NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

FTE Networks, Inc. (collectively with its subsidiaries, “FTE” or the “Company”), by and through its wholly-owned subsidiary, US Home Rentals, LLC, (“USHR”) is a major owner and operator of single-family rental homes in tier 3 and 4 markets. With approximately 3,200 rental home properties across the United States, FTE seeks to transform its sizeable rental home portfolio into high quality single-family homes to meet the demands and needs of an evolving real estate market and demographic.

Basis of Presentation and Consolidation

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

Use of Estimates

The preparation of consolidated financial statements in conformity with U. S. GAAP requires management 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 the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates.

Reclassification

Certain reclassifications have been made to the 2018 consolidated financial statement presentation to correspond to the current year’s presentation. Reclassifications primarily relate to related party borrowings as of December 31, 2018, which are no longer considered related party borrowings as of December 31, 2019, due to the disposition of Benchmark Builders, Inc. (“Benchmark”) on October 10, 2019. (see Notes 4 and 12). Total stockholders’ equity (deficit) and net loss are unchanged due to these reclassifications.

Liquidity and Managements’ Plans

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty. In accordance with Accounting Standards Update, (“ASU”), 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. This evaluation requires management to perform two steps. First, management must evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern. Second, if management concludes that substantial doubt is raised, management is required to consider whether it has plans in place to alleviate that doubt. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Disclosures in the notes to the consolidated financial statements are required if management concludes that substantial doubt exists or that its plans alleviate the substantial doubt that was raised.

The Company’s ultimate success is dependent on its ability to obtain additional financing and generate sufficient cash flow to meet its obligations on a timely basis. The Company’s business will require significant amounts of capital to sustain operations and the Company will need to make the investments it needs to execute its longer-term business plan. Absent generation of sufficient revenue from the execution of the Company’s long-term business plan, the Company will need to obtain debt or equity financing, especially if the Company experiences downturns in its business that are more severe or longer than anticipated, or if the Company experiences significant increases in expense levels resulting from being a publicly-traded company or operations. Such additional debt or equity financing may not be available to the Company on favorable terms, if at all.

At December 31, 2019, the Company had $2,140 in cash and working capital deficit of $93,561. The Company reported aggregated net losses from continuing operations of $95,246 for the two-year period ended December 31, 2019.

Management has assessed the Company’s ability to continue as a going concern in accordance with the requirement of ASC 205-40. Management believes the Company’s present cash flows from operations will not enable it to meet its obligations for the twelve months from the date these consolidated financial statements are available to be issued. Management currently has available certain bridge financing from a significant shareholder to fund its operations, but is actively seeking new sources of financing at more favorable terms and conditions, that will enable the Company to meet its obligations for the twelve-month period from the date the financial statements are available to be issued. There is no assurance that management will be successful in raising additional funds.