**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM        10-Q/AAmendment        No. 2**

| (Mark                One) |                                                                                                                                  |
|---------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
|                      |                                                                                                                                  |
| ý                    | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934  |
|                      |                                                                                                                                  |
|                      | For                the quarterly period ended March 31, 2007or                                                                        |
|                      |                                                                                                                                  |
|  ̈                    | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 |
|                      |                                                                                                                                  |
|                      | For                the transition period from to                                                                                      |

**OTELCO      INC.**

| 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)                           |
|                                                            |   |                                                |

----

----

 No       ̈

**APPLICABLE      ONLY TO CORPORATE USERS:**

| **Class**                                                       |   | **Outstanding                at May 9, 2007** |
|-----------------------------------------------------------------|--------|-----------------------------------------------|
| Class                A Common Stock ($0.01 par value per share) |   | 9,676,733                                     |
| Class                B Common Stock ($0.01 par value per share) |   | 544,671                                       |

----

*Unless      the context otherwise requires, the words “we”, “us”, “our”, “the      Company*
*”and      “Otelco” refer to Otelco Inc., a Delaware corporation.*

**EXPLANATORY        NOTE**

----

**PART          I FINANCIAL          INFORMATION**

**Item.          1. Financial          Statements**

**Note          to Consolidated Financial          Statements**

| **7.** | **Subsidiary                  Guarantees** |
|--------|--------------------------------------------|

----

**Otelco          Inc.**

**Notes        To Consolidated Financial Statements**

**Condensed          Consolidating Balance Sheet**

**March          31, 2007**

|                                                                       |   | Parent |        | Guarantor    |   | Non-Guarantor |   | Eliminations |       | Consolidated |   |
|----------------------------------------------------------------------------|--------|--------|-------------|--------------|--------|---------------|--------|--------------|------------|--------------|--------|
|                                                                       |   |   |        | Subsidiaries |   | Subsidiaries  |   |         |       |         |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |
| ASSETS                                                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    assets                                          |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Cash                    and cash equivalents                               |   | $      | -           |         | $      | 10,630,629    |   | $            | 10,795     |         | $      | - |   | $ | 10,641,424 |   |
| Accounts                    receivable, net                                |   |   | 26,070      |         |   | 5,762,096     |   |         | 1,241,957  |         |   | - |   |   | 7,030,123 |   |
| Materials                    and supplies                                  |   |   | -           |         |   | 845,050       |   |         | 1,175,549  |         |   | - |   |   | 2,020,599 |   |
| Prepaid                    and other current assets                        |   |   | 67,667      |         |   | 686,695       |   |         | 50,085     |         |   | - |   |   | 804,447 |   |
| Deferred                    income taxes                                   |   |   | 832,946     |         |   | -             |   |         | -          |         |   | - |   |   | 832,946 |   |
| Investment                    in subsidiaries                              |   |   | 79,452,675  |         |   | -             |   |         | -          |         |   | (79,452,675 | ) |   | - |   |
| Intercompany                    receivables                                |   |   | 24,794,085  |         |   | -             |   |         | -          |         |   | (24,794,085 | ) |   | - |   |
| Total                    current assets                                    |   |   | 105,173,443 |         |   | 17,924,470    |   |         | 2,478,386  |         |   | (104,246,760 | ) |   | 21,329,539 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Property                    and equipment, net                             |   |   | -           |         |   | 41,822,122    |   |         | 16,893,537 |         |   | - |   |   | 58,715,659 |   |
| Goodwill                                                                   |   |   | -           |         |   | 136,339,810   |   |         | (1,936,640 | )            |   | - |   |   | 134,403,170 |   |
| Intangibles                    assets, net                                 |   |   | -           |         |   | 7,307,852     |   |         | 3,576,445  |         |   | - |   |   | 10,884,297 |   |
| Investments                                                                |   |   | 1,000       |         |   | 899,814       |   |         | 325,187    |         |   | - |   |   | 1,226,001 |   |
| Other                    long-term assets                                  |   |   | 9,638,954   |         |   | 627,999       |   |         | -          |         |   | - |   |   | 10,266,753 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    assets                                            |   | $      | 114,813,197 |         | $      | 204,922,067   |   | $            | 21,336,915 |         | $      | (104,246,760 | ) | $ | 236,825,419 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' EQUITY                    |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    liabilities                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Accounts                    payables and accrued expenses                  |   | $      | 739,450     |         | $      | 2,403,385     |   | $            | 1,404,870  |         | $      | - |   | $ | 4,547,705 |   |
| Intercompany                    payables                                   |   |   | -           |         |   | 7,738,345     |   |         | 17,055,740 |         |   | (24,794,085 | ) |   | - |   |
| Other                    current liabilities                               |   |   | -           |         |   | 2,267,282     |   |         | 89,572     |         |   | - |   |   | 2,356,854 |   |
| Total                    current liabilities                               |   |   | 739,450     |         |   | 12,409,012    |   |         | 18,550,182 |         |   | (24,794,085 | ) |   | 6,904,559 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Deferred                    income taxes                                   |   |   | 4,728,411   |         |   | 17,544,383    |   |         | 2,506,140  |         |   | - |   |   | 24,778,934 |   |
| Other                    liabilities                                       |   |   | -           |         |   | 180,082       |   |         | -          |         |   | - |   |   | 180,082 |   |
| Long-term                    notes payables                                |   |   | 105,458,990 |         |   | 95,616,508    |   |         | -          |         |   | - |   |   | 201,075,498 |   |
| Derivative                    liability                                    |   |   | 1,890,008   |         |   | -             |   |         | -          |         |   | - |   |   | 1,890,008 |   |
| Class                    B common convertible to senior subordinated notes |   |   | 4,085,033   |         |   | -             |   |         | -          |         |   | - |   |   | 4,085,033 |   |
| Stockholders'                    equity (deficit)                          |   |   | (2,088,695  | )            |   | 79,172,082    |   |         | 280,593    |         |   | (79,452,675 | ) |   | (2,088,695 | ) |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    liabilities and stockholders' equity (deficit)    |   | $      | 114,813,197 |         | $      | 204,922,067   |   | $            | 21,336,915 |         | $      | (104,246,760 | ) | $ | 236,825,419 |   |

