding warrants for the purchase of securities equivalent to 40,141,799 shares of common stock, and a note payable convertible into 200,000 shares of common stock. The Series D shares are automatically 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 will 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.

We pay no dividends.

We have never paid cash dividends in the past, and currently do not intend to pay any cash dividends in the foreseeable future.

There is, at present, only a limited market for our common stock and there is no assurance that an active trading market for our common stock will develop.

Although our common stock is quoted on the OTC Pink marketplace from time to time, the market for our common stock is extremely limited.  In addition, although there have been market makers in our securities, we cannot assure that these market makers will continue to make a market in our securities or that other factors outside of our control will not cause them to stop market making in our securities.  Making a market in securities involves maintaining bid and ask quotations and being able to effect transactions in reasonable quantities at those quoted prices, subject to various securities laws and other regulatory requirements. Furthermore, the development and maintenance of a public trading market depends upon the existence of willing buyers and sellers, the presence of which is not within our control or that of any market maker. Market makers are not required to maintain a continuous two-sided market, are required to honor firm quotations for only a limited number of shares, and are free to withdraw firm quotations at any time. Even with a market maker, factors such as our past losses from operations and the small size of our company mean that there can be no assurance of an active and liquid market for our securities developing in the foreseeable future. Even if a market develops, we cannot assure that a market will continue, or that shareholders will be able to resell their securities at any price.

Since our common stock is classified as “penny stock,” the restrictions of the SEC’s penny stock regulations may result in less liquidity for our common stock.

The Securities and Exchange Commission (“SEC”) has adopted regulations which define a “penny stock” to be any equity security that has a market price (as therein defined) of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.  For any transactions involving a penny stock, unless exempt, the rules require the delivery, prior to any transaction involving a penny stock by a retail customer, of a disclosure schedule prepared by the SEC relating to the penny stock market.  Disclosure is also required to be made about commissions payable to both the broker/dealer and the registered representative and current quotations for the securities.  Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.  Because the market price for shares of our common stock is less than $5.00, and we do not satisfy any of the exceptions to the SEC’s definition of penny stock, our common stock is classified as a penny stock.  As a result of the penny stock restrictions, brokers or potential investors may be reluctant to trade in our securities, which may result in less liquidity for our common stock.

Shareholders who hold unregistered shares of our common stock are subject to resale restrictions pursuant to Rule 144.

Pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (“Rule 144”), a “shell company” is defined as a company that has no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents or assets consisting of any amount of cash and cash equivalents and nominal other assets. We previously were a “shell company” pursuant to Rule 144, and, as such, sales of our securities pursuant to Rule 144 cannot be made unless, among other things, we continue to remain subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we file all of our required periodic reports with the SEC under the Exchange Act. Because our unregistered securities cannot be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we sell in the future or issue to consultants or employees, in consideration for services rendered or for any other purpose, will have no liquidity unless we continue to comply with such requirements. As a result, it may be more difficult for us to obtain financing to fund our operations and pay our consultants and employees with our securities instead of cash.

The Lateral Redemption Rights Agreement (a) could result in the dilution of existing ownership interests and significant cash payments to redeem Lateral’s preferred stock interests; and (b) imposes restrictions on the Company’s ability to undertake certain transactions.

In connection with the Lateral credit agreement, the Company issued 555,344 shares of Series F preferred stock to Lateral.  The Company and Lateral also entered into a Registration Rights agreement in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares. In addition, the Company and Lateral entered into a Redemption Rights Agreement whereby Lateral may request redemption of some or all of its Series F preferred stock at any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis.  The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral Series F preferred stock shares outstanding.  In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. Furthermore, so long as Lateral maintains a fully-diluted ownership interest of 10% or more, the Company may not without Lateral’s consent (a) enter into new indebtedness exceeding $400,000; (b) undertake a Major Transaction Event (as defined); or (c) terminate or replace its Chief Executive Officer.

ITEM 1B. Unresolved Staff Comments.

None.

ITEM 2. Properties.

On December 1, 2015, our executive offices were relocated to 999 Vanderbilt Beach Road, Suite 601, Naples, Florida, 34108 and our telephone number is (877) 878-8136. Our subsidiaries lease one additional office/warehouse facility, as well as two additional office locations in the United States and Ireland. The old Naples, FL office lease expired on October 31, 2015. Our current lease expires November 30, 2022 and the square footage increase from 3,310 square feet to 5,377 square feet. The Washington State warehouse lease expired September 22, 2015 and was renewed on November 1, 2015. The square footage decreased from 7,669 to 4,000 square feet. This lease expires in October 2016. The Indianapolis, IN office lease expired on December 31, 2015 and was renewed on January 1, 2016. This lease expires on January 1, 2019 and the square footage is still 4,000 square feet.

