----

----

| (Mark One) |                                                                                     |
|------------|------------------------------------------------------------------------------------------|
|       |                                                                                     |
| x          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  |
|       |                                                                                     |
|       | For the quarterly period ended September 30, 2009                                        |
|       |                                                                                     |
|       | OR                                                                                       |
|       |                                                                                     |
| o          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|       |                                                                                     |
|       | For the transition period from  to                                             |

| Delaware                                         |   | 52-2126395                           |
|--------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or |   | (I.R.S. Employer Identification No.) |
| organization)                                    |   |                                 |
|                                             |   |                                 |
| 505 Third Avenue East, Oneonta, Alabama          |   | 35121                                |
| (Address of Principal Executive Offices)         |   | (Zip Code)                           |
|                                             |   |                                 |

| Yes  x | No  o |
|------------------|-----------------|

| Yes  o | No  o |
|------------------|-----------------|

| Large accelerated filer o                     | Accelerated filerx | Non-accelerated filero | Smaller reporting companyo |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|------------------------|----------------------------|

| Yes  o | No  x |
|------------------|-----------------|

| Class                                            |   | Outstanding at November 6, 2009 |
|--------------------------------------------------|--------|---------------------------------|
| Class A Common Stock ($0.01 par value per share) |   | 12,676,733                      |
| Class B Common Stock ($0.01 par value per share) |   | 544,671                         |

----

|                                    |                                                                                                         |   |   |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------|--------|--------|
|                                    |                                                                                                         |   | Page   |
|                                    |                                                                                                         |   |
| PART I  FINANCIAL INFORMATION |                                                                                                         | 2      |
| Item 1.                                 | Financial Statements                                                                                         |   | 2      |
|                                    | Consolidated Balance Sheets as of December 31, 2008 and September 30, 2009                                   |   | 2      |
|                                    | Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2008 and 2009 |   | 3      |
|                                    | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2008 and 2009                  |   | 4      |
|                                    | Notes to Consolidated Financial Statements                                                                   |   | 5      |
| Item 2.                                 | Management’s Discussion and Analysis of Financial Condition and Results of Operations                  |   | 16     |
| Item 3.                                 | Quantitative and Qualitative Disclosures About Market Risk                                                   |   | 26     |
| Item 4.                                 | Controls and Procedures                                                                                      |   | 26     |
|                                    |                                                                                                         |   |
| PART II  OTHER INFORMATION    |                                                                                                         | 27     |
| Item 6.                                 | Exhibits                                                                                                     |   | 27     |

----

----

PART I  FINANCIAL INFORMATION

Item 1.  

| OTELCO INC.                                                                                                     |   |
|-----------------------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                                                                     |   |
|                                                                                                            |   |   |   |   |   |   |
|                                                                                                            |   | December 31, |   |   | September 30, |   |
|                                                                                                            |   | 2008 |   |   | 2009 |   |
| Assets                                                                                                          |   |   |   |   | (unaudited) |   |
| Current assets                                                                                                  |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                       |   | $ | 13,542,255 |   |   | $ | 16,717,829 |   |
| Accounts receivable:                                                                                            |   |   |   |   |   |   |   |   |
|   Due from subscribers, net of allowance for doubtful accounts of $318,446 and $365,076, respectively |   |   | 5,207,731 |   |   |   | 4,707,292 |   |
|   Unbilled receivables                                                                                     |   |   | 2,567,730 |   |   |   | 2,488,917 |   |
|     Other                                                                                        |   |   | 4,348,044 |   |   |   | 3,327,553 |   |
| Materials and supplies                                                                                          |   |   | 2,305,755 |   |   |   | 2,092,842 |   |
| Prepaid expenses                                                                                                |   |   | 1,141,908 |   |   |   | 1,052,704 |   |
| Income tax receivable                                                                                           |   |   | 181,644 |   |   |   | 6,000 |   |
| Deferred income taxes                                                                                           |   |   | 827,686 |   |   |   | 827,686 |   |
| Total Current Assets                                                                                            |   |   | 30,122,753 |   |   |   | 31,220,823 |   |
|                                                                                                            |   |   |   |   |   |   |   |   |
| Property and equipment, net                                                                                     |   |   | 75,407,062 |   |   |   | 70,057,795 |   |
|  Goodwill                                                                                                  |   |   | 189,334,837 |   |   |   | 188,190,078 |   |
| Intangible assets, net                                                                                          |   |   | 44,390,644 |   |   |   | 36,261,961 |   |
| Investments                                                                                                     |   |   | 2,015,583 |   |   |   | 1,996,451 |   |
| Deferred financing costs                                                                                        |   |   | 8,315,921 |   |   |   | 7,301,991 |   |
| Deferred income taxes                                                                                           |   |   | 5,897,382 |   |   |   | 6,123,703 |   |
| Interest rate cap                                                                                               |   |   | 7,765 |   |   |   | - |   |
| Other assets                                                                                                    |   |   | 49,540 |   |   |   | 203,233 |   |
| Total Assets                                                                                                    |   | $ | 355,541,487 |   |   | $ | 341,356,035 |   |
|                                                                                                            |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                            |   |   |   |   |   |   |   |   |
| Current liabilities                                                                                             |   |   |   |   |   |   |   |   |
| Accounts payable                                                                                                |   | $ | 2,312,920 |   |   | $ | 2,304,996 |   |
| Accrued expenses                                                                                                |   |   | 6,632,287 |   |   |   | 5,853,988 |   |
| Advance billings and payments                                                                                   |   |   | 2,024,123 |   |   |   | 1,660,142 |   |
| Customer deposits                                                                                               |   |   | 180,582 |   |   |   | 191,324 |   |
| Total Current Liabilities                                                                                       |   |   | 11,149,912 |   |   |   | 10,010,450 |   |
| Deferred income taxes                                                                                           |   |   | 45,962,402 |   |   |   | 45,328,310 |   |
| Interest rate swaps                                                                                             |   |   | - |   |   |   | 1,318,608 |   |
| Advance billings and payments                                                                                   |   |   | 739,736 |   |   |   | 708,698 |   |
| Other liabilities                                                                                               |   |   | 188,346 |   |   |   | 158,387 |   |
| Long-term notes payable                                                                                         |   |   | 278,799,513 |   |   |   | 273,738,754 |   |
| Total Liabilities                                                                                               |   |   | 336,839,909 |   |   |   | 331,263,207 |   |
|                                                                                                            |   |   |   |   |   |   |   |   |
| Derivative liability                                                                                            |   |   | 238,054 |   |   |   | 89,318 |   |
|   Class B common convertible to senior subordinated notes                                                  |   |   | 4,085,033 |   |   |   | 4,085,033 |   |

|                                                                                                       |   |   |        |   |   |   |        |   |
|------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|-------------|--------|
| Stockholders' Equity                                                                                       |   |   |        |   |   |   |        |   |
| Class A Common Stock, $.01 par value-authorized 20,000,000 shares;Issued and outstanding 12,676,733 shares |   |   | 126,767     |   |   |   | 126,767     |   |
| Class B Common Stock, $.01 par value-authorized 800,000 shares; issuedand outstanding 544,671 shares       |   |   | 5,447       |   |   |   | 5,447       |   |
| Additional paid in capital                                                                                 |   |   | 19,277,959  |   |   |   | 12,575,136  |   |
| Retained deficit                                                                                           |   |   | (3,870,923  | )      |   |   | (5,470,262  | )      |
| Accumulated other comprehensive loss                                                                       |   |   | (1,160,759  | )      |   |   | (1,318,611  | )      |
| Total stockholders' equity                                                                                 |   |   | 14,378,491  |   |   |   | 5,918,477   |   |
| Total liabilities and stockholders' equity                                                                 |   | $      | 355,541,487 |   |   | $      | 341,356,035 |   |