----

**Otelco        Inc.**

**Notes        to Consoldiated Financial Statements**

**Condensed          Consolidated Statement of Operations**

**For          the Three Months Ended March 31, 2007**

|                                                              |   |   |       | Guarantor    |   | Non-Guarantor |   |         |       |         |   |
|-------------------------------------------------------------------|--------|--------|------------|--------------|--------|---------------|--------|--------------|------------|--------------|--------|
|                                                              |   | Parent |       | Subsidiaries |   | Subsidiaries  |   | Eliminations |       | Consolidated |   |
|                                                              |   |   |       |         |   |     |   |         |       |         |   |
| Revenue                                                           |   | $      | 727,815    |         | $      | 15,287,319    |   | $            | 3,245,673  |         | $      | (2,088,414 | ) | $ | 17,172,393 |   |
| Operating                    expenses                             |   |   | (823,899   | )            |   | (11,236,178   | )      |         | (2,430,285 | )            |   | 2,088,414 |   |   | (12,401,948 | ) |
| Income                    from operations                         |   |   | (96,084    | )            |   | 4,051,141     |   |         | 815,388    |         |   | - |   |   | 4,770,445 |   |
| Other                    income (expense)                         |   |   | (3,711,167 | )            |   | (1,165,780    | )      |         | -          |         |   | - |   |   | (4,876,947 | ) |
| Earnings                    from subsidiaries                     |   |   | 3,700,749  |         |   | -             |   |         | -          |         |   | (3,700,749 | ) |   | - |   |
| Income                    before income tax and accretion expense |   |   | (106,502   | )            |   | 2,885,361     |   |         | 815,388    |         |   | (3,700,749 | ) |   | (106,502 | ) |
| Income                    tax expense                             |   |   | (11,705    | )            |   | -             |   |         | -          |         |   | - |   |   | (11,705 | ) |
| Accretion                    of class B common convertible        |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| to                    senior subordinated notes                   |   |   | -          |         |   | -             |   |         | -          |         |   | - |   |   | - |   |
|                                                              |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Net                    income (loss) to common stockholders       |   | $      | (118,207   | )            | $      | 2,885,361     |   | $            | 815,388    |         | $      | (3,700,749 | ) | $ | (118,207 | ) |

