Guarantees/Related Party Advances

From October 1, 2014 through December 31, 2016, the Chief Executive Officer (CEO) provided cash advances witnessed by an interest bearing note, and from time to time, advances for the Company’s behalf on credit cards the CEO is personally liable for, aggregating $503,856. Additionally, the Company entered into several secured equipment financing arrangements with total obligations of approximately $298,000 as of December 31, 2016 that required the guaranty of a Company officer, which was provided by the CEO.

The Chief Financial Officer personally guaranteed several secured equipment financing arrangements with total obligations of approximately $320,525 as of December 31, 2016. Additionally, the Chief Financial Officer provided 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 CFO is personally liable for the payment of the entire amount of the open credit obligation, which was $57,525 as of December 31, 2016.

Property Lease Obligations

On October 1, 2015, the Company entered into a three year lease for 4,500 square feet of warehouse space in Naples, FL, at a monthly rent of $4,500.

On October 13, 2015, the Company entered into a seven year lease, commencing December 1, 2015, for 5,377 square feet of office space in Naples, FL, at a monthly rent of $27,158.

On November 1, 2015, the Company entered into a one year lease for 4,000 square feet of office and warehouse space in Marysville, WA, at a monthly rent of $3,000. That lease expired October 31, 2016 and was not renewed.

On January 1, 2016, the Company renewed its lease for 4,000 square feet of office space in Indianapolis, IN for three years, at a monthly rent of $2,700.

On March 1, 2016, the Company entered into a two year lease for 5,000 square feet of office and warehouse space in Des Moines, IA, at a monthly rent of $2,000.

On March 1, 2016, the Company entered into a one year lease for 4,000 square feet of office and warehouse space in Springfield, MO, at a monthly rent of $2,400.

On May 1, 2016, the Company entered into a three year lease for 8,640 square feet of office and warehouse space in Dallas, TX, at a monthly rent of $4,500.

On December 1, 2016, the Company entered into a three year lease for 3,000 square feet of office and warehouse space in Dallas, TX, at a monthly rent of $4,000.

The remaining aggregate commitment for lease payments under the operating lease for the facilities as of December 31, 2016 are as follows:

Rental expense, resulting from property lease agreements, for the year ended December 31, 2016, the transitional three months ended December 31, 2015, and the year ended September 30, 2015, was $591,405, $148,555, and $181,895, respectively.

Employment Agreements

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.

Effective September 27, 2016, the Company entered into an employment agreement with Lynn Martin to serve as the Company’s Chief Operating Officer in consideration of a salary of $250,000 per year, with standard employee insurance and benefits. The employment agreement commenced on May 16, 2016, and expires on May 16, 2019.

Accrued Litigation Expense

Legal Matters - The Company is involved in litigation claims arising in the ordinary course of business. Legal fees and other costs associated with such actions are expensed as incurred. In addition, the Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. The Company reserves for costs relating to these matters when a loss is probable and the amount can be reasonably estimated. As of September 30, 2015, the Company had reserved an aggregate of $1,840,891 in Accrued Litigation Costs for legal matters. On December 28, 2016, the Company reached a settlement agreement on the Enterprise FM Trust/EAN Services LLC et al litigation, in which the indemnification against certain companies under an Asset Purchase Agreement dated June 19, 2013 was reached, resulting in a dismissal of the lawsuits, and net cash to the Company of $19,000. Because of this settlement, the liability for litigation and contingencies was reversed, and as of December 31, 2016, the reserve for litigation and contingencies was $0.

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. This matter was settled on December 28, 2016 as described above.

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. This matter was settled on December 28, 2016 as described above.

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. This matter was settled December 28, 2016 as described above.

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. This matter was settled December 28, 2016 as described above.

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.