1.	Nature of Business

Otelco Inc. (together with its consolidated subsidiaries, the “Company”) provides a broad range of telecommunication services on a retail and wholesale basis. These services include local and long distance calling; network access to and from the Company’s customers; data transport; digital high-speed internet access; cable and Internet Protocol television; other telephone related services; and cloud hosting and managed services. The principal markets for these services are business and residential customers residing in and adjacent to the exchanges the Company serves in Alabama, Maine, Massachusetts, Missouri, Vermont, and West Virginia and business customers throughout Maine and New Hampshire. The Company offers various communications services that are sold to economically similar customers in a comparable manner of distribution. The Company also offers cloud hosting and managed services for small and mid-sized companies who rely on mission-critical software applications. The majority of customers buy multiple services, often bundled together at a single price. The Company views, manages and evaluates the results of its operations from the various communications services as

one

company and therefore has identified

one

reporting segment as it relates to providing segment information.

Refinancings

January 25, 2016,

the Company entered into a senior loan agreement (the “Senior Loan Agreement”), providing for a

five

year term loan facility in the aggregate principal amount of

$85.0

million and a

five

year

$5.0

million revolving credit facility, and a subordinated loan agreement (the “Subordinated Loan Agreement”), providing for a

five

and a half year term loan facility in the aggregate principal amount of

$15.0

million. On

February 17, 2016,

the Subordinated Loan Agreement was amended to increase the aggregate principal amount available for borrowing thereunder to

$15.3

million, and the Company borrowed

$85.0

million under the term loan facility of the Senior Loan Agreement and

$15.3

million under the Subordinated Loan Agreement. The Company used the borrowings under the Senior Loan Agreement and the Subordinated Loan Agreement to, among other things, pay all amounts due, including principal, interest and fees, and satisfy in full all of its obligations under its previous credit facility (the “Previous Credit Facility”), which was scheduled to mature on

April 30, 2016.

As a result of the repayment of the Previous Credit Facility, all of the shares of the Company’s Class B common stock were automatically converted into an equal number of shares of the Company’s Class A common stock. The term loan facility under the Senior Loan Agreement required principal payments of

$1.0

million quarterly, which payments began on

April 1, 2016.

Principal amounts outstanding under the Subordinated Loan Agreement were generally

not

due until maturity. The Company recorded costs of

$15

thousand and write-off of loan costs of

$140

thousand in connection with this refinancing. During

second

quarter

2017,

the Company paid an amendment fee of

$77.9

thousand to its senior lender under the Senior Loan Agreement to raise the capital expenditure limits under the Senior Loan Agreement to

$8.5

million and

$7.5

million for

2017

and

2018,

respectively. The increased capital expenditures were necessary to fulfill build out requirements associated with the Federal Communications Commission’s (the “FCC’s”) Alternative Connect America Model (“A-CAM”) program.

November 2, 2017,

the Company refinanced the Senior Loan Agreement and the Subordinated Loan Agreement with a new

$92

million,

five

-year credit facility from a consortium of banks led by CoBank, ACB (the “New Credit Facility”). The New Credit Facility includes an

$87.0

million term loan and a

$5.0

million revolving loan, which is undrawn. The New Credit Facility also includes a

$20.0

million accordion feature that could be used to increase the term-loan portion of the New Credit Facility. Proceeds from the New Credit Facility and cash on hand were used to pay all amounts due in respect of principal, interest, prepayment premiums and fees under the Senior Loan Agreement and the Subordinated Loan Agreement, as well as fees associated with the transaction. The Company recorded costs of

$28

thousand and write-off of loan costs of

$3.7

million in connection with this refinancing.