Our subsidiaries each maintain separate websites including www.ftenetworkservices.com and www.fvpworx.com. The table below summarizes our leased properties:

ITEM 3. Legal Proceedings.

We are involved in litigation claims arising in the ordinary course of business, including:

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.

Enterprise FM Trust v. Focus Venture Partners, Inc., et al,

Complaint filed December 12, 2013, District Court of Tulsa, Oklahoma, Docket No. CJ 2013-05647.

Plaintiff Enterprise FM Trust, a vendor, made breach of contract claims against Defendant Focus Venture Partners, Inc.

Primary relief sought approximately $118,869 in principal. Consent judgment against Focus Venture Partners, Inc. in the amount of $153,043.

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.

EAN Services, LLC v. Focus Fiber Solutions, LLC, et al,

Complaint filed December 4, 2013 District Court of Tulsa, Oklahoma, Docket No. CJ 2013-05529.

Plaintiff Enterprise FM Trust, a vendor, made breach of contract claims against Defendant Focus Fiber Solutions, LLC.

Primary relief sought is approximately $819,425 in principal. Consent judgment against Focus Fiber Solutions, LLC in the amount of $1,042,796.

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 including but not limited to the following cases: Roadsafe Traffic Systems, Inc. v. Focus Fiber Solutions, LLC, et al vs. Zayo Group, Enterprise FM Trust v. Focus Venture Partners, Inc., et al, and EAN Services, LLC v. Focus Fiber Solutions, LLC, et al and Primus Electric Corporation v. Focus Fiber Solutions, LLC.

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.

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.

Primary relief sought: $190,000 under the severance claims and $380,000 under the change of control claims. Settled November 2015: $150,000 cash, $250,000 Note, 512,000 Shares of Common Stock.

Shorewood Packaging, LLC v. Optos Capital Partners, LLC.

Complaint filed October 2, 2013 in Superior Court of New Jersey, Law Division, Bergen County, Docket No. BER-L-7469-13.

Plaintiff Shorewood Packaging, LLC is a landlord for a commercial property located in New Jersey with claims for damages against Optos Capital Partners, LLC, the guarantor for tenant, Focus Wireless, LLC, relative to a breach of lease agreement.

Primary relief sought approximately $280,000. Settled: October 2015: $75,000.

ITEM 4. Mine Safety Disclosures.

None.

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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, because 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 was not listed, traded or quoted on any national stock exchange or on the OTC Markets.

On May 16, 2015, our registration statement on Form 10 became effective and on December 10, 2015, our common stock resumed trading on the OTC Pink marketplace.

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 that our common stock did not trade during fiscal 2015.

Stockholders

There were 287 holders of record of our common stock as of January 8, 2016.

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.

Recent Sales of Unregistered Securities

During the fourth quarter of fiscal 2015, the Company issued 118,332 shares of Series D preferred stock valued at $473,328 to vendors and others, as compensation, in recognition of favorable payments terms that were extended to the Company,

The Series D preferred 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. 

Issuer Purchases of Equity Securities

During the quarter ended September 30, 2015, there were no purchases of our equity by us or any “affiliated purchaser”.

ITEM 6. Selected Financial Data.

FTE Networks, Inc. is a “smaller reporting company” as defined by Regulation S-K and as such, is not required to provide the information contained in this item pursuant to Regulation S-K.

ITEM 7. 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:

Recent Business Developments

On November 3, 2015, the Company entered into a credit agreement, dated October 28, 2015 (the “Agreement”), pursuant to which the Company received $8 million in term loans from Lateral Investment Management (“Lateral”). A portion of the proceeds was used to extinguish an aggregate principal amount of approximately $3.5 million of Senior Secured Promissory Notes, pursuant to a tender offer. The noteholders who tendered their notes received the tender offer consideration of $0.50 per $1 principal amount of the Notes from the proceeds from the term loan, and all interest payable on the notes was forgiven.  The Company expects to recognize approximately a $3.5 million gain related to the extinguishment of the Senior Secured Promissory Notes.  In connection with the agreement, the Company issued 555,344 shares of Series F preferred stock to Lateral.  The Company and Lateral also entered into a Registration Rights agreement in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares.  Lateral may request redemption of some or all of its Series F preferred stock any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis.  The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral Series F preferred stock shares outstanding.  In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. Furthermore, so long as Lateral maintains a fully-diluted ownership interest of 10% or more, the Company may not without Lateral’s consent (a) enter into new indebtedness exceeding $400,000; (b) undertake a Major Transaction Event (as defined); or (c) terminate or replace its Chief Executive Officer.  In connection with the new credit facility, the Company cancelled one of its factoring agreements and didn’t renew the other factoring agreement.

