Annual report pursuant to Section 13 and 15(d)

Summary of Significant Policies

Summary of Significant Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Policies



Acquisition of Real Estate Assets


Upon the acquisition of real estate assets, the Company evaluates its acquired single-family residential properties for purposes of determining whether a transaction should be accounted for as an asset acquisition or business combination. The Company expects that substantially all of its transactions will be accounted for as asset acquisitions. The Company’s purchase of the residential real estate was treated as an asset acquisition and recorded at fair value at the acquisition date, which is allocated between land and building, based upon their relative fair values as of the date of acquisition.


Cash and Cash Equivalents and Restricted Cash


Cash consisting of interest-bearing demand deposits is carried at cost, which approximates fair value. The Company considers cash in banks and holdings of highly liquid investments with original maturities of three months or less when purchased to be cash or cash equivalents. At various times throughout the year, and as of December 31, 2019, some accounts held at financial institutions were in excess of the federally insured limit of $250. The Company reduces its exposure to credit risk by maintaining its cash deposits with major financial institutions and monitoring their credit ratings. The Company has not experienced any losses on these accounts and believes credit risk to be minimal.


As a condition of certain loan arrangements associated with the Rental Home Portfolio Asset Purchase, the Company is restricted as to use of funds of certain bank accounts without the approval of the lender. (See Note 4). These balances have been excluded from the Company’s cash and cash equivalents balance and are classified as restricted cash in the Company’s consolidated balance sheets.


Allowance for Doubtful Accounts


The Company maintains an allowance for doubtful accounts for estimated losses due to the inability of its customers and lessees to make the required payments. Management analyzes the collectability of rents, trade accounts and other receivables and the adequacy of the allowance for doubtful accounts on a regular basis taking into consideration the aging of the account balances, historical bad debt experience, customer concentration, customer credit-worthiness, customer financial condition and credit report and the current economic environment. In addition, an allowance is established when it is probable that a specific receivable is not collectible, and the loss can be reasonably estimated. Amounts are written off against the allowance when they are considered to be uncollectible. The allowance for doubtful accounts is included in general and administrative expenses in the consolidated statements of operations


Deferred Financing Costs and Amortization of Deferred Financing Cost


Deferred financing costs relate to the Company’s debt instruments, the short- and long-term portions of which are reflected as a deduction from the carrying amount of the related debt instruments, including the Company’s Senior Debt. Deferred financing costs are amortized using the straight-line method over the term of the related debt instrument which approximates the effective interest method.


Long-Lived Assets- Impairments


The Company’s long-lived assets consist primarily of its investment in real estate and property and equipment. Depreciation is computed on a straight-line basis over the remaining useful lives of the related tangible assets. Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.


Property and equipment under capital leases are depreciated over their estimated useful lives. Expenditures for repairs and maintenance are charged to expense as incurred. The carrying amount of assets sold or retired and the related accumulated depreciation are eliminated in the year of disposal, with resulting gains or losses on disposition of property and equipment included in other income or expense. When the Company identifies assets to be sold, those assets are valued based on their estimated fair value less costs to sell, classified as held-for-sale and depreciation is no longer recorded. Estimated losses on disposals are included within operating expenses.


The carrying amounts of long-lived assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable.


Revenue and Cost of Goods Sold Recognition


On January 1, 2018, the Company adopted ASU 2014-09, Revenue from Contracts with Customers, (“ASU 2014-09”) and all subsequent amendments, which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets. The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s consolidated financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.


The Company recognizes revenue from continuing operations from two sources, rental income and telecommunications services.


Rental Income


Rental income is recognized on a straight-line basis over the life of the respective leases when collectability is reasonably assured, and the tenant has taken possession or controls the physical use of the leased assts. Tenant recoveries related to reimbursement of real estate taxes, insurance and other expenses are recognized as revenue in the period the applicable costs are incurred.