----

| OTELCO INC.                                        |   |
|----------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF OPERATIONS              |   |
|                                               |   |
| (unaudited)                                        |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |
|                                               |   | Three months endedSeptember 30, |   |   | Nine months endedSeptember 30, |   |
|                                               |   | 2008 |   |   | 2009 |   |   | 2008 |   |   | 2009 |   |
| Revenues                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Local services                                     |   | $ | 6,678,826 |   |   | $ | 12,396,806 |   |   | $ | 20,116,902 |   |   | $ | 36,315,205 |   |
| Network access                                     |   |   | 6,694,486 |   |   |   | 8,517,512 |   |   |   | 19,237,269 |   |   |   | 24,876,708 |   |
| Cable television                                   |   |   | 601,025 |   |   |   | 614,114 |   |   |   | 1,713,457 |   |   |   | 1,833,164 |   |
| Internet                                           |   |   | 3,028,963 |   |   |   | 3,500,870 |   |   |   | 9,060,822 |   |   |   | 10,542,696 |   |
| Transport services                                 |   |   | 1,234,274 |   |   |   | 1,373,832 |   |   |   | 3,637,276 |   |   |   | 4,132,208 |   |
| Total revenues                                     |   |   | 18,237,574 |   |   |   | 26,403,134 |   |   |   | 53,765,726 |   |   |   | 77,699,981 |   |
| Operating expenses                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of services and products                      |   |   | 6,654,860 |   |   |   | 10,445,442 |   |   |   | 20,052,583 |   |   |   | 31,245,153 |   |
| Selling, general and administrative expenses       |   |   | 2,777,411 |   |   |   | 3,222,825 |   |   |   | 7,998,818 |   |   |   | 10,142,354 |   |
| Depreciation and amortization                      |   |   | 3,140,688 |   |   |   | 6,525,796 |   |   |   | 9,903,702 |   |   |   | 19,922,383 |   |
| Total operating expenses                           |   |   | 12,572,959 |   |   |   | 20,194,063 |   |   |   | 37,955,103 |   |   |   | 61,309,890 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income from operations                             |   |   | 5,664,615 |   |   |   | 6,209,071 |   |   |   | 15,810,623 |   |   |   | 16,390,091 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense)                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                   |   |   | (4,773,647 | ) |   |   | (6,468,875 | ) |   |   | (14,229,727 | ) |   |   | (19,514,730 | ) |
| Change in fair value of derivative                 |   |   | 173,842 |   |   |   | 74,274 |   |   |   | 99,787 |   |   |   | 148,736 |   |
| Other income                                       |   |   | 188,160 |   |   |   | 29,540 |   |   |   | 618,785 |   |   |   | 267,911 |   |
| Total other expenses                               |   |   | (4,411,645 | ) |   |   | (6,365,061 | ) |   |   | (13,511,155 | ) |   |   | (19,098,083 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income tax                    |   |   | 1,252,970 |   |   |   | (155,990 | ) |   |   | 2,299,468 |   |   |   | (2,707,992 | ) |
| Income tax (expense) benefit                       |   |   | (463,727 | ) |   |   | 144,251 |   |   |   | (696,049 | ) |   |   | 1,108,652 |   |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) available to common stockholders |   | $ | 789,243 |   |   | $ | (11,739 | ) |   | $ | 1,603,419 |   |   | $ | (1,599,340 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Basic                                        |   |   | 12,676,733 |   |   |   | 12,676,733 |   |   |   | 12,676,733 |   |   |   | 12,676,733 |   |
|  Diluted                                      |   |   | 13,221,404 |   |   |   | 13,221,404 |   |   |   | 13,221,404 |   |   |   | 13,221,404 |   |
| Basic net income (loss) per share                  |   | $ | 0.06 |   |   | $ | (0.00 | ) |   | $ | 0.13 |   |   | $ | (0.13 | ) |
| Diluted net income (loss) per share                |   | $ | 0.04 |   |   | $ | (0.01 | ) |   | $ | 0.10 |   |   | $ | (0.13 | ) |
|                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends declared per share                       |   | $ | 0.18 |   |   | $ | 0.18 |   |   | $ | 0.53 |   |   | $ | 0.53 |   |

----

| OTELCO INC.                           |   |
|---------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS |   |
|                                  |   |
| (unaudited)                           |   |

|                                                                         |   | Nine months ended |       |
|------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                         |   | September 30,     |       |
|                                                                         |   | 2008              |       |   | 2009 |   |
| Cash flows from operating activities:                                        |   |              |       |   |   |   |
| Net income (loss)                                                            |   | $                 | 1,603,419  |   |   | $ | (1,599,340 | ) |
| Adjustments to reconcile net income to cash flows from operating activities: |   |              |       |   |   |   |   |   |
| Depreciation                                                                 |   |              | 8,275,580  |   |   |   | 10,594,257 |   |
| Amortization                                                                 |   |              | 1,628,122  |   |   |   | 9,328,126 |   |
| Interest rate caplet                                                         |   |              | 722,527    |   |   |   | 1,168,521 |   |
| Amortization of debt premium                                                 |   |              | (54,117    | ) |   |   | (60,759 | ) |
| Amortization of loan costs                                                   |   |              | 1,118,481  |   |   |   | 1,013,930 |   |
| Change in fair value of derivative                                           |   |              | (99,787    | ) |   |   | (148,736 | ) |
| Provision for deferred income taxes                                          |   |              | -          |   |   |   | 114,171 |   |
| Provision for uncollectible revenue                                          |   |              | 229,404    |   |   |   | 271,536 |   |
| Gain on early lease termination                                              |   |              | (121,124   | ) |   |   | - |   |
| Changes in assets and liabilities; net of assets and liabilities acquired:   |   |              |       |   |   |   |   |   |
| Accounts receivables                                                         |   |              | (582,528   | ) |   |   | 1,147,822 |   |
| Material and supplies                                                        |   |              | (268,213   | ) |   |   | 212,913 |   |
| Prepaid expenses and other assets                                            |   |              | 601,101    |   |   |   | 89,204 |   |
| Income tax receivable                                                        |   |              | 255,106    |   |   |   | 175,644 |   |
| Accounts payable and accrued liabilities                                     |   |              | (1,302,625 | ) |   |   | (616,048 | ) |
| Advance billings and payments                                                |   |              | (181,015   | ) |   |   | (395,019 | ) |
| Other liabilities                                                            |   |              | 5,539      |   |   |   | (19,216 | ) |
|                                                                         |   |              |       |   |   |   |   |   |
| Net cash from operating activities                                           |   |              | 14,435,120 |   |   |   | 21,277,006 |   |
|                                                                         |   |              |       |   |   |   |   |   |
| Cash flows from investing activities:                                        |   |              |       |   |   |   |   |   |
| Acquisition and construction of property and equipment                       |   |              | (6,848,799 | ) |   |   | (6,392,058 | ) |
| Deferred charges                                                             |   |              | (533,098   | ) |   |   | (6,551 | ) |
|                                                                         |   |              |       |   |   |   |   |   |
| Net cash used in investing activities                                        |   |              | (7,381,897 | ) |   |   | (6,398,609 | ) |
|                                                                         |   |              |       |   |   |   |   |   |
| Cash flows from financing activities:                                        |   |              |       |   |   |   |   |   |
| Cash dividends paid                                                          |   |              | (6,702,822 | ) |   |   | (6,702,823 | ) |
| Repayment of long-term notes payable                                         |   |              | -          |   |   |   | (5,000,000 | ) |
|                                                                         |   |              |       |   |   |   |   |   |
| Net cash used in financing activities                                        |   |              | (6,702,822 | ) |   |   | (11,702,823 | ) |
|                                                                         |   |              |       |   |   |   |   |   |
| Net increase in cash and cash equivalents                                    |   |              | 350,401    |   |   |   | 3,175,574 |   |
| Cash and cash equivalents, beginning of period                               |   |              | 12,810,497 |   |   |   | 13,542,255 |   |
|                                                                         |   |              |       |   |   |   |   |   |
| Cash and cash equivalents, end of period                                     |   | $                 | 13,160,898 |   |   | $ | 16,717,829 |   |

|                                               |   |   |       |   |   |   |       |   |
|----------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|
| Supplemental disclosures of cash flow information: |   |   |       |   |   |   |       |   |
| Interest paid                                      |   | $      | 12,705,214 |   |   | $      | 17,763,703 |   |
|                                               |   |   |       |   |   |   |       |   |
| Income taxes paid (received)                       |   | $      | (122,606   | )      |   | $      | 53,658     |   |
|                                               |   |   |       |   |   |   |       |   |
| Non-cash gain on early lease termination           |   | $      | (121,124   | )      |   | $      | -          |   |