During 2015, the Company accumulated approximately $1.5 million of unpaid payroll tax liabilities related to its staffing segment and has accrued an additional $0.3 million of related penalties and interest.

During fiscal 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 fiscal 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 and deferred tax assets, plus the valuation of 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 the year ended September 30, 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 Operating Results, Years Ended September 30, 2015 and 2014.

Overview

We reported a consolidated net loss attributable to common shareholders of $3,634,475 for the year ended September 30, 2015, as compared to net income attributable to common shareholders of $435,957 for the year ended September 30, 2014, reflecting a decrease in net income of $4,070,432. The decrease in net income resulted from the decrease in gross profit of $1,094,247, primarily due to the loss of a major client, and an increase in other expense of $3,311,311, as described below.

Revenues and Gross Profit

We had overall revenues of $14.4 million for the year ended September 30, 2015, as compared to revenues of $16.9 million for the year ended September 30, 2014, resulting in a decrease of $2.5 million, or 15%. Decreases in telecommunication revenues of approximately $8.2 million were partially offset by $5.7 million of staffing revenues generated during the year ended September 30, 2015. The decrease in telecommunication revenues was primarily related to the loss of our largest, but low margin, customer in our telecommunication segment which provided revenues of approximately $12.3 million during 2014, partially offset by increases in revenues provided by several of our smaller, but 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 9, above.) The increase in staffing revenues was primarily a result of the incorporation a significant new customer which provided revenues of approximately $5.3 million during 2015. In addition, significant new telecommunication 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.

Our gross profit for the year ended September 30, 2015 and 2014 was $3,316,602 and $4,410,849, respectively, representing a decrease of $1,094,247 or 25%, resulting from reduced revenues resulting from the loss of a major client, and a shift in revenue mix from the telecommunications segment to the staffing segment as discussed above, which generates lower margins. In fiscal 2015, gross profits for the telecommunication and staffing segments were $2.7 million and $0.6 million 31% and 11% of segment revenues, respectively. In Fiscal 2014 gross profit from the telecommunication segment was $4.4 million or 26% if revenues. The staffing segment was in the development phase during 2014 and reported negligible revenues and gross profit during the period.

Operating Expenses

We reported operating expenses of $4,923,423 and $5,258,549 for the years ended September 30, 2015 and 2014, respectively, (including non-cash expenses of $865,745 and $907,850, respectively), reflecting a decrease of $335,126 or 6%. The decrease in operating expenses was primarily due to a reduction in compensation expense of $1,454,550 or 44%, resulting from a significant decrease in the number of field employees, as well as a reduction in transaction expenses of $219,475 or 83% due to less due diligences fees during 2015. These reductions were partially offset by increases in selling, general and administrative expenses of $1,219,019 or 103%, due to accounting, audit, and financial services expenses incurred in order to complete a two-year audit and prepare the registration statement on Form 10, as well as increased selling and business development costs related to the formation of a business development team (see Recent Business Developments, above).

Operating Loss

The operating loss increased by $759,121, from a loss of $847,700 for the year ended September 30, 2014 to a loss of $1,606,821 for the year ended September 30, 2015. The change in operating loss is principally related to the reduction in gross profit.

Other (Expense) Income

Other expense was $1,948,093 for the year ended September 30, 2015, as compared to other income of $1,363,218 for the year ended September 30, 2014. The unfavorable variance is partly due to a one-time gain on the forgiveness of debt of $2,748,158 related to the cancellation of a term loan agreement that was recorded during the year ended September 30, 2014, which did not recur in 2015. Also, during the year ended September 30, 2015 we recognized forbearance incentive expense of $101,156 resulting from the issuance of 5,115,562 shares of the Company’s common stock and 12,500 shares of the Company’s preferred stock in consideration for forbearance on notes payable, plus we recognized other expense of $538,861 primarily related to litigation expenses.

Liquidity and Capital Resources

Overview

As of September 30, 2015, the Company had an accumulated deficit of approximately $13.4 million and a working capital deficiency of approximately $6.4 million, which includes approximately $1.8 million of liabilities for unpaid payroll taxes and the related penalties and interest. In addition, during the year ended September 30, 2015, the Company used approximately $64,000 of cash in operating activities.  As a result, the Company needed to regularly monitor its liquidity situation.