----

**Otelco          Inc.**

**Notes        to Consolidated Financial Statements**

**Condensed        Consolidating Statement of Cash Flows**

**For          the Three Months Ended March 31, 2007**

|                                                                    |   |   |       | Guarantor    |   | Non-Guarantor |   |         |       |         |   |
|-------------------------------------------------------------------------|--------|--------|------------|--------------|--------|---------------|--------|--------------|------------|--------------|--------|
|                                                                    |   | Parent |       | Subsidiaries |   | Subsidiaries  |   | Eliminations |       | Consolidated |   |
|                                                                    |   |   |       |         |   |          |   |         |       |         |   |
| Cash                    flows from operating activities:                |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Net                    income (loss)                                    |   | $      | (118,207   | )            | $      | 2,885,361     |   | $            | 815,388    |         | $      | (3,700,749 | ) | $ | (118,207 | ) |
| Adjustment                    to reconcile net income (loss)            |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| to                    cash flows from operating activities              |   |   | 341,197    |         |   | 2,584,933     |   |         | 1,127,934  |         |   | - |   |   | 4,054,064 |   |
| Changes                    in assets and liabilities, net of            |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| assets                    and liabilities acquired                      |   |   | 5,183,283  |         |   | (8,035,947    | )      |         | (1,764,623 | )            |   | - |   |   | (4,617,287 | ) |
| Cash                    flows from investing activities                 |   |   |       |         |   | (1,180,561    | )      |         | (192,910   | )            |   | - |   |   | (1,373,471 | ) |
| Cash                    flows from financing activities                 |   |   | (1,705,524 | )            |   | -             |   |         | -          |         |   | - |   |   | (1,705,524 | ) |
| Net                    increase (decrease) in cash and cash equivalents |   |   | 3,700,749  |         |   | (3,746,214    | )      |         | (14,211    | )            |   | (3,700,749 | ) |   | (3,760,425 | ) |
|                                                                    |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Cash                    and cash equivalents, beginning of period       |   |   | -          |         |   | 14,376,843    |   |         | 25,006     |         |   | - |   |   | 14,401,849 |   |
|                                                                    |   |   |       |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Cash                    and cash equivalents, end of period             |   | $      | -          |         | $      | 10,630,629    |   | $            | 10,795     |         | $      | - |   | $ | 10,641,424 |   |