----

  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

----

----

----

|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |
|--------|--------------------------------------------------------------------|--------|---------------------------------|------------|--------|--------------------------------|--------|------------|--------|--------|--------|------------|--------|
|   |                                                               |   | Three months endedSeptember 30, |       |   | Nine months endedSeptember 30, |   |
|   |                                                               |   | 2008                            |       |   | 2009                           |   |       | 2008   |   |   | 2009       |   |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |
|   | Weighted average common shares-basic                               |   |                            | 12,676,733 |   |                           |   | 12,676,733 |   |   |   | 12,676,733 |   |   |   | 12,676,733 |   |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Effect of dilutive securities                                      |   |                            | 544,671    |   |                           |   | 544,671    |   |   |   | 544,671    |   |   |   | 544,671 |   |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Weighted-average common shares and potential common shares-diluted |   |                            | 13,221,404 |   |                           |   | 13,221,404 |   |   |   | 13,221,404 |   |   |   | 13,221,404 |   |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Net income (loss) available to common stockholdes                  |   | $                               | 789,243    |   |                           |   | (11,739    | )      |   | $      | 1,603,419  |   |   | $ | (1,599,340 | ) |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Net income (loss) per basic share                                  |   | $                               | 0.06       |   |                           | $      | (0.00      | )      |   | $      | 0.13       |   |   | $ | (0.13 | ) |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Net income (loss) available to common stockholders                 |   | $                               | 789,243    |   |                           | $      | (11,739    | )      |   | $      | 1,603,419  |   |   | $ | (1,599,340 | ) |
|   | Less: Change in fair value of B share derivative                   |   |                            | (201,655   | )      |                           |   | (74,274    | )      |   |   | 297,893    |   |   |   | 148,736 |   |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Net income (loss) available for diluted shares                     |   | $                               | 587,588    |   |                           | $      | (86,013    | )      |   | $      | 1,305,526  |   |   | $ | (1,748,076 | ) |
|   |                                                               |   |                            |       |   |                           |   |       |   |   |   |       |   |   |   |   |   |
|   | Net income (loss) per diluted share                                |   | $                               | 0.04       |   |                           | $      | (0.01      | )      |   | $      | 0.10       |   |   | $ | (0.13 | ) |

----

|   |                          |   |               |       |   |        |   |       |        |   |   |        |   |
|--------|-------------------------------|--------|--------------------|------------|--------|-------------|--------|------------|-------------|--------|--------|-------------|--------|
|   |                          |   | September 30, 2009 |       |
|   |                          |   | Fair Value         |       |   | Level 1 (1) |   |       | Level 2 (2) |   |   | Level 3 (3) |   |
|   | Assets                        |   |               |       |   |        |   |       |        |   |   |        |   |
|   | Cash and cash equivalents     |   | $                  | 16,717,829 |   |        | $      | 16,717,829 |        |   | $      | -           |   |   | $ | - |   |
|   | Interest rate cap             |   |               | -          |   |        |   | -          |        |   |   | -           |   |   |   | - |   |
|   | Co-operative patronage shares |   |               | 1,541,410  |   |        |   | -          |        |   |   | -           |   |   |   | 1,541,410 |   |
|   | Total assets                  |   | $                  | 18,259,239 |   |        | $      | 16,717,829 |        |   | $      | -           |   |   | $ | 1,541,410 |   |
|   |                          |   |               |       |   |        |   |       |        |   |   |        |   |   |   |   |   |
|   | Liabilities                   |   |               |       |   |        |   |       |        |   |   |        |   |   |   |   |   |
|   | Interest rate swaps           |   | $                  | 1,318,608  |   |        | $      | -          |        |   | $      | 1,318,608   |   |   | $ | - |   |
|   | Class B derivative liability  |   |               | 89,318     |   |        |   | -          |        |   |   | -           |   |   |   | 89,318 |   |
|   | Total liabilities             |   | $                  | 1,407,926  |   |        | $      | -          |        |   | $      | 1,318,608   |   |   | $ | 89,318 |   |

----

|   | (1) | Quoted prices in active markets for identical assets. |
|--------|-----|-------------------------------------------------------|

|   | (2) | Significant other observable inputs. |
|--------|-----|--------------------------------------|

|   | (3) | Significant unobservable inputs. |
|--------|-----|----------------------------------|

----

|   |                                 |   |   |        |   |
|--------|--------------------------------------|--------|--------|-------------|--------|
|   | Cash received                        |   | $      | (20,167     | )      |
|   | Additional senior debt notes payable |   |   | 108,853,032 |   |
|   | Purchase price                       |   | $      | 108,832,865 |   |

|   |                            |   |             |        |   |
|--------|---------------------------------|--------|------------------|-------------|--------|
|   |                            |   | October 31, 2008 |        |
|   | Cash                            |   | $                | 247,285     |   |
|   | Other current assets            |   |             | 4,602,298   |   |
|   | Property and equipment          |   |             | 24,034,722  |   |
|   | Intangible assets               |   |             | 37,800,000  |   |
|   | Goodwill                        |   |             | 53,619,643  |   |
|   | Other assets                    |   |             | 6,142,596   |   |
|   | Current liabilities             |   |             | (2,744,832  | )      |
|   | Deferred income tax liabilities |   |             | (14,844,479 | )      |
|   | Other liabilities               |   |             | (24,368     | )      |
|   | Purchase price                  |   | $                | 108,832,865 |   |

|   | ● | Term loans of $173.5 million due October 31, 2013, consisting of an original term loan of $64.6 million, and an additional term loan of $108.9 million, used to finance the acquisition and related transaction costs and to provide working capital for the Company and its subsidiaries and for other corporate purposes; and |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | A revolving loan commitment of up to $15 million. |
|--------|---------|---------------------------------------------------|

----

|                       |   | Three months endedSeptember 30, 2008 |       | Nine months endedSeptember 30, 2008 |   |
|----------------------------|--------|--------------------------------------|------------|-------------------------------------|--------|
|                       |   | (unaudited)                          |       | (unaudited)                         |   |
| Revenues                   |   | $                                    | 26,698,825 |                                | $      | 78,179,476 |   |
| Income from operations     |   |                                 | 5,297,848  |                                |   | 13,880,321 |   |
| Net loss                   |   |                                 | (729,195   | )                                   |   | (3,267,604 | ) |
| Basic net loss per share   |   | $                                    | (0.06      | )                                   | $      | (0.26 | ) |
| Diluted net loss per share |   | $                                    | (0.06      | )                                   | $      | (0.26 | ) |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 7.     | Subsidiary Guarantees                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | The Company has no independent assets or operations separate from its operating subsidiaries. The guarantees of its senior subordinated notes by 12 of its 14 operating subsidiaries are full and unconditional, joint and several. The operating subsidiaries have no independent long-term notes payable. There are no significant restrictionson the ability of the Company to obtain funds from its operating subsidiaries by dividend or loan. The condensed consolidated financial information is provided for the guarantor entities. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | The following tables present condensed consolidating balance sheets as of December 31, 2008 and September 30, 2009, condensed consolidating statements of operations for the three months ended September 30, 2008 and 2009, condensed consolidating statements of operations for the nine months ended September 30, 2008 and 2009; and condensedconsolidating statements of cash flows for the nine months ended September 30, 2008 and 2009.                                                                                              |