Telecommunications Services


Revenue from telecommunication services are derived from short-term projects performed under master and other service agreements as well as from contracts for specific projects or jobs requiring the installation of an entire infrastructure system or specified units within an entire infrastructure system. The Company has determined that these short-term projects provide a distinct service and, therefore, qualify as one performance obligation. The Company provides services under unit-price or fixed-price master service or other service agreements under which the Company furnishes specified units of service for a fixed-price per unit of service and revenue is recognized upon completion of the defined project due to its short-term nature.


The Company also derives service revenues by managing wireless networks for customers to offer to their tenants and bills monthly in advance for the month’s services. The Company determined the wireless service contracts cover a single performance obligation and transfer control of access to the wireless service continuously as the customer simultaneously receives and consumes the benefits. Therefore, the revenue for the monthly wireless service is considered to be recognized over time.


Discontinued Operation


Prior to the strict foreclosure of the Company’s equity interests in Benchmark on October 10, 2020, which is classified as discontinued operations on the Company’s consolidated balance sheets and statement of operations, the Company derived revenue from construction services at Benchmark from short-term construction projects ranging from 6 to 12 months in duration under fixed-price contracts. The Company determined that these short-term construction projects provided a distinct service and, therefore, qualified as one performance obligation as the promise to transfer the individual goods or services were not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue from fixed-price contracts provided for a fixed amount of revenue for the entire project, subject to certain additions for modified scope or specifications to the original project. Revenue was recognized over time, because of the continuous transfer of control to the customer as all the work is performed at the customer’s site and, therefore, the customer controls the asset as it is being constructed. This continuous transfer of control to the customer is further supported by clauses in the contract that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process.


Under ASC 606, the cost-to-cost measure of progress continues to best depict the transfer of control of assets to the customer, which occurs as the Company incur costs. Contract costs include labor, material, and other direct costs. Contract modifications are routine in the performance of the contracts. Contracts are often modified to account for changes in the contract specifications or requirements. In most instances, contract modifications are for goods or services that are not distinct, therefore, accounted for as part of the existing contract. Cost to obtain contracts (pre-contract costs) are generally charged to expense as incurred and included in operating expenses on the consolidated statements of operations.


Certain construction contracts include retention provisions to provide assurance to the customers that the Company will perform in accordance with the contract terms and therefore, not considered a financing benefit. The balances billed but not paid by customers pursuant to these provisions generally become due upon completion and acceptance of the project work or products by the customer. The Company has determined that there are no significant financing components in its contracts during the year ended December 31, 2018.


Costs to mobilize equipment and labor to a job site prior to substantive work beginning are capitalized as incurred and amortized over the expected duration of the contract. On December 31, 2018 and January 1, 2018, the Company had no material capitalized mobilization costs.


Income Taxes


The Company records 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, the Company’s experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives.


Significant judgment is required in evaluating the Company’s tax positions and determining its 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. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.


Stock-Based Compensation


Compensation expense for all stock-based employee and director compensation awards granted is based on the grant date fair value estimated in accordance with the provisions of ASC Topic 718, Stock Compensation (“ASC 718”). The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Vesting terms vary based on the individual grant terms. These costs are recorded in selling, general and administrative expenses.


The Company estimates the fair value of stock-based compensation awards on the date of grant using the Black-Scholes-Merton option pricing model. This method considers among other factors, the expected term of the award and the expected volatility of the Company’s stock price. Expected terms are calculated using the Simplified Method, volatility is determined based on the Company’s historical stock price and the discount rate is based upon U.S. treasury rates with instruments of similar expected terms.


Fair Value of Financial Instruments


Under ASC Topic 820, Fair Value Measurement (“ASC 820”), the Company uses inputs from the three levels of the fair value hierarchy to measure its financial assets and liabilities. The three levels are as follows:


Level 1- Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.


Level 2- Inputs are other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).


Level 3- Inputs are unobservable and reflect the Company’s assumptions that market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available.




The Company accounts for derivative instruments in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”) and all derivative instruments are reflected as either assets or liabilities at fair value in the balance sheet.