----

**Otelco          Inc.**

**Notes        To Consolidated Financial Statements**

**Condensed        Consolidating Balance Sheet**

**December          31, 2006**

|                                                                       |   | Parent |        | Guarantor    |   | Non-Guarantor |   | Eliminations |       | Consolidated |   |
|----------------------------------------------------------------------------|--------|--------|-------------|--------------|--------|---------------|--------|--------------|------------|--------------|--------|
|                                                                       |   |   |        | Subsidiaries |   | Subsidiaries  |   |         |       |         |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |
| ASSETS                                                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    assets                                          |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Cash                    and cash equivalents                               |   | $      | -           |         | $      | 14,376,843    |   | $            | 25,006     |         | $      | - |   | $ | 14,401,849 |   |
| Accounts                    receivable, net                                |   |   | 21,028      |         |   | 6,050,195     |   |         | 1,038,770  |         |   | - |   |   | 7,109,993 |   |
| Materials                    and supplies                                  |   |   | -           |         |   | 847,045       |   |         | 1,115,893  |         |   | - |   |   | 1,962,938 |   |
| Prepaid                    and other current assets                        |   |   | 3,487       |         |   | 1,006,316     |   |         | 53,144     |         |   | - |   |   | 1,062,947 |   |
| Deferred                    income taxes                                   |   |   | 766,225     |         |   | -             |   |         | -          |         |   | - |   |   | 766,225 |   |
| Investment                    in subsidiaries                              |   |   | 75,751,926  |         |   | -             |   |         | -          |         |   | (75,751,926 | ) |   | - |   |
| Intercompany                    receivables                                |   |   | 34,232,103  |         |   | -             |   |         | -          |         |   | (34,232,103 | ) |   | - |   |
| Total                    current assets                                    |   |   | 110,774,769 |         |   | 22,280,399    |   |         | 2,232,813  |         |   | (109,984,029  | ) |   | 25,303,952 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Property                    and equipment, net                             |   |   | -           |         |   | 42,745,710    |   |         | 17,748,079 |         |   | - |   |   | 60,493,789 |   |
| Goodwill                                                                   |   |   | -           |         |   | 136,118,949   |   |         | (1,936,640 | )            |   | - |   |   | 134,182,309 |   |
| Intangibles                    assets, net                                 |   |   | -           |         |   | 7,689,851     |   |         | 3,650,955  |         |   | - |   |   | 11,340,806 |   |
| Investments                                                                |   |   | 1,000       |         |   | 914,093       |   |         | 325,157    |         |   | - |   |   | 1,240,250 |   |
| Other                    long-term assets                                  |   |   | 10,589,917  |         |   | 701,264       |   |         | -          |         |   | - |   |   | 11,291,181 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    assets                                            |   | $      | 121,365,686 |         | $      | 210,450,236   |   | $            | 22,020,394 |         | $      | (109,984,029  | ) | $ | 243,852,287 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' EQUITY                    |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    liabilities                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Accounts                    payables and accrued expenses                  |   | $      | 4,924,962   |         | $      | 3,081,839     |   | $            | 1,233,497  |         | $      | - |   | $ | 9,240,298 |   |
| Intercompany                    payables                                   |   |   | -           |         |   | 15,495,558    |   |         | 18,736,545 |         |   | (34,232,103 | ) |   | - |   |
| Other                    current liabilities                               |   |   | -           |         |   | 2,238,188     |   |         | 79,009     |         |   | - |   |   | 2,317,197 |   |
| Total                    current liabilities                               |   |   | 4,924,962   |         |   | 20,815,585    |   |         | 20,049,051 |         |   | (34,232,103 | ) |   | 11,557,495 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |  |   |   |   |   |
| Deferred                    income taxes                                   |   |   | 4,661,690   |         |   | 17,544,383    |   |         | 2,506,140  |         |   | - |   |   | 24,712,213 |   |
| Other                    liabilities                                       |   |   | -           |         |   | 187,037       |   |         | -          |         |   | - |   |   | 187,037 |   |
| Long-term                    notes payables                                |   |   | 105,458,990 |         |   | 95,616,508    |   |         | -          |         |   | - |   |   | 201,075,498 |   |
| Derivative                    liability                                    |   |   | 2,107,877   |         |   | -             |   |         | -          |         |   | - |   |   | 2,107,877 |   |
| Class                    B common convertible to senior subordinated notes |   |   | 4,085,033   |         |   | -             |   |         | -          |         |   | - |   |   | 4,085,033 |   |
| Stockholders'                    equity (deficit)                          |   |   | 127,134     |         |   | 76,286,723    |   |         | (534,797   | )            |   | (75,751,926 | ) |   | 127,134 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    liabilities and stockholders' equity (deficit)    |   | $      | 121,365,686 |         | $      | 210,450,236   |   | $            | 22,020,394 |         | $      | (109,984,029 | ) | $ | 243,852,287 |   |