|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|--------|---------------------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|--------------|
|   |                                                    |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |         |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | ASSETS                                                  |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | Current assets                                          |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | Cash and cash equivalents                               |   | $      | -           |   |                  | $      | 13,521,138  |                      |   | $      | 21,117       |   |   | $            | -            |   |   | $ | 13,542,255 |   |
|   | Accounts receivable, net                                |   |   | -           |   |                  |   | 10,869,233  |                      |   |   | 1,254,272    |   |   |         | -            |   |   |   | 12,123,505 |   |
|   | Materials and supplies                                  |   |   | -           |   |                  |   | 1,029,214   |                      |   |   | 1,276,541    |   |   |         | -            |   |   |   | 2,305,755 |   |
|   | Prepaid and other current assets                        |   |   | 66,560      |   |                  |   | 994,500     |                      |   |   | 80,848       |   |   |         | -            |   |   |   | 1,141,908 |   |
|   | Income tax receivables                                  |   |   | 181,644     |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 181,644 |   |
|   | Deferred income taxes                                   |   |   | 827,686     |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 827,686 |   |
|   | Investment in subsidiaries                              |   |   | 99,481,692  |   |                  |   | -           |                      |   |   | -            |   |   |         | (99,481,692  | ) |   |   | - |   |
|   | Intercompany receivable                                 |   |   | 155,535,369 |   |                  |   | -           |                      |   |   | -            |   |   |         | (155,535,369 | ) |   |   | - |   |
|   | Total current assets                                    |   |   | 256,092,951 |   |                  |   | 26,414,085  |                      |   |   | 2,632,778    |   |   |         | (255,017,061 | ) |   |   | 30,122,753 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Property and equipment, net                             |   |   | -           |   |                  |   | 62,507,141  |                      |   |   | 12,899,921   |   |   |         | -            |   |   |   | 75,407,062 |   |
|   | Goodwill                                                |   |   | -           |   |                  |   | 191,271,477 |                      |   |   | (1,936,640   | )      |   |         | -            |   |   |   | 189,334,837 |   |
|   | Intangibles assets, net                                 |   |   | -           |   |                  |   | 41,286,088  |                      |   |   | 3,104,556    |   |   |         | -            |   |   |   | 44,390,644 |   |
|   | Investments                                             |   |   | 1,000       |   |                  |   | 1,686,908   |                      |   |   | 327,675      |   |   |         | -            |   |   |   | 2,015,583 |   |
|   | Deferred income taxes                                   |   |   | 5,897,382   |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 5,897,382 |   |
|   | Other long-term assets                                  |   |   | 8,879,424   |   |                  |   | (506,198    | )                         |   |   | -            |   |   |         | -            |   |   |   | 8,373,226 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Total assets                                            |   | $      | 270,870,757 |   |                  | $      | 322,659,501 |                      |   | $      | 17,028,290   |   |   | $            | (255,017,061 | ) |   | $ | 355,541,487 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | LIABILITIES AND STOCKHOLDERS’ EQUITY              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Current liabilities                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Accounts payable and accrued expenses                   |   | $      | 3,316,323   |   |                  | $      | 4,543,542   |                      |   | $      | 1,085,342    |   |   | $            | -            |   |   | $ | 8,945,207 |   |
|   | Intercompany payables                                   |   |   | -           |   |                  |   | 146,585,645 |                      |   |   | 8,949,724    |   |   |         | (155,535,369 | ) |   |   | - |   |
|   | Other current liabilities                               |   |   | -           |   |                  |   | 2,129,257   |                      |   |   | 75,448       |   |   |         | -            |   |   |   | 2,204,705 |   |
|   | Total current liabilities                               |   |   | 3,316,323   |   |                  |   | 153,258,444 |                      |   |   | 10,110,514   |   |   |         | (155,535,369 | ) |   |   | 11,149,912 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Deferred income taxes                                   |   |   | 10,316,819  |   |                  |   | 31,595,332  |                      |   |   | 4,050,251    |   |   |         | -            |   |   |   | 45,962,402 |   |
|   | Other liabilities                                       |   |   | -           |   |                  |   | 928,082     |                      |   |   | -            |   |   |         | -            |   |   |   | 928,082 |   |
|   | Long-term notes payable                                 |   |   | 238,536,037 |   |                  |   | 40,263,476  |                      |   |   | -            |   |   |         | -            |   |   |   | 278,799,513 |   |
|   | Derivative liability                                    |   |   | 238,054     |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 238,054 |   |
|   | Class B common convertible to senior subordinated notes |   |   | 4,085,033   |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 4,085,033 |   |
|   | Stockholders’ equity                              |   |   | 14,378,491  |   |                  |   | 96,614,167  |                      |   |   | 2,867,525    |   |   |         | (99,481,692  | ) |   |   | 14,378,491 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Total liabilities and stockholders’ equity        |   | $      | 270,870,757 |   |                  | $      | 322,659,501 |                      |   | $      | 17,028,290   |   |   | $            | (255,017,061 | ) |   | $ | 355,541,487 |   |

----

|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|--------|---------------------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|--------------|
|   |                                                    |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |         |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | ASSETS                                                  |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | Current assets                                          |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |
|   | Cash and cash equivalents                               |   | $      | -           |   |                  | $      | 16,597,834  |                      |   | $      | 119,995      |   |   | $            | -            |   |   | $ | 16,717,829 |   |
|   | Accounts receivable, net                                |   |   | -           |   |                  |   | 9,505,573   |                      |   |   | 1,018,189    |   |   |         | -            |   |   |   | 10,523,762 |   |
|   | Materials and supplies                                  |   |   | -           |   |                  |   | 1,040,662   |                      |   |   | 1,052,180    |   |   |         | -            |   |   |   | 2,092,842 |   |
|   | Prepaid and other current assets                        |   |   | 39,455      |   |                  |   | 970,239     |                      |   |   | 43,010       |   |   |         | -            |   |   |   | 1,052,704 |   |
|   | Income tax receivable                                   |   |   | 6,000       |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 6,000 |   |
|   | Deferred income taxes                                   |   |   | 827,686     |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 827,686 |   |
|   | Investment in subsidiaries                              |   |   | 115,389,928 |   |                  |   | -           |                      |   |   | -            |   |   |         | (115,389,928 | ) |   |   | - |   |
|   | Intercompany receivable                                 |   |   | 125,282,787 |   |                  |   | -           |                      |   |   | -            |   |   |         | (125,282,787 | ) |   |   | - |   |
|   | Total current assets                                    |   |   | 241,545,856 |   |                  |   | 28,114,308  |                      |   |   | 2,233,374    |   |   |         | (240,672,715 | ) |   |   | 31,220,823 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Property and equipment, net                             |   |   | -           |   |                  |   | 58,195,186  |                      |   |   | 11,862,609   |   |   |         | -            |   |   |   | 70,057,795 |   |
|   | Goodwill                                                |   |   | -           |   |                  |   | 190,126,718 |                      |   |   | (1,936,640   | )      |   |         | -            |   |   |   | 188,190,078 |   |
|   | Intangibles assets, net                                 |   |   | -           |   |                  |   | 33,343,678  |                      |   |   | 2,918,283    |   |   |         | -            |   |   |   | 36,261,961 |   |
|   | Investments                                             |   |   | 1,000       |   |                  |   | 1,667,776   |                      |   |   | 327,675      |   |   |         | -            |   |   |   | 1,996,451 |   |
|   | Deferred Income taxes                                   |   |   | 6,123,703   |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 6,123,703 |   |
|   | Other long-term assets                                  |   |   | 7,857,729   |   |                  |   | (352,505    | )                         |   |   | -            |   |   |         | -            |   |   |   | 7,505,224 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Total assets                                            |   | $      | 255,528,288 |   |                  | $      | 311,095,161 |                      |   | $      | 15,405,301   |   |   | $            | (240,672,715 | ) |   | $ | 341,356,035 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | LIABILITIES AND STOCKHOLDERS’ EQUITY              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Current liabilities                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Accounts payable and accrued expenses                   |   | $      | 958,847     |   |                  | $      | 5,863,597   |                      |   | $      | 1,336,540    |   |   | $            | -            |   |   | $ | 8,158,984 |   |
|   | Intercompany payables                                   |   |   | -           |   |                  |   | 120,740,218 |                      |   |   | 4,542,569    |   |   |         | (125,282,787 | ) |   |   | - |   |
|   | Other current liabilities                               |   |   | -           |   |                  |   | 1,762,130   |                      |   |   | 89,336       |   |   |         | -            |   |   |   | 1,851,466 |   |
|   | Total current liabilities                               |   |   | 958,847     |   |                  |   | 128,365,945 |                      |   |   | 5,968,445    |   |   |         | (125,282,787 | ) |   |   | 10,010,450 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Deferred income taxes                                   |   |   | 9,682,727   |   |                  |   | 31,595,332  |                      |   |   | 4,050,251    |   |   |         | -            |   |   |   | 45,328,310 |   |
|   | Other liabilities                                       |   |   | 1,318,608   |   |                  |   | 867,085     |                      |   |   | -            |   |   |         | -            |   |   |   | 2,185,693 |   |
|   | Long-term notes payable                                 |   |   | 233,475,278 |   |                  |   | 40,263,476  |                      |   |   | -            |   |   |         | -            |   |   |   | 273,738,754 |   |
|   | Derivative liability                                    |   |   | 89,318      |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 89,318 |   |
|   | Class B common convertible to senior subordinated notes |   |   | 4,085,033   |   |                  |   | -           |                      |   |   | -            |   |   |         | -            |   |   |   | 4,085,033 |   |
|   | Stockholders’ equity                              |   |   | 5,918,477   |   |                  |   | 110,003,323 |                      |   |   | 5,386,605    |   |   |         | (115,389,928 | ) |   |   | 5,918,477 |   |
|   |                                                    |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |         |   |   |   |   |   |
|   | Total liabilities and stockholders’ equity        |   | $      | 255,528,288 |   |                  | $      | 311,095,161 |                      |   | $      | 15,405,301   |   |   | $            | (240,672,715 | ) |   | $ | 341,356,035 |   |