The Company uses estimates of fair value to value its derivative instruments. Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads (including for the Company’s liabilities), relying first on observable data from active markets. Additional adjustments may be made for factors including liquidity, credit, bid/offer spreads, etc., depending on current market conditions. Transaction costs are not included in the determination of fair value. When possible, the Company seeks to validate the model’s output to market transactions. Depending on the availability of observable inputs and prices, different valuation models could produce materially different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency utilized in measuring financial instruments at fair value as discussed above.


Warrant Liability


The Company accounts for certain common stock warrants outstanding as a liability at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s consolidated statements of operations. The fair value of the warrants issued by the Company has been estimated using the Monte Carlo simulation and or the Black-Scholes-Merton model.




The Company leases corporate and regional office space and related office equipment. Certain vehicle leases, subject to purchase options are leased under finance leases. As of January 1, 2019, these leases are accounted for under the ASC 842, Leases ( See Note 3).


The Company accounts for leases for the corporate and regional offices as operating leases. The lease term may include options to extend or terminate the lease when it is reasonably certain the Company will exercise that option. For leases with initial terms greater than 12 months, we record operating lease right-of-use assets and corresponding operating lease liabilities. Operating lease right-of-use assets represent our right to use the underlying asset for the lease term and operating lease liabilities represent our obligation to make the related lease payments. These assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.


We have elected the short-term lease recognition exemption for our office equipment leases and therefore do not record these leases on our consolidated balance sheets. These office equipment leases are not material to our consolidated financial statements.


Embedded Conversion Features


The Company evaluates embedded conversion features within convertible debt to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in the Statement of Operations in accordance with ASC 815. If the conversion feature does not require recognition of a bifurcated derivative, the convertible debt instrument is evaluated for consideration of any beneficial conversion feature (“BCF”) requiring separate recognition. When the Company records a BCF, the intrinsic value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid-in capital) and amortized to interest expense over the life of the debt.




As of October 13, 2016, the Company adopted a sequencing policy whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors and convertible preferred stock.


Equity Preferred Stock


The Company applies the classification and measurement principles in accordance with ASC 815 with respect to accounting for its issuance of preferred stock. The Company evaluates convertible preferred stock at each reporting date for appropriate balance sheet classification.




The Company operates in two segments in accordance with the ASC Topic 280 “Segment Reporting”, (“ASC 280”). Operating segments as defined in ASC 280, are components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker in deciding how to assess performance and allocate resources. The two primary segments are the infrastructure segment and real estate segment. The Company is reporting one segment as the acquisition of the real estate segment occurred on December 30, 2019, no results from operations or cash flows were recorded in the Company’s financial statement during 2019 for the real estate segment.




Advertising costs, if any, are expensed as incurred. For the years ended December 31, 2019 and 2018, the Company’s spending on advertising was immaterial.


Customer Concentrations


For the years ended December 31, 2019 and 2018, the Company had three customers that exceeded 10% of revenues from the infrastructure segment. These customers accounted for 75% and 68% of revenues in each of the years ended December 31, 2019 and 2018, respectively.


(in thousands)   Revenues     % of Total Revenue  
    2019     2018     2019     2018  
Customer A   $ 2,620     $ 4,368       35 %     29 %
Customer B   $ 1,963     $ 2,816       26 %     20 %
Customer C   $ 1,081     $ 1,952       14 %     13 %


(in thousands)   Accounts Receivable     % of Accounts Receivable  
    2019     2018     2019     2018  
Customer A   $ 325     $ 552       44 %     38 %
Customer B   $ 267     $       36 %     %
Customer C   $     $ 216       %     15 %
Customer D   $       153             10


The Company’s infrastructure segment customer base is highly concentrated. Revenues are non-recurring, project-based revenues, therefore, it is not unusual for 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 contracts.


Net Loss Per Common Share


Basic net income (loss) per share is computed by dividing net income (loss) attributable to common stockholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted net income per common share attributable to common shareholders is computed by dividing net income by the weighted average number of common shares outstanding during the period adjusted for the dilutive effects of common stock equivalents. In periods when losses from continuing operations are reported, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. For the years ended December 31, 2019 and 2018 no dilutive effect for common stock equivalents was considered in the calculation of diluted loss per share as their effect was anti-dilutive.