Subsequent to September 30, 2015, we entered into an $8 million senior secured credit facility of which (a) $1.8 million was utilized to extinguish $3.5 million of senior secured debt and $1.8 million of related accrued interest; and (b) $3.0 million was deposited into a restricted Company bank account which requires the credit provider’s approval to utilize. Management's plans are to enter into an installment plan with the IRS for the payment of its unpaid payroll taxes and to continue to raise additional funds through the sales of debt or equity securities, until such time that operations generate sufficient cash to sustain operations.

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, enter into an acceptable installment plan with the IRS or whether the Company will become more profitable and generate sufficient 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 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 2015, 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 collections slowed as we transitioned from lower margin to higher margin customers. Retainage balances decreased from $1,053,451 at September 30, 2014 to $19,809 at September 30, 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, 2015 and 2014 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 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. 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. Subsequent to September 30, 2015, as discussed above, the Senior Secured Notes were extinguished.

The Company suspended payments to two non-senior secured note holders pending the closing of the senior secured credit facility described above. 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 also suspended payments on all unsecured notes payable totaling $734,574 pending the closing of the senior secured credit facility described above. 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 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.

Lateral Redemption Rights Agreement Considerations

In connection with the Lateral credit agreement, the Company issued 555,344 shares of Series F preferred stock to Lateral.  The Company and Lateral also entered into a Registration Rights agreement in connection with the issuance of these shares, pursuant to which the Company must file a registration statement with the SEC, with respect to the shares. In addition, the Company and Lateral entered into a Redemption Rights Agreement whereby Lateral may request redemption of some or all of its Series F preferred stock at any time after October 28, 2017, subject to the Company (a) meeting certain minimum capitalization and EBITDA requirements; and (b) being able to continue as a going concern on a post-redemption basis.  The redemption price per share is variable and equals 10 (ten) times the last twelve months EBITDA, multiplied by the Lateral fully-diluted ownership percentage and then divided by the Lateral Series F preferred stock shares outstanding.  In addition, Lateral was granted anti-dilution rights which permit it to receive additional equity securities to maintain its fully-diluted ownership interest to the extent that the Company issues equity securities to third parties, up to a maximum of $5,000,000. Furthermore, so long as Lateral maintains a fully-diluted ownership interest of 10% or more, the Company may not without Lateral’s consent (a) enter into new indebtedness exceeding $400,000; (b) undertake a Major Transaction Event (as defined); or (c) terminate or replace its Chief Executive Officer.

Cash Flows for the Years Ended September 30, 2015 and 2014 

Cash Used by Operating Activities

Net cash used in operating activities was approximately $64,000 during the year ended September 30, 2015 as compared to cash used in operating activities of approximately $2.1 million during the year ended September 30, 2014. For the year ended September 30, 2015, cash used in operating activities was primarily attributable to the net loss of $3,554,914 adjusted for net non-cash expenses of $1,092,289, and for non-cash income for gain on settlement of lease termination costs of $226,544, partially offset by $2,624,777 of cash provided by changes in the levels of operating assets and liabilities. For the year ended September 30, 2014, cash used by operating activities was primarily attributable to net income of $515,518, plus non-cash expenses of $907,850 and reduced for non-cash income for gain on forgiveness of debt of $2,748,158, partially offset by $769,205 of cash used by changes in the levels of operating assets and liabilities.

Cash Used by Investing Activities

We used $125,573 of cash in investing activities during the year ended September 30, 2015, as compared to using $19,915 of cash in investing activities during the prior year. 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 $396,451 during the year ended September 30, 2015, as compared to cash provided by financing activities of approximately $2.1 million during the year ended September 30, 2014. During the year ended September 30, 2015, $660,000 of proceeds on the repayment of our subscription receivable, $430,683 of cash proceeds from the sale of preferred stock and $183,538 of cash advances received from related parties was partially offset by $383,682 of net payments on our factor lines of credit, $354,088 of payments on our notes payable and $140,000 of payments of deferred financing cost. During the year ended September 30, 2014, we received cash proceeds of $984,236 from our factor lines of credit, $889,436 from the issuance of notes payable and $613,600 of proceeds from the issuance of preferred stock, partially offset by payments on notes payable of $404,862.

Off Balance Sheet Arrangements 

None.

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.

FTE Networks, Inc. is a “smaller reporting company” as defined by Regulations S-K and as such, is not required to provide the information contained in this item pursuant to Regulation S-K.

ITEM 8. Financial Statements and Supplementary Data.

The financial statements required to be included in this Annual Report on Form 10-K appear immediately following the signature page to this Annual Report on Form 10-K beginning on page F-1.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

ITEM 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Principal Executive and Accounting Officer, as appropriate to allow timely decisions regarding required disclosure. Internal controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized, recorded and reported; and (2) our assets are safeguarded against unauthorized or improper use, to permit the preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles.