|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |
|--------|------------------------------------------|--------|--------|------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|------------|
|   |                                     |   | Parent |       |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |       |
|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |
|   | Revenues                                 |   | $      | 813,891    |   |                  | $      | 16,533,991  |                      |   | $      | 3,250,425    |   |   | $            | (2,360,733 | ) |   | $ | 18,237,574 |   |
|   | Operating expenses                       |   |   | (813,891   | )      |                  |   | (11,711,478 | )                         |   |   | (2,408,323   | )      |   |         | 2,360,733  |   |   |   | (12,572,959 | ) |
|   | Income from operations                   |   |   | —    |   |                  |   | 4,822,513   |                      |   |   | 842,102      |   |   |         | —    |   |   |   | 5,664,615 |   |
|   | Other income (expense)                   |   |   | (4,410,341 | )      |                  |   | (1,253      | )                         |   |   | (51          | )      |   |         | —    |   |   |   | (4,411,645 | ) |
|   | Earnings from subsidiaries               |   |   | 5,663,311  |   |                  |   | —     |                      |   |   | —      |   |   |         | (5,663,311 | ) |   |   | — |   |
|   | Income before income tax                 |   |   | 1,252,970  |   |                  |   | 4,821,260   |                      |   |   | 842,051      |   |   |         | (5,663,311 | ) |   |   | 1,252,970 |   |
|   | Income tax expense                       |   |   | (463,727   | )      |                  |   | —     |                      |   |   | —      |   |   |         | —    |   |   |   | (463,727 | ) |
|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |   |   |   |   |   |
|   | Net income (loss) to common stockholders |   | $      | 789,243    |   |                  | $      | 4,821,260   |                      |   | $      | 842,051      |   |   | $            | (5,663,311 | ) |   | $ | 789,243 |   |

----

|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |
|--------|------------------------------------------|--------|--------|------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|------------|
|   |                                     |   | Parent |       |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |       |
|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |
|   | Revenues                                 |   | $      | 651,922    |   |                  | $      | 25,512,149  |                      |   | $      | 2,931,113    |   |   | $            | (2,692,050 | ) |   | $ | 26,403,134 |   |
|   | Operating expenses                       |   |   | (651,922   | )      |                  |   | (20,202,597 | )                         |   |   | (2,031,594   | )      |   |         | 2,692,050  |   |   |   | (20,194,063 | ) |
|   | Income from operations                   |   |   | -          |   |                  |   | 5,309,552   |                      |   |   | 899,519      |   |   |         | -          |   |   |   | 6,209,071 |   |
|   | Other income (expense)                   |   |   | (6,266,921 | )      |                  |   | (98,139     | )                         |   |   | (1           | )      |   |         | -          |   |   |   | (6,365,061 | ) |
|   | Earnings from subsidiaries               |   |   | 6,110,931  |   |                  |   | -           |                      |   |   | -            |   |   |         | (6,110,931 | ) |   |   | - |   |
|   | Income (loss) before income tax          |   |   | (155,990   | )      |                  |   | 5,211,413   |                      |   |   | 899,518      |   |   |         | (6,110,931 | ) |   |   | (155,990 | ) |
|   | Income tax benefit                       |   |   | 144,251    |   |                  |   | -           |                      |   |   | -            |   |   |         | -          |   |   |   | 144,251 |   |
|   |                                     |   |   |       |   |                  |   |        |                      |   |   |         |   |   |         |       |   |   |   |   |   |
|   | Net income (loss) to common stockholders |   | $      | (11,739    | )      |                  | $      | 5,211,413   |                      |   | $      | 899,518      |   |   | $            | (6,110,931 | ) |   | $ | (11,739 | ) |

|   |                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|--------|------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|-------------|
|   |                                     |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |        |
|   |                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|   | Revenues                                 |   | $      | 2,273,659   |   |                  | $      | 48,924,931  |                      |   | $      | 9,376,845    |   |   | $            | (6,809,709  | ) |   | $ | 53,765,726 |   |
|   | Operating expenses                       |   |   | (2,273,659  | )      |                  |   | (35,121,133 | )                         |   |   | (7,370,020   | )      |   |         | 6,809,709   |   |   |   | (37,955,103 | ) |
|   | Income from operations                   |   |   | -           |   |                  |   | 13,803,798  |                      |   |   | 2,006,825    |   |   |         | -           |   |   |   | 15,810,623 |   |
|   | Other income (expense)                   |   |   | (13,275,232 | )      |                  |   | (235,954    | )                         |   |   | 31           |   |   |         | -           |   |   |   | (13,511,155 | ) |
|   | Earnings from subsidiaries               |   |   | 15,574,700  |   |                  |   | -           |                      |   |   | -            |   |   |         | (15,574,700 | ) |   |   | - |   |
|   | Income before income tax                 |   |   | 2,299,468   |   |                  |   | 13,567,844  |                      |   |   | 2,006,856    |   |   |         | (15,574,700 | ) |   |   | 2,299,468 |   |
|   | Income tax expense                       |   |   | (696,049    | )      |                  |   | -           |                      |   |   | -            |   |   |         | -           |   |   |   | (696,049 | ) |
|   |                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |
|   | Net income (loss) to common stockholders |   | $      | 1,603,419   |   |                  | $      | 13,567,844  |                      |   | $      | 2,006,856    |   |   | $            | (15,574,700 | ) |   | $ | 1,603,419 |   |
|   |                                     |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |

|   |                                     |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   |  Eliminations |   |   |  Consolidated |        |
|--------|------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------------|--------|--------|--------------------|-------------|
|   |                                     |   |   |        |   |                  |   |        |                      |   |   |               |   |   |               |        |   |   |   |   |   |
|   | Revenues                                 |   | $      | 2,186,352   |   |                  | $      | 74,938,358  |                      |   | $      | 8,773,453          |   |   | $                  | (8,198,182  | ) |   | $ | 77,699,981 |   |
|   | Operating expenses                       |   |   | (2,186,352  | )      |                  |   | (61,065,868 | )                         |   |   | (6,255,852         | )      |   |               | 8,198,182   |   |   |   | (61,309,890 | ) |
|   | Income from operations                   |   |   | -           |   |                  |   | 13,872,490  |                      |   |   | 2,517,601          |   |   |               | -           |   |   |   | 16,390,091 |   |
|   | Other income (expense)                   |   |   | (18,786,406 | )      |                  |   | (313,157    | )                         |   |   | 1,480              |   |   |               | -           |   |   |   | (19,098,083 | ) |
|   | Earnings from subsidiaries               |   |   | 16,078,414  |   |                  |   | -           |                      |   |   | -                  |   |   |               | (16,078,414 | ) |   |   | - |   |
|   | Income (loss) before income tax          |   |   | (2,707,992  | )      |                  |   | 13,559,333  |                      |   |   | 2,519,081          |   |   |               | (16,078,414 | ) |   |   | (2,707,992 | ) |
|   | Income tax benefit                       |   |   | 1,108,652   |   |                  |   | -           |                      |   |   | -                  |   |   |               | -           |   |   |   | 1,108,652 |   |
|   |                                     |   |   |        |   |                  |   |        |                      |   |   |               |   |   |               |        |   |   |   |   |   |
|   | Net income (loss) to common stockholders |   | $      | (1,599,340  | )      |                  | $      | 13,559,333  |                      |   | $      | 2,519,081          |   |   | $                  | (16,078,414 | ) |   | $ | (1,599,340 | ) |