----

**Otelco          Inc.**

**Notes        To Consolidated Financial Statements**

**Condensed        Consolidating Balance Sheet**

**March          31, 2006**

|                                                                       |   | Parent |        | Guarantor    |   | Non-Guarantor |   | Eliminations |       | Consolidated |   |
|----------------------------------------------------------------------------|--------|--------|-------------|--------------|--------|---------------|--------|--------------|------------|--------------|--------|
|                                                                       |   |   |        | Subsidiaries |   | Subsidiaries  |   |         |       |         |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |
| ASSETS                                                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    assets                                          |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Cash                    and cash equivalents                               |   | $      | -           |         | $      | 5,455,136     |   | $            | 131,078    |         |   | - |   | $ | 5,586,214 |   |
| Accounts                    receivable, net                                |   |   | 30,340      |         |   | 4,026,161     |   |         | 459,714    |         |   | - |   |   | 4,516,215 |   |
| Materials                    and supplies                                  |   |   | -           |         |   | 905,129       |   |         | 24,427     |         |   | - |   |   | 929,556 |   |
| Prepaid                    and other current assets                        |   |   | 828,087     |         |   | 394,041       |   |         | 40,808     |         |   | - |   |   | 1,262,936 |   |
| Deferred                    income taxes                                   |   |   | 872,675     |         |   | -             |   |         | -          |         |   | - |   |   | 872,675 |   |
| Investment                    in subsidiaries                              |   |   | 69,411,194  |         |   | -             |   |         | -          |         |   | (69,411,194 | ) |   | - |   |
| Intercompany                    receivables                                |   |   | 36,553,287  |         |   | -             |   |         | -          |         |   | (36,553,287 | ) |   | - |   |
| Total                    current assets                                    |   |   | 107,695,583 |         |   | 10,780,467    |   |         | 656,027    |         |   | (105,964,481 | ) |   | 13,167,596 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Property                    and equipment, net                             |   |   | -           |         |   | 32,552,463    |   |         | 11,251,488 |         |   | - |   |   | 43,803,951 |   |
| Goodwill                                                                   |   |   | -           |         |   | 116,355,199   |   |         | 3,076,794  |         |   | - |   |   | 119,431,993 |   |
| Intangibles                    assets, net                                 |   |   | -           |         |   | -             |   |         | 1,536,655  |         |   | - |   |   | 1,536,655 |   |
| Investments                                                                |   |   | 1,000       |         |   | 955,783       |   |         | 16,530     |         |   | - |   |   | 973,313 |   |
| Other                    long-term assets                                  |   |   | 12,675,282  |         |   | -             |   |         | -          |         |   | - |   |   | 12,675,282 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    assets                                            |   | $      | 120,371,865 |         | $      | 160,643,912   |   | $            | 16,537,494 |         |   | (105,964,481 | ) | $ | 191,588,790 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| LIABILITIES                    AND STOCKHOLDERS' EQUITY                    |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Current                    liabilities                                     |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Accounts                    payables and accrued expenses                  |   | $      | 251,887     |         | $      | 2,393,885     |   | $            | 219,476    |         |   | - |   | $ | 2,865,248 |   |
| Intercompany                    payables                                   |   |   | -           |         |   | 21,099,506    |   |         | 15,453,782 |         |   | (36,553,287 | ) |   | - |   |
| Other                    current liabilities                               |   |   | -           |         |   | 1,463,437     |   |         | 12,912     |         |   | - |   |   | 1,476,349 |   |
| Total                    current liabilities                               |   |   | 251,887     |         |   | 24,956,827    |   |         | 15,686,170 |         |   | (36,553,287 | ) |   | 4,341,597 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Deferred                    income taxes                                   |   |   | 4,019,721   |         |   | 9,173,477     |   |         | 2,152,692  |         |   | - |   |   | 15,345,890 |   |
| Other                    liabilities                                       |   |   | -           |         |   | 184,538       |   |         | -          |         |   | - |   |   | 184,538 |   |
| Long-term                    notes payables                                |   |   | 105,458,990 |         |   | 55,616,508    |   |         | -          |         |   | - |   |   | 161,075,498 |   |
| Derivative                    liability                                    |   |   | 1,650,353   |         |   | -             |   |         | -          |         |   | - |   |   | 1,650,353 |   |
| Class                    B common convertible to senior subordinated notes |   |   | 3,766,186   |         |   | -             |   |         | -          |         |   | - |   |   | 3,766,186 |   |
| Stockholders'                    equity (deficit)                          |   |   | 5,224,728   |         |   | 70,712,562    |   |         | (1,301,368 | )            |   | (69,411,194 | ) |   | 5,224,728 |   |
|                                                                       |   |   |        |         |   |          |   |         |       |         |   |   |   |   |   |   |
| Total                    liabilities and stockholders' equity (deficit)    |   | $      | 120,371,865 |         | $      | 160,643,912   |   | $            | 16,537,494 |         |   | (105,964,481 | ) | $ | 191,588,790 |   |

----

**Otelco          Inc.**

**Notes          to Consoldiated Financial Statements**

**Condensed          Consolidated Statement of Operations**

**For          the Three Months Ended March 31, 2006**

|                                                                |   |   |       | Guarantor    |   | Non-Guarantor |   |         |      |         |   |
|---------------------------------------------------------------------|--------|--------|------------|--------------|--------|---------------|--------|--------------|-----------|--------------|--------|
|                                                                |   | Parent |       | Subsidiaries |   | Subsidiaries  |   | Eliminations |      | Consolidated |   |
|                                                                |   |   |       |         |   |          |   |         |      |         |   |
|                                                                |   |   |       |         |   |          |   |         |      |         |   |
| Revenue                                                             |   | $      | 628,629    |         | $      | 10,723,155    |   | $            | 1,645,972 |         | $      | (1,484,359 | ) | $ | 11,513,397 |   |
| Operating                      expenses                             |   |   | (774,199   | )            |   | (6,538,197    | )      |         | (986,332  | )            |   | 1,484,359 |   |   | (6,814,369 | ) |
| Income                      from operations                         |   |   | (145,570   | )            |   | 4,184,958     |   |         | 659,640   |         |   | - |   |   | 4,699,028 |   |
| Other                      income (expense)                         |   |   | (3,063,744 | )            |   | (1,118,751    | )      |         | -         |         |   | - |   |   | (4,182,495 | ) |
| Earnings                      from subsidiaries                     |   |   | 3,725,847  |         |   | -             |   |         | -         |         |   | (3,725,847 | ) |   | - |   |
| Income                      before income tax and accretion expense |   |   | 516,533    |         |   | 3,066,207     |   |         | 659,640   |         |   | (3,725,847 | ) |   | 516,533 |   |
| Income                      tax expense                             |   |   | (161,210   | )            |   | -             |   |         | -         |         |   | - |   |   | (161,210 | ) |
| Accretion                      of class B common convertible        |   |   |       |         |   |               |   |         |      |         |   |   |   |   |   |   |
| to                      senior subordinated notes                   |   |   | (110,732   | )            |   | -             |   |         | -         |         |   | - |   |   | (110,732 | ) |
|                                                                |   |   |       |         |   |               |   |         |      |         |   |   |   |   |   |   |
| Net                      income (loss) to common stockholders       |   | $      | 244,591    |         | $      | 3,066,207     |   | $            | 659,640   |         | $      | (3,725,847 | ) | $ | 244,591 |   |

