Item
8.01 Other Events
FTE
Networks, Inc. (the “Company”) will be relying on the Securities and Exchange Commission’s Order dated
March 4, 2020 (Release No. 34-88318) (the “Order”) to delay the filing of its Annual Report on Form 10-K for the year
ended December 31, 2019 (the “2019 Report”) until May 14, 2020 due to circumstances related to the 2019 coronavirus
disease (“COVID-19”). A significant portion of the Company’s business communications among the legal,
accounting and auditing functions have been limited to virtual communication regarding its preparation of its financial statements.
As a result of these travel and work restrictions stemming from the COVID-19 pandemic, the Company is unable to complete its
remaining accounting and internal review processes and provide its auditors with timely access to its original books and records
to complete their audit procedures in a timely manner and is therefore unable to file a timely and accurate 2019 Report by
the prescribed date without undue hardship and expense to the Company.
As previously disclosed, the Company is
in the process of preparing its annual report on Form 10-K for the fiscal year ended December 31, 2018 and restating its financial
statements for 2016 and 2017. Prior to the outbreak of the COVID-19 pandemic, the Company was already managing potential delays
in its ability to timely file its annual report for the fiscal year ended December 31, 2019, given the significant recent turnover
of its employees, executive officers and board; recent changes to its business; changes to its independent registered public accounting
firm; the pending investigations relating to whether prior management had proper authorization to issue convertible notes and
related shares issuable upon conversion of said convertible notes, and certain other debt instruments and equity transactions;
issues related to the accounting for and disclosure of certain expenses incurred by prior management; and the appropriateness
and disclosure of certain related party transactions and the pending restatement of the Company’s previously issued financial
statements.
The
following risk factor supplements the risk factor disclosure contained in the Company’s prior periodic reports filed with
the Securities and Exchange Commission.
The
current pandemic of the novel coronavirus, or COVID-19, and the future outbreak of other highly infectious or contagious diseases,
could materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance.
Since
being reported in December 2019, COVID-19 has spread globally, including to every state in the United States. On March 11, 2020,
the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency
with respect to COVID-19.
The
COVID-19 pandemic has had, and another pandemic in the future could have, repercussions across regional and global economies and
financial markets. The outbreak of COVID-19 in many countries has significantly adversely impacted global economic activity and
has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak has been
rapidly evolving and, as cases of COVID-19 have continued to be identified in additional countries, many countries, including
the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.
Certain
states and cities, including where we own rental homes, have also reacted by instituting quarantines, restrictions on travel,
“shelter in place” rules, restrictions on types of business that may continue to operate. The Company expects that additional
states and cities will implement similar restrictions. As a result, the COVID-19 pandemic is negatively impacting almost every
industry directly or indirectly. We expect that a significant number of our tenants will suffer economic dislocation, such as
through job furloughs or job loss, which will adversely impact their ability to pay rent to the Company. Some of our tenants have
already requested rent deferral or rent abatement during this pandemic. Many experts predict that the outbreak will trigger, or
even has already triggered, a period of global economic slowdown or a global recession, which would further adversely impact the
ability of our tenants to pay rent to the Company. The COVID-19 pandemic, or a future pandemic, could have material and adverse
effects on our ability to successfully operate and on our financial condition, results of operations and cash flows due to, among
other factors:
● a
complete or partial closure of, or other operational issues at, our rental and associated property management business from government
or tenant action;
●
the reduced economic activity severely impacts our tenants’ livelihoods, financial condition and liquidity and may cause them
to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;
●
difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global
financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business
operations or address existing and anticipated liabilities on a timely basis;
●
a general decline in business activity and demand for real estate transactions could adversely affect our ability or desire to
grow our portfolio of properties;
●
a deterioration in our ability to operate in affected areas or delays in the supply of products or services to us from vendors
that are needed for our efficient operations could adversely affect our operations; and
●
the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, could
result in a deterioration in our ability to ensure business continuity during a disruption.
The
extent to which the COVID-19 pandemic impacts our operations and those of our tenants will depend on future developments, which
are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the
actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and
containment measures, among others. The inability of our tenants rent to us, and early terminations by our tenants of their leases,
could reduce our cash flows, which could have a material adverse impact on our performance, financial condition, results of operations,
cash flows and performance. The rapid development and fluidity of this situation precludes any prediction as to the full adverse
impact of the COVID-19 pandemic. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our
performance, financial condition, results of operations, cash flows and performance.