----

|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|--------|-----------------------------------------------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|-------------|
|   |                                                                              |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |        |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|   | Cash flows from operating activities:                                             |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|   | Net income (loss)                                                                 |   | $      | 1,603,419   |   |                  | $      | 13,567,845  |                      |   | $      | 2,006,856    |   |   | $            | (15,574,701 | ) |   | $ | 1,603,419 |   |
|   | Adjustment to reconcile net income (loss) to cash flows from operating activities |   |   | 1,687,104   |   |                  |   | 6,984,658   |                      |   |   | 3,027,324    |   |   |         | -           |   |   |   | 11,699,086 |   |
|   | Changes in assets and liabilities, net of assets and liabilities acquired         |   |   | 19,464,090  |   |                  |   | (13,931,795 | )                         |   |   | (4,399,680   | )      |   |         | -           |   |   |   | 1,132,615 |   |
|   | Net cash provided by operating activities                                         |   |   | 22,754,613  |   |                  |   | 6,620,708   |                      |   |   | 634,500      |   |   |         | (15,574,701 | ) |   |   | 14,435,120 |   |
|   | Cash flows used in investing activities                                           |   |   | (477,090    | )      |                  |   | (6,207,910  | )                         |   |   | (696,897     | )      |   |         | -           |   |   |   | (7,381,897 | ) |
|   | Cash flows used in financing activities                                           |   |   | (22,277,523 | )      |                  |   | -           |                      |   |   | -            |   |   |         | 15,574,701  |   |   |   | (6,702,822 | ) |
|   | Net increase (decrease) in cash and cash equivalents                              |   |   | -           |   |                  |   | 412,798     |                      |   |   | (62,397      | )      |   |         | -           |   |   |   | 350,401 |   |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |
|   | Cash and cash equivalents, beginning of period                                    |   |   | -           |   |                  |   | 12,707,674  |                      |   |   | 102,823      |   |   |         | -           |   |   |   | 12,810,497 |   |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |
|   | Cash and cash equivalents, end of period                                          |   | $      | -           |   |                  | $      | 13,120,472  |                      |   | $      | 40,426       |   |   | $            | -           |   |   | $ | 13,160,898 |   |

|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|--------|-----------------------------------------------------------------------------------|--------|--------|-------------|--------|-----------------------|--------|-------------|---------------------------|--------|--------|--------------|--------|--------|--------------|-------------|
|   |                                                                              |   | Parent |        |   | GuarantorSubsidiaries |   |        | Non-GuarantorSubsidiaries |   |   | Eliminations |   |   | Consolidated |        |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|   | Cash flows from operating activities:                                             |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |
|   | Net income (loss)                                                                 |   | $      | (1,599,340  | )      |                  | $      | 13,559,333  |                      |   | $      | 2,519,081    |   |   | $            | (16,078,414 | ) |   | $ | (1,599,340 | ) |
|   | Adjustment to reconcile net income (loss) to cash flows from operating activities |   |   | 1,112,543   |   |                  |   | 18,803,471  |                      |   |   | 2,365,032    |   |   |         | -           |   |   |   | 22,281,046 |   |
|   | Changes in assets and liabilities, net of assets and liabilities acquired         |   |   | 28,268,034  |   |                  |   | (23,946,905 | )                         |   |   | (3,725,829   | )      |   |         | -           |   |   |   | 595,300 |   |
|   | Net cash provided by operating activities                                         |   |   | 27,781,237  |   |                  |   | 8,415,899   |                      |   |   | 1,158,284    |   |   |         | (16,078,414 | ) |   |   | 21,277,006 |   |
|   | Cash flows used in investing activities                                           |   |   | -           |   |                  |   | (5,339,203  | )                         |   |   | (1,059,406   | )      |   |         | -           |   |   |   | (6,398,609 | ) |
|   | Cash flows used in financing activities                                           |   |   | (27,781,237 | )      |                  |   | -           |                      |   |   | -            |   |   |         | 16,078,414  |   |   |   | (11,702,823 | ) |
|   | Net increase in cash and cash equivalents                                         |   |   | -           |   |                  |   | 3,076,696   |                      |   |   | 98,878       |   |   |         | -           |   |   |   | 3,175,574 |   |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |
|   | Cash and cash equivalents, beginning of period                                    |   |   | -           |   |                  |   | 13,521,138  |                      |   |   | 21,117       |   |   |         | -           |   |   |   | 13,542,255 |   |
|   |                                                                              |   |   |        |   |                  |   |        |                      |   |   |         |   |   |         |        |   |   |   |   |   |
|   | Cash and cash equivalents, end of period                                          |   | $      | -           |   |                  | $      | 16,597,834  |                      |   | $      | 119,995      |   |   | $            | -           |   |   | $ | 16,717,829 |   |

| 8.     | Revenue Concentrations                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Revenues for interstate access services are based on reimbursement of costs and an allowed rate of return. Revenues of this nature are received from the National Exchange Carrier Association in the form of monthly settlements. Such revenues amounted to 14.1% and 10.4% of the Company’s total revenues from continuing operations forthe nine months ended September 30, 2008 and 2009, respectively.                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | The Company acquired a multi-year contract with a large multiple system operator for the provision of wholesale network connections to its customers in Maine and New Hampshire. Associated with closing the acquisition of the CR Companies, various terms of the agreement were amended, including extending the contract through 2012. The customerrepresented approximately 12.7% of the consolidated revenue for the nine months ended September 30, 2009. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 9.     | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | FairPoint Communications, Inc. (“FairPoint”) is the primary local exchange carrier in Maine. On October 26, 2009, Fairpoint filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District ofNew York.                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | In anticipation of the Chapter 11 cases, the debtors entered into a Plan Support Agreement (the “Support Agreement”), dated as of October 25, 2009, with secured lenders. Pursuant to the Support Agreement, Fairpoint is required to file a Chapter 11 plan of reorganization within 45 days after filing of the Chapter 11 cases.                                                                                                                 |

----

|   | The Company’s subsidiaries in Maine are customers of and suppliers to FairPoint in the normal course of business, exchanging traffic originating from and terminating to each company’s telecommunications subscribers and providing other telecommunications services to each other under tariffs and/or interconnection agreements.All accounts between the two companies are currently operating on a normal business basis. However, due to the bankruptcy filing, the court will have final determination over whether any obligations of FairPoint to the Company will not be fulfilled. This could include payment for services provided to FairPoint prior to the bankruptcy filing, whether paid by or due from FairPoint. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | The Company billed FairPoint $1,189,000 and $3,704,000 for services rendered during the three months and nine months ended September 30, 2009, respectively. In the consolidated list of creditors filed with the bankruptcy court, PTN is listed with an amount of claim of $582,192.13 as of October 26,2009. It is not feasible to predict or determinethe ultimate outcome of the Bankruptcy Court’s decisions and therefore the Company’s risk exposure cannot be determined at this time.                                                                                                                                                                                                                                     |