In connection with the preparation of this Annual Report, management, with the participation of our Principal Executive and Financial Officers, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Principal Executive and Financial Officers concluded that, as of September 30, 2015, our disclosure controls and procedures were not effective.

Management’s Assessment of Internal Control Over Financial Reporting

 The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”) for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of the Company’s internal control over financial reporting as of September 30, 2015. The framework used by management in making that assessment was the criteria set forth in the document entitled “2013 Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, management concluded that, during the period covered by this report, such internal controls and procedures were not effective as of September 30, 2015 and that material weaknesses in ICFR existed as more fully described below.

A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board (“PCOAB”) Audit Standard No. 5, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that as of September 30, 2015 our internal controls over financial reporting were not effective at the reasonable assurance level: 

We have taken steps to remediate some of the weaknesses described above, including by engaging a financing consultant with expertise in accounting for complex transactions. We intend to continue to address these weaknesses as resources permit.

Notwithstanding the assessment that our ICFR was not effective and that there are material weaknesses as identified herein, we believe that our consolidated financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm as we are a smaller reporting company and are not required to provide the report.

 Changes in Internal Control over Financial Reporting

During the fiscal quarter ended September 30, 2015, there were no changes in our internal controls over financial reporting, or in other factors that could significantly affect these controls, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and all fraud. Controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

ITEM 9B. Other Information.

None.

PART III

ITEM 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance.

The following table sets forth 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 a 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, Jus-Com 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 or audit committee financial expert.

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.

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.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16 of the Exchange Act requires that reports of beneficial ownership of common stock and changes in such ownership be filed with the Securities and Exchange Commission by Section 16 “reporting persons,” including directors, certain officers, holders of more than 10% of the outstanding common stock and certain trusts of which reporting persons are trustees. We are required to disclose in this Annual Report each reporting person whom we know to have failed to file any required reports under Section 16 on a timely basis during the fiscal year ended September 30, 2015. To our knowledge, based solely on a review of copies of Forms 3, 4 and 5 filed with the Securities and Exchange Commission and written representations that no other reports were required, during the fiscal year ended September 30, 2015, our officers, directors and 10% stockholders complied with all Section 16(a) filing requirements applicable to them, except one Form 3 and Form 5 by Michael Palleschi, Chief Executive Officer, and three Form 13-G’s to be filed by TLP Investments LLC, TBK Investments LLC, and 5G Investments LLC.  The information for these Forms has been compiled and will be filed.

ITEM 11. 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, 2015, we did not have any equity incentive plan awards outstanding.

Employment Agreements

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. During May 2015, Mr. Wood’s salary was increased to $200,000 per annum.

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. On October 26, 2015 the employment agreement was amended to extend the term of Mr. Palleschi’s employment through June 13, 2019.

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, 2015 and 2014.

Option Exercises

There were no options exercised by our named officers during the years ended September 30, 2015 and 2014.

Compensation of Directors

We have no non-executive directors. Director compensation of executive directors is disclosed in the Summary Compensation Table.

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 12. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth, as of January 8, 2016, 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.

* Less than 1%.

ITEM 13. Certain Relationships and Related Transactions and Director Independence.

The following is a description of transactions during the years ended September 30, 2015 and 2014 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 September 30, 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 September 30, 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 $30,895 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 September 30, 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 $30,000 during the guaranty period.  Additionally, we have entered into several secured equipment financing arrangements during 2015 with total obligations of approximately $360,000 as of September 30, 2015 that 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. As of September 30, 2015, the outstanding balance due to the factors was $600,554.

During 2015, the CEO provided short-term cash advances to the Company aggregating to approximately $184,000, in order to meet short-term liquidity needs.

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 10.

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 14. Principal Accountant Fees and Services.

Audit Committee Pre-Approval Policies and Procedures

All audit and non-audit services performed by the independent accountants have been pre-approved by the Audit Committee to assure that such services do not impair the auditors’ independence from us.

PART IV

ITEM 15. Exhibits and Financial Statement Schedules.

SIGNATURES

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

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

FTE NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders

of FTE Networks, Inc.

We have audited the accompanying consolidated balance sheets of FTE Networks, Inc. and Subsidiaries (the “Company”) as of September 30, 2015 and 2014, and the related consolidated statements of operations, stockholders’ deficiency and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of FTE Networks, Inc. and Subsidiaries, as of September 30, 2015 and 2014, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Marcum LLP

Marcum LLP

New York, NY

January 13, 2016

FTE NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

FTE NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

FTE NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED SEPTEMBER 30, 2015 AND 2014