----

**Otelco          Inc.**

**Notes        to Consolidated Financial Statements**

**Condensed        Consolidating Statement of Cash Flows**

**For          the Three Months Ended March 31, 2006**

|                                                                    |   |   |       | Guarantor    |   | Non-Guarantor |   |         |     |         |   |
|-------------------------------------------------------------------------|--------|--------|------------|--------------|--------|---------------|--------|--------------|----------|--------------|--------|
|                                                                    |   | Parent |       | Subsidiaries |   | Subsidiaries  |   | Eliminations |     | Consolidated |   |
|                                                                    |   |   |       |         |   |          |   |         |     |         |   |
| Cash                    flows from operating activities:                |   |   |       |         |   |          |   |         |     |         |   |   |   |   |   |   |
| Net                    income (loss)                                    |   | $      | 244,591    |         | $      | 3,066,207     |   | $            | 659,640  |         | $      | (3,725,847 | ) | $ | 244,591 |   |
| Adjustment                    to reconcile net income (loss)            |   |   |       |         |   |          |   |         |     |         |   |   |   |   |   |   |
| to                    cash flows from operating activities              |   |   | 437,389    |         |   | 1,626,910     |   |         | 380,380  |         |   | - |   |   | 2,444,679 |   |
| Changes                    in assets and liabilities, net of            |   |   |       |         |   |          |   |         |     |         |   |   |   |   |   |   |
| assets                    and liabilities acquired                      |   |   | 4,764,281  |         |   | (3,821,571    | )      |         | (864,263 | )            |   | - |   |   | 78,447 |   |
| Cash                    flows from investing activities                 |   |   | (14,890    | )            |   | (928,349      | )      |         | (101,973 | )            |   | - |   |   | (1,045,212 | ) |
| Cash                    flows from financing activities                 |   |   | (1,705,524 | )            |   | -             |   |         | -        |         |   | - |   |   | (1,705,524 | ) |
| Net                    increase (decrease) in cash and cash equivalents |   |   | 3,725,847  |         |   | (56,803       | )      |         | 73,784   |         |   | (3,725,847 | ) |   | 16,981 |   |
|                                                                    |   |   |       |         |   |          |   |         |     |         |   |   |   |   |   |   |
| Cash                    and cash equivalents, beginning of period       |   |   | -          |         |   | 5,511,939     |   |         | 57,294   |         |   | - |   |   | 5,569,233 |   |
|                                                                    |   |   |       |         |   |          |   |         |     |         |   |   |   |   |   |   |
| Cash                    and cash equivalents, end of period             |   | $      | -          |         | $      | 5,455,136     |   | $            | 131,078  |         | $      | - |   | $ | 5,586,214 |   |

----

**PART      II OTHER INFORMATION**

**Item.      6. Exhibits**

----

**Signatures**

| Date:                    June 25, 2007 | **OTELCO                    INC.**               |
|----------------------------------------|--------------------------------------------------|
|                                   |                                             |
|                                   |                                             |
|                                   |                                             |
|                                   | By:                    /s/ Curtis L. Garner, Jr. |
|                                   | Curtis                    L. Garner, Jr.         |
|                                   | Chief                    Financial Officer       |

----

**EXHIBIT      INDEX**

| **Exhibit                No.** |   | **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 |

----