----

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | Local services. We receive revenues from providing local exchange telecommunications services in our ten rural territories, from the wholesale network services in New England,and on a competitive basis throughout Maine and New Hampshire. These revenues include monthly subscription charges for basic service, calling beyond the local territory on a fixed price and on a per minute basis, local private line services and enhanced calling features, such as voicemail, caller identification, call waiting and call forwarding. We also provide billing and collections services for other carriers under contract and receive revenues from directory advertising. A growing portion of our rural subscriberstake bundled service plans which include multiple services, including unlimited domestic calling, for a flat monthly fee.                                                                                                                                                   |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | ● | Network access. We receive revenues from charges established to compensate us for the origination, transport and termination of calls of long distance and other interexchangecarriers. These include subscriber line charges imposed on end users and switched and special access charges paid by carriers. Switched access charges for long distance services within Alabama, Massachusetts, Maine, Missouri, the New Hampshire and West Virginia are based on rates approved by the Alabama Public Service Commission, the Massachusetts Department of Telecommunications and Cable, the Maine Public Utilities Commission (“MPUC”), the Missouri Public Service Commission, the New Hampshire PublicUtilities Commission (“NHPUC”) and the West Virginia Public Service Commission, respectively, where appropriate. Switched and special access charges for interstate and international services are based on rates approved by the Federal Communications Commission. |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | ● | Cable television. We offer basic, digital, high-definition, digital video recording and pay per view cable television services to a portion of our telephone service territoryin both Alabama and Missouri, including Internet Protocol television (“IPTV”) in Alabama. We are a reseller of satellite services for DirecTV.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | ● | Internet. We receive revenues from monthly recurring charges for digital high-speed data lines, dial-up Internet access and ancillary services such as web hosting and computervirus protection.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | ● | Transport services. We receive monthly recurring revenues for the rental of fiber to transport data and other telecommunications services in Maine.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

----

|                              |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
|-----------------------------------|--------|-------------------------|--------|-------------------------|--------|------------------------|--------|-----------------------------|---------|--------|--------|---------|--------|--------|---------|--------|
|                              |   | Year Ended December 31, |   |   March 31,2009(2) |   |   June 30,2009(2) |   |   September 30,2009(2) |    |
| Key Operating Statistics          |   | 2007                    |   | 2008(2)                 |   |                   |   |                        |
| RLEC access lines:                |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
| Voice lines                       |   |                    | 36,687 |                    |   | 51,530                 |   |                        | 50,807  |   |   | 50,078  |   |   | 48,998  |   |
| Data lines                        |   |                    | 12,160 |                    |   | 18,709                 |   |                        | 19,365  |   |   | 19,596  |   |   | 19,784  |   |
| RLEC access line equivalents(1)   |   |                    | 48,847 |                    |   | 70,239                 |   |                        | 70,172  |   |   | 69,674  |   |   | 68,782  |   |
|                              |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
| CLEC access lines:                |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
| Voice lines                       |   |                    | 16,973 |                    |   | 26,558                 |   |                        | 26,744  |   |   | 27,110  |   |   | 28,153  |   |
| Data lines                        |   |                    | 2,571  |                    |   | 3,246                  |   |                        | 3,228   |   |   | 3,298   |   |   | 3,297   |   |
| CLEC access line equivalents(1)   |   |                    | 19,544 |                    |   | 29,804                 |   |                        | 29,972  |   |   | 30,408  |   |   | 31,450  |   |
|                              |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
| Otelco access line equivalents(1) |   |                    | 68,391 |                    |   | 100,043                |   |                        | 100,144 |   |   | 100,082 |   |   | 100,232 |   |
|                              |   |                    |   |                    |   |                   |   |                        |    |   |   |    |   |   |    |   |
| Wholesale network connections     |   |                    | -      |                    |   | 98,187                 |   |                        | 113,855 |   |   | 122,471 |   |   | 127,317 |   |
| Cable television customers        |   |                    | 4,169  |                    |   | 4,082                  |   |                        | 4,132   |   |   | 4,114   |   |   | 4,126   |   |
| Dial-up Internet customers        |   |                    | 15,249 |                    |   | 11,864                 |   |                        | 10,885  |   |   | 10,165  |   |   | 9,651   |   |

|   |                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1)    | We define access line equivalents as voice access lines and data access lines (including cable modems, digital subscriber lines, and dedicated data access trunks). |
|   |                                                                                                                                                                |
| (2)    | We acquired the CR Companies effective October 31, 2008.                                                                                                            |

----

----

|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |
|----------------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|--------|---------------------|--------|--------|--------|---------|
|                                               |   | Three Months Ended September 30, |   |   | Nine Months Ended September 30, |   |
|                                               |   | 2008                             |   |   | 2009                            |   |   | 2008                |   |   | 2009   |    |
| Revenues                                           |   |                             |   |   |                            |   |   |                |   |   |   |    |
| Local services                                     |   |                             | 36.6   | %      |                            |   | 47.0   | %    |   |   | 37.4   | %       |   |   | 46.7 | % |
| Network access                                     |   |                             | 36.7   |   |                            |   | 32.2   |                |   |   | 35.8   |    |   |   | 32.0 |   |
| Cable television                                   |   |                             | 3.3    |   |                            |   | 2.3    |                |   |   | 3.2    |    |   |   | 2.4 |   |
| Internet                                           |   |                             | 16.6   |   |                            |   | 13.3   |                |   |   | 16.8   |    |   |   | 13.6 |   |
| Transport services                                 |   |                             | 6.8    |   |                            |   | 5.2    |                |   |   | 6.8    |    |   |   | 5.3 |   |
| Total revenues                                     |   |                             | 100.0  | %      |                            |   | 100.0  | %                   |   |   | 100.0  | %       |   |   | 100.0 | % |
| Operating expenses                                 |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Cost of services and products                      |   |                             | 36.5   | %      |                            |   | 39.6   | %                   |   |   | 37.3   | %  |   |   | 40.2 | %  |
| Selling, general and administrative expenses       |   |                             | 15.2   |   |                            |   | 12.2   |                |   |   | 14.9   |    |   |   | 13.1 |   |
| Depreciation and amortization                      |   |                             | 17.2   |   |                            |   | 24.7   |                |   |   | 18.4   |    |   |   | 25.6 |   |
| Total operating expenses                           |   |                             | 68.9   |   |                            |   | 76.5   |                |   |   | 70.6   |    |   |   | 78.9 |   |
|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Income from operations                             |   |                             | 31.1   |   |                            |   | 23.5   |                |   |   | 29.4   |    |   |   | 21.1 |   |
|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Other income (expense)                             |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Interest expense                                   |   |                             | (26.2  | )      |                            |   | (24.5  | )                   |   |   | (26.5  | )       |   |   | (25.1 | ) |
| Change in fair value of derivative                 |   |                             | 1.0    |   |                            |   | 0.3    |                |   |   | 0.2    |    |   |   | 0.2 |   |
| Other income                                       |   |                             | 1.0    |   |                            |   | 0.1    |                |   |   | 1.2    |    |   |   | 0.3 |   |
| Total other expenses                               |   |                             | (24.2  | )      |                            |   | (24.1  | )                   |   |   | (25.1  | )       |   |   | (24.6 | ) |
|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Income (loss) before income taxes                  |   |                             | 6.9    |   |                            |   | (0.6   | )                   |   |   | 4.3    |    |   |   | (3.5 | ) |
|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Income tax (expense) benefit                       |   |                             | (2.6   | )      |                            |   | 0.6    |                |   |   | (1.3   | )       |   |   | 1.4 |   |
|                                               |   |                             |   |   |                            |   |   |                |   |   |   |    |   |   |   |   |
| Net income (loss) available to common stockholders |   |                             | 4.3    | %      |                            |   | (0.0   | )%                  |   |   | 3.0    | %       |   |   | (2.1 | )% |

|               |   |                            |   |   |   |   |   |    |   |   |   |   |   |
|--------------------|--------|---------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|               |   | Three Months EndedSeptember 30, |   | Change |   |
|               |   | 2008                            |   | 2009   |   | Amount |   | Percent |   |
|               |   | (dollars in thousands)          |   |
| Local services     |   | $                               | 6,679  |   | $      | 12,397 |   | $       | 5,718  |   |   | 85.6   | %      |
| Network access     |   |                            | 6,694  |   |   | 8,517  |   |    | 1,823  |   |   | 27.2   |   |
| Cable television   |   |                            | 601    |   |   | 614    |   |    | 13     |   |   | 2.2    |   |
| Internet           |   |                            | 3,029  |   |   | 3,501  |   |    | 472    |   |   | 15.6   |   |
| Transport services |   |                            | 1,235  |   |   | 1,374  |   |    | 139    |   |   | 11.3   |   |
| Total              |   | $                               | 18,238 |   | $      | 26,403 |   | $       | 8,165  |   |   | 44.8   |   |