The Company had the following common stock equivalents at December 31, 2019 and 2018.


    2019     2018  
Convertible preferred stock, Series A     1,548,666       2,395,830  
Convertible preferred stock, Series A-1     975,508       767,040  
Convertible preferred stock, Series H            
Convertible notes     8,686,546       21,303,158  
Common stock warrants           287,484  
Options           19,010  
Total potentially dilutive shares     11,210,720       24,772,522  


The above table excludes any common shares related to the convertible debt for the Series A and Series B notes since such debt is only convertible at the then prevailing market price upon default.


Recent Accounting Pronouncements


Recently Adopted Accounting Standards


In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 – Leases (Topic 842), (“ASU 2016-02”). For all leases with terms greater than 12 months, the new guidance requires lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet and to disclose qualitative and quantitative information about lease transactions. The new standard maintains a distinction between finance leases and operating leases. As a result, the effect of the new guidance on leases in the statement of operations and statement of cash flows is largely unchanged.


Effective January 1, 2019, the Company adopted the requirements of ASU 2016-02 using the transition provisions at the date of adoption instead of at the earliest comparative period presented in the financial statements. Accordingly, comparative financial statements for periods prior to the date of adoption were not adjusted. The Company elected the package of practical expedients permitted under the transition guidance. Utilizing the practical expedients, the Company did not reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification for any expired or existing leases, or (iii) initial direct costs for any existing leases.


The impact of the adoption of ASU 2016-02 on the accompanying consolidated balance sheets resulted in recording operating right-of-use assets and lease liabilities of approximately $2,032 and $2,032, respectively, at January 1, 2019.Comparative periods presented reflect the former lease accounting guidance and the required comparative disclosures are included in Note 3. The adoption of ASU 2016-02 did not have a material impact on our consolidated statements of operations or cash flows.


In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, (“ASU 2018-07”). The standard simplifies the accounting for share-based payments granted to nonemployees for goods and services. In accordance with ASU 2018-07, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The adoption of ASU 2018-07 on January 1, 2019 did not have a material impact on the consolidated statements of operation or cash flows.


In July 2017, the FASB issued ASU 2017-11 – Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. ASU 2017-11 is intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the Board determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. ASU 2017-11 is effective for fiscal years, and interim periods within fiscal years beginning after beginning after December 15, 2018. The adoption of ASU 201-11 on January 1, 2019 did not have a material impact on the consolidated statements of operation or cash flows.


In July 2018, the FASB issued ASU 2018-09, Codification Improvements. These amendments provide clarifications and corrections to certain ASC subtopics including Compensation – Stock Compensation – Income Taxes (Topic 718-740), Business Combinations – Income Taxes (Topic 805-740) and Fair Value Measurement – Overall (Topic 820-10). The adoption of ASU 2018-09 on January 1, 2019 did not have a material impact on the consolidated statements of operation or cash flows.


Accounting Pronouncements Issued


In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). The new guidance requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost. This pronouncement will be effective for fiscal years beginning after December 15, 2019. The Company is currently evaluating the effect of the standard on its consolidated financial statements.


In December 2019, the FASB issued ASU 2019-12 – Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes (“ASU 2019-12”). The amendments in ASU 2019-12 simplify the accounting for income taxes by removing certain exceptions regarding the incremental approach for intra-period tax allocations, deferred tax liabilities for equity method investments, and general methodology calculations when a year-to-date loss exceeds the anticipated loss. Additionally, ASU 2019-12 further simplifies accounting for income taxes by requiring certain franchise taxes to be accounted for as income-based tax or non-income-based tax, requiring evaluation of the tax basis of goodwill in business combinations, specifying the requirements and elections for allocating consolidated current and deferred tax expense to legal entities separately not subject to tax and requiring reflection of the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The various amendments can be applied on a retrospective, modified retrospective, or prospective basis, depending on the amendment. The Company is currently evaluating the effect of the standard on its consolidated financial statements.