----

|               |   |                           |   |   |   |   |   |    |   |   |   |   |   |
|--------------------|--------|--------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|               |   | Nine Months EndedSeptember 30, |   | Change |   |
|               |   | 2008                           |   | 2009   |   | Amount |   | Percent |   |
|               |   | (dollars in thousands)         |   |
| Local services     |   | $                              | 20,117 |   | $      | 36,315 |   | $       | 16,198 |   |   | 80.5   | %      |
| Network access     |   |                           | 19,237 |   |   | 24,877 |   |    | 5,640  |   |   | 29.3   |   |
| Cable television   |   |                           | 1,714  |   |   | 1,833  |   |    | 119    |   |   | 6.9    |   |
| Internet           |   |                           | 9,061  |   |   | 10,543 |   |    | 1,482  |   |   | 16.4   |   |
| Transport services |   |                           | 3,637  |   |   | 4,132  |   |    | 495    |   |   | 13.6   |   |
| Total              |   | $                              | 53,766 |   | $      | 77,700 |   | $       | 23,934 |   |   | 44.5   |   |

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|                                         |   |                            |   |   |   |   |   |    |   |   |   |   |
|----------------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|
|                                         |   | Three Months EndedSeptember 30, |   | Change |   |
|                                         |   | 2008                            |   | 2009   |   | Amount |   | Percent |   |
|                                         |   | (dollars in thousands)          |   |
| Cost of services and products                |   | $                               | 6,655  |   | $      | 10,445 |   | $       | 3,790  |   | 56.9   | %      |
| Selling, general and administrative expenses |   |                            | 2,777  |   |   | 3,223  |   |    | 446    |   | 16.1   |   |
| Depreciation and amortization                |   |                            | 3,141  |   |   | 6,526  |   |    | 3,385  |   | 107.8  |   |
| Total                                        |   | $                               | 12,573 |   | $      | 20,194 |   | $       | 7,621  |   | 60.6   |   |

|                                         |   |                           |   |   |   |   |   |    |   |   |   |   |   |
|----------------------------------------------|--------|--------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|                                         |   | Nine Months EndedSeptember 30, |   | Change |   |
|                                         |   | 2008                           |   | 2009   |   | Amount |   | Percent |   |
|                                         |   | (dollars in thousands)         |   |
| Cost of services and products                |   | $                              | 20,052 |   | $      | 31,245 |   | $       | 11,193 |   |   | 55.8   | %      |
| Selling, general and administrative expenses |   |                           | 7,999  |   |   | 10,142 |   |    | 2,143  |   |   | 26.8   |   |
| Depreciation and amortization                |   |                           | 9,904  |   |   | 19,923 |   |    | 10,019 |   |   | 101.2  |   |
| Total                                        |   | $                              | 37,955 |   | $      | 61,310 |   | $       | 23,355 |   |   | 61.5   |   |

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|                               |   |                            |   |   |   |   |   |    |   |   |   |   |   |
|------------------------------------|--------|---------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|                               |   | Three Months EndedSeptember 30, |   | Change |   |
|                               |   | 2008                            |   | 2009   |   | Amount |   | Percent |   |
|                               |   | (dollars in thousands)          |   |
| Interest expense                   |   | $                               | (4,774 | )      | $      | (6,469 | )      | $       | 1,695  |   |   | 35.5   | %      |
| Change in fair value of derivative |   |                            | 174    |   |   | 74     |   |    | (100   | )      |   | (57.5  | )      |
| Other income                       |   |                            | 188    |   |   | 30     |   |    | (158   | )      |   | (84.0  | )      |
| Income tax (expense) benefit       |   |                            | (464   | )      |   | 144    |   |    | 608    |   |   | (131.0 | )      |

|                               |   |                           |    |   |   |    |   |    |   |   |   |   |   |
|------------------------------------|--------|--------------------------------|---------|--------|--------|---------|--------|---------|--------|--------|--------|--------|--------|
|                               |   | Nine Months EndedSeptember 30, |    | Change |   |
|                               |   | 2008                           |    | 2009   |   | Amount  |   | Percent |   |
|                               |   | (dollars in thousands)         |    |
| Interest expense                   |   | $                              | (14,230 | )      | $      | (19,515 | )      | $       | 5,285  |   |   | 37.1   | %      |
| Change in fair value of derivative |   |                           | 100     |   |   | 149     |   |    | 49     |   |   | 49.0   |   |
| Other income                       |   |                           | 619     |   |   | 268     |   |    | (351   | )      |   | (56.7  | )      |
| Income tax (expense) benefit       |   |                           | (696    | )      |   | 1,109   |   |    | 1,805  |   |   | (259.3 | )      |

----

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|                                             |   | Total  |   |   | Less than 1year |   |   | 1-3 years |   |   | 3-5 years |   |   | More than 5years |   |
|--------------------------------------------------|--------|--------|--------|--------|-----------------|--------|--------|-----------|--------|--------|-----------|--------|--------|------------------|--------|
| Second amended and restated credit facility Term |   | $      | 168.5  |   |            | $      | -      |      |   | $      | -         |   |   | $                | 168.5  |   |   | $ | - |   |
| Revolver (1)                                     |   |   | -      |   |            |   | -      |      |   |   | -         |   |   |             | -      |   |   |   | - |   |
| Senior subordinated notes (2)                    |   |   | 107.7  |   |            |   | -      |      |   |   | -         |   |   |             | -      |   |   |   | 107.7 |   |
| Expected interest expense (3)                    |   |   | 185.4  |   |            |   | 23.7   |      |   |   | 49.5      |   |   |             | 38.8   |   |   |   | 73.4 |   |
| Total contractual cash obligations               |   | $      | 461.6  |   |            | $      | 23.7   |      |   | $      | 49.5      |   |   | $                | 207.3  |   |   | $ | 181.1 |   |

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| (1) | We have a $15.0 million revolving credit facility with an October 2013 maturity. No amounts were drawn on this facility as of September 30, 2009 or during 2009. The company pays a commitment fee of 0.50% per annum, payable quarterly in arrears, on the unused portion of the revolver loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Includes $4.1 million liquidation value of Class B common stock convertible into senior subordinated notes and interest on those notes beginning December 30, 2009, the date they can be exchanged for IDSs on a one-for-one basis without passing a financial test.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (3) | Expected interest payments to be made in future periods reflect anticipated interest payments related to our $168.5 million senior credit facility and our $107.7 million senior subordinated notes at 13.0%, including those associated with our IDSs and those sold separately. Interest on the senior credit facility reflects a LIBORthree month rate of 2.0% plus a margin of 4.0% through February 8, 2012, reflecting interest rate swaps currently in place, and 3.0% thereafter. We have assumed in the presentation above that we will hold the senior credit facility until maturity in October 2013 and the senior subordinated notes until maturity in 2019. No interest payment is included for the revolving credit facility because of the variability and timing of advances and repayments thereunder. |

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|   | Level 1 – Quoted prices in active markets for identical assets or liabilities.                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                              |
|   | Level 2 – Inputs other than Level 1 that are directly or indirectly observable, such as quoted prices for similar assets or liabilities or quoted prices in markets which are not active. The inputs are generally observable or can be corroborated in observable markets. |
|   |                                                                                                                                                                                                                                                                              |
|   | Level 3 – Unobservable inputs where there is little or no market activity to support valuation.                                                                                                                                                                             |

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tem 3. Quantitative and Qualitative Disclosures About Market Risk

tem 4. Controls and Procedures

----

ART II OTHER INFORMATION

tem 6. Exhibits

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|                   |        |                      |   |
|------------------------|-------------|---------------------------|--------|
| Date: November 6, 2009 | OTELCO INC. |
|                   |        |                      |
|                   | By:         | /s/ Curtis L. Garner, Jr. |   |
|                   |        | Curtis L. Garner, Jr.     |
|                   |        | Chief Financial Officer   |

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|       |   |                                                                                                                                                 |
|------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNo. |   | Description                                                                                                                                          |
|       |   |                                                                                                                                                 |
| 31.1       |   | Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer                       |
|       |   |                                                                                                                                                 |
| 31.2       |   | Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer                       |
|       |   |                                                                                                                                                 |
| 32.1       |   | Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer |
|       |   |                                                                                                                                                 |
| 32.2       |   | Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer |