ICTC GROUP, INC.

Posted April 19th, 2011

BUSINESS SECTION BACKGROUND AND HISTORY OF ICTC GROUP, INC. We, ICTC Group, Inc. (formerly Sunshine PCS Corporation), were incorporated in July 2000 to hold and develop three licenses, which granted us the non-exclusive right to provide personal communications services to approximately 960,000 people in the Florida cities of Tallahassee, Panama City and Ocala. On December 31, 2003, we sold the licenses to Cingular Wireless LLC for $13,600,000 in cash. From that date until March 31, 2010, we were a holding company. On that date, we issued 320,000 shares of our Class A Common Stock to a subsidiary of LICT Corporation (LICT) to acquire LICTs North Dakota operations, described below. On May 24, 2010, LICT distributed 315,700 shares of the Class A Common Stock it received to its shareholders on the basis of thirteen shares of our stock for each Common share of LICT owned. On that date, we also changed our name to ICTC Group Inc. (the Company). Until March 31, 2010, Lynch Telephone II, LLC (Lynch II) served as the holding company for LICTs North Dakota operations and was a wholly-owned subsidiary of Lynch Telephone North LLC, (North) which is a wholly-owned subsidiary of Brighton Communications Corporation (Brighton), which in turn is a wholly-owned subsidiary of LICT. Lynch II serves as a holding company for Inter-community Telephone Company, LLC (Inter-Community) and Valley Communications, Inc. (Valley). InterCommunity is a rural independent local telephone company (RLEC) serving communities in southeastern North Dakota providing regulated telephone service and Valley is a competitive local exchange carrier (CLEC) which provides internet and other non-regulated services. On March 31, 2010, we acquired 100% of the shares of Lynch II by issuing approximately 98% of our shares, post transaction, to North; North subsequently distributed the shares to LICT. Our total shares outstanding are 324,426. Of these shares outstanding, approximately 4,500 are unrestricted and able to be traded on Pink Sheets under the symbol SNSH. For further information with respect to our business and common stock please refer to the Companys website at www.ICTCGroup.net or contact us at P.O. Box 8, Nome, ND 58062 or by telephone at (701) 924-1000. Voice and Data Communications Services RLEC Operations We conduct our RLEC operations through Inter-Community, which was incorporated in North Dakota on July 9, 1947, and has provided telephone service there continuously over the past sixty-three years. InterCommunity serves a total of approximately 2,300 access lines, of which some 1,560 are residential and 740 are business lines. Inter-Communitys revenues in 2010 were approximately $3.39 million. Its headquarters is located in Nome, ND and its service territory covers 1,760 square miles, including the counties of Barnes, Cass, Griggs, Ransom and Steele in southeastern North Dakota. Within this area, Inter-Community has nine exchanges located in the communities of Alice, Buffalo/Wheatland, Dazey, Hannaford, Hope, Nome/Fingal, Page, Sanborn/Rogers, and Tower City. Inter-Community currently
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ICTC GROUP, INC. Posted April 19th, 2011

employs thirteen people, including a General Manager, an Operations Manager, two full- time Customer Service Representatives, and one part-time and eight full-time Plant Technicians. Inter-Community owns and provides its services over 1,660 miles of copper facilities and 269 miles of fiber optic cable, using nine switches located throughout its service territory. In recent years, it has targeted it capital expenditures to expanding the broadband capacities of its network by deploying more fiber optic cable and increasing its DSL capabilities. These efforts have been successful in increasing the number of its broadband business and Inter-Community now serves some 800 DSL customers. DSL revenues now are $480,000 annually, or approximately 10% of Inter-Communitys annual revenues. CLEC Operations The Company conducts its CLEC operations through Valley, primarily in the Valley City, ND area. Valley was incorporated on May 21, 1998 and provides broadband services in the form of Internet access. It has approximately 1,000 customers and serves them through both wire line and unlicensed wireless facilities. Valleys revenue in 2010 was $627,488 and its EBITDA was $331,396. ICTC Group intends to continue to develop Valleys CLEC business. Operational Data The following table summarizes certain information the Companys operations: At or for the Years Ended December 31, 2008 Operations: Voice Access Lines % Residential % Business DSL Lines % Residential % Business Internet subscribers Total Revenues: Local service Network access Other business Total 13% 69% 18% 100% 14% 65% 21% 100% 15% 61% 24% 100% 2,271 59% 41% 660 80% 20% 1,083 2,219 68% 32% 800 82% 18% 1,064 2131 67% 33% 850 83% 17% 1,027 2009 2010

ICTC GROUP, INC. Posted April 19th, 2011

Regulatory Environment Inter-Community and Valley are subject to Federal and state regulation. Operating telephone companies, like Inter-Community, are regulated by the FCC with respect to interstate telecommunications services and by the North Dakota Public Service Commission (NDPSC) with respect to intrastate telecommunications services. They are also subject to local government regulation, in some cases, such as regarding the use of local streets and rights of way. The FCC and the state commissions do not regulate all providers that come under their jurisdiction in the same way. Incumbent Local Exchange Carriers ("ILECs") remain more highly regulated than Competitive Local Exchange Carriers (CLECs), like Valley, who are also providing telecommunications services. While some regulation of ILECs has eased as competition has increased, that regulation remains more burdensome than the regulation of CLECs. The extent and nature of regulation by the FCC and by state commission changes for various reasons such as Congressional and judicial mandates, public policy decisions and other factors. Under North Dakota law, the NDPSC does not regulate telephone companies that serve less than 8,000 access lines. Ongoing proceedings at the FCC and at the state level are addressing a number of critical telecommunications issues within their respective jurisdictions. A number of these proceedings have been active for many years while others commenced in 2010. Some of the issues being addressed include making broadband more widely available; interconnection between different types of networks; access and interconnection pricing; internet access and special access regulation; the interrelationship between traditional circuit switched telephone services and newer services that use Internet Protocol (IP) and other advanced technologies and standards; the treatment of Voice over IP (VoIP); the future of the various Federal and state universal service support funds and the mechanisms that support them; the structure of intercarrier compensation and the future direction and organization of the agency itself. National Broadband Plan. On March 16, 2010, after extensive public comment, the FCC released the National Broadband Plan (NBP) which it had authored in response to a Congressional mandate contained in the American Recovery and Reinvestment Act of 2009 (the ARRA). The purpose of the 360-page NBP was not to make any immediate or actual changes in the FCCs existing regulations, but rather to lay out a plan for the FCCs regulatory approach over the coming decade. The basic thrust of the FCCs efforts, as set forth in the NBP, will be to expand the geographic availability and increase the bandwidth capacities provided to users. These efforts have overall goals, among others, of making a minimum download speed of 4 Mbps and upload speed of 1 Mbps available to every household and business in the nation, and making 100 Mbps service available to at least 100 million households in the next ten years. One of the measures that the FCC stated it intends to use to accomplish this is to gradually shift Universal Service Fund (USF) support over a ten-year period into a new Connect America Fund (CAF) that will focus on the achievement of its broadband goals. The policy recommendations include guiding principles to foster competition in broadband, telephone, wireless and cable services over the next decade, including recommendations related to USF reform, intercarrier compensation, cable set-top boxes and spectrum reallocation, among others. The NBP recommendations most relevant to the Company include shifting the current USF mechanisms that support universal voice telephone services to support of universal broadband deployment and the phased reduction of intercarrier access compensation levels,
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ICTC GROUP, INC. Posted April 19th, 2011

with a potential phase-out of all such compensation within ten years. The FCC has begun some proceedings to implement aspects of the NBP; however, in order to fully implement the NBP, a significant number of FCC rulemaking proceedings and possibly further Congressional action will be required. Neither the timeframe for these developments, although it is likely to be many years long, nor the actual outcomes of future FCC and Congressional consideration of the issues involved, can be predicted with any certainty at the current time. In an April 6, 2010 decision, as part of an FCC proceeding to adopt rules related to the conduct of retail Internet services providers, a Federal appeals court found that the FCC lacked authority over certain Internet-related practices of Comcast. On December 21, 2010, notwithstanding the Federal appeals court decision, the FCC adopted rules requiring that such providers honor certain operating principles, including principles of (i) transparency, (ii) no blocking, (iii) no unreasonable discrimination, and (iv) reasonable network management in connection with their Internet services. The FCC order has already been appealed. In addition, the FCC adopted a Notice of Proposed Rulemaking (NPRM) and Further NPRM on February 8, 2011 with short and long-term proposals to again consider reforming the current intercarrier compensation structure and to consider rules for transitioning the current universal service fund to support broadband deployment. The FCC's actions in these and future proceedings could significantly alter the structure of these arrangements, and affect the costs and sources or revenue for affected service providers. Action in any of these proceedings could have a material impact on us. We will continue to monitor these matters, participate in them as we deem appropriate, and assess the potential impact on our consolidated financial position and results of operations. Federal Telecommunications Act of 1996. In prior years, well before the NBP, various aspects of federal and state telephone regulation had been subject to re-examination and on-going modification. In February 1996, the federal Telecommunications Act of 1996 (the "1996 Act"), which is the most substantial revision of communications regulation since the 1930's, became law. The 1996 Act is intended generally to allow telephone, cable, broadcast and other telecommunications providers to compete in each other's businesses, while loosening regulation of those businesses. The 1996 Acts principal goals were to foster local and intrastate competition while ensuring universal service to rural America, and it has substantially achieved these goals overall. National Exchange Carrier Association. For interstate services, Inter-Community participates in the National Exchange Carrier Association ("NECA") common line and traffic sensitive tariffs and access revenue pools. The NECA revenue pools are intended to compensate LECs, including RLECs such as Inter-Community, for the costs of facilities furnished in originating and terminating interstate long distance services, including a fair rate-of-return. Inter-Communityis compensated for its intrastate costs through billing and keeping intrastate access charge revenues (there is no intrastate access revenue pool). Intrastate access charge revenues are based on intrastate access rates filed with the NDPSC. Intercarrier Compensation Reform. As discussed above, in the February 8, 2011 NPRM the FCC requests comments on revising intercarrier compensation. Currently, the rate for intercarrier
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compensation depends on the type of traffic at issue, the types of carriers involved, and the end points of the communications which creates opportunities for regulatory arbitrage, as well as incentives for inefficient investment and deployment decisions. The intent of the intercarrier compensation reform effort is to replace the existing patchwork of intercarrier compensation rules with a unified approach. However, it is not possible to predict what modifications the FCC or state regulatory agencies may adopt regarding intercarrier compensation, the timing of such modifications or the impact of those modifications on the Company. Universal Service Fund. The USF mechanisms are intended, among other things, to provide special support funds to high-cost RLECs so that they can provide affordable services to their customers, notwithstanding their elevated expenses resulting from the low population densities of the areas served. The FCC has minimum requirements for a telecommunications carrier to be designated as an eligible telecommunications carrier (ETC) for the purpose of receiving federal USF. Inter-Community is already designated as an ETC. The FCC has bifurcated USF mechanisms between rural and non-rural companies and Inter-Community is a rural, rate-of-return company for interstate regulatory purposes. Rate-of-return companies receive support based on their costs. Inter-Community files an annual certificate with the NDPSC to support its status as an Eligible Telecommunications Carrier (ETC) so that it may continue to receive USF. As with intercarrier compensation, the FCCs February 8, 2011 NPRM requested comment on short and long-term proposed changes to USF and indicated that it favored re-focusing USF to support the development of broadband services through the creation of the CAF. However, it is not possible at the current time to predict what modifications Congress, the FCC or state regulatory agencies may ultimately adopt regarding USF, the timing of such modifications or the impact of those modifications on the Company. Voice over Internet Protocol. Inter-Community has moderate but increasing wireline competition at the present time. Much more significantly, wireless usage and VoIP are continuing to increase across the nation, including in the areas served by Inter-Community. Competition from VoIP services could have substantial detrimental impact on future revenues and create additional uncertainty for the Company. It is not possible to predict the extent to which these complementary or substitutable services might impact the Companys revenues. Because of the rural nature of their operations and related low population densities, Inter-Community is a high cost operation which receives substantial federal and state support. However, it appears that in at least some areas, the regulatory environment for RLEC operations is becoming less supportive than has historically been the case, which may enhance the competitive impact of VoIP. The focus of the NBP on broadband Internet technology, as discussed above, may exacerbate this trend. Moreover, VoIP usage is increasing as both a transport facility between switching centers and as a means to serve the end users voice telephone needs. As a transport facility, it is expected to decrease the overall cost of transport in the long run. The Company is analyzing whether VoIP could be utilized for transport in a cost effective manner. , The interexchange carriers (IXCs) would like to have access minutes that are transported over VoIP exempted from paying access charges. If the IXCs were exempted from paying access charges on VoIP traffic, it would have a significant detrimental impact to the Companys access charge revenues. While
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the FCC has initially determined that computer-to-computer VoIP traffic should not be considered a telecommunications service, the FCC has not issued a final decision on this matter and it is not possible to predict the FCCs future actions regarding the transport issue. The FCC has issued several orders dealing with particular aspects of VoIP and it currently is conducting an ongoing, comprehensive proceeding to determine the overall extent to which VoIP should be subject to regulation. VoIP is included in the NPRM and the implementation of the NBP, and it is not possible to predict the timeframe or the results which may occur. In addition to transport, companies are increasing the use of VoIP in providing voice services to the end user. This VoIP end user traffic is typically low-priced or even free although it requires the use of a broadband service, such as DSL or cable modem. Obviously, however, if the end user purchases the broadband service from a competitor, such as a cable or wireless broadband company, the telephone company loses all revenue associated with the customer switching to VoIP. Of even greater concern is the fact that the Company loses the access charge revenue associated with intrastate calls that previously were provided through the Companys switched network. It is not possible to determine the potential lost revenue from calls that are handled by VoIP rather than the public switched network. This is very similar to revenue losses due to wireless usage where minutes of use are being removed from the Companys switching platform to the wireless carriers switch, thus reducing the Companys access revenues. Competitive Developments. In addition to the VoIP competition described above, competition in the telecommunications industry is increasing across the board. Competition in the Companys wireline telecommunications markets is becoming more significant in the areas closest to larger towns or metropolitan areas. Inter-Community has historically been a monopoly wireline provider in its respective area for local telephone exchange service, but the regulatory landscape is changing. We now experience competition from long distance carriers, from cable companies and Internet service providers with respect to Internet access, from cable telephony, and from wireless carriers. Competition is resulting in a continuing loss of access lines and minutes of use, and in the conversion of retail lines to wholesale lines, which negatively affects revenues and margins from those lines. Competition also puts pressure on the prices we are able to charge for some services, particularly for some non-residential services. The total number of competitors is difficult to estimate since many of the companies do not have a local presence, but instead compete for services via the Internet using VoIP or through wireless operations. As a result of the 1996 Act, followed by FCC and state regulatory initiatives and judicial decisions aimed at increasing competition, certain telecommunications providers have attempted to bypass local exchange carriers to connect directly with high-volume toll customers. We do not consider them a significant near-term competitive threat due to the limited number of high-volume customers served by InterCommunity. Investments We hold minority interests (less than 50% owned) in several investments that are described below.

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Dakota Carrier Network, LLC Inter-Community has a 3.43% ownership interest in Dakota Carrier Network, LLC (DCN), a statewide telecommunications system comprised primarily of fiber optic facilities and owned by Inter-Community and fourteen other North Dakota RLECs. DCN provides a broad range of services to its RLEC owners, including data, voice and video transport; Signaling System 7 (SS-7); and data storage. DCN is a member of Indatel, a nationwide association of twenty-three statewide fiber networks owned by RLECs within each of the states involved. Inter-Communitys proportionate share of DCNs revenues, operating profits, and earnings were $1,027,769, $261,461 and $261,715 respectively, for the year ended December 31, 2010 and $910,693, $241,797 and $241,892 respectively, for the year ended December 31, 2009. Inter-Communitys proportionate share the book value of DCN was $1,051,764 at December 31, 2010 as compared to $911,143 at December 31, 2009. Inter-Community received $120,940 and $153,603 in cash distributions from DCN in 2010 and 2009 respectively. Cellular Telephone Interests Inter-Community owns minority interests in two partnerships that provide wireless cellular telephone service in RSA #3 and RSA #5 in North Dakota. These RSAs cover areas with a total population of approximately 100,000 persons. Verizon Wireless is the operating general partner in these entities. These RSAs are accounted for on a cost basis. However, Inter-Communitys proportionate share of these operations combined revenues, operating profits, and earnings were $1,903,178, $767,245 and $780,085 respectively, for the year ended December 31, 2010 and $1,560,578, $552,622 and $559,038 respectively, for the year ended December 31, 2009. Inter-Communitys proportionate share of the combined book value of these entities was $1,009,696 at December 31, 2010 as compared to $956,211 at December 31, 2009. Inter-CommunityThe cellular telephone interests have no debt. The NDPSC does not regulate these wireless operations. The FCC regulates the licensing, construction, modification, operation, ownership, sale and interconnection of wireless communications systems. The results in the wireless arena of the FCCs implementation of the NBP also cannot be predicted but are likely to have some effects on Inter-CommunitysINTER-COMMUNITY cellular interests. The current regulatory requirements are complex and subject to modification, and could increase the costs or diminish revenues of the cellular interests. Further, the FCC and state and local agencies may adopt regulations or take regulatory action that could adversely affect the cellular businesses or make cellular operations more costly or less profitable. Wireless carriers are required to pay compensation to a wire line local exchange carrier that transports and terminates a local call which originates on the wireless carriers network. Similarly, the wireless carrier is entitled to receive compensation when it transports and terminates a local call that originates on a wire line local exchange network. Wireless carriers negotiate interconnection arrangements for their networks with local exchange carriers, and these arrangements are subject to state approval. The FCCs interconnection rules and rulings, as well as state arbitration proceedings, will directly impact the nature and costs of facilities necessary for the interconnection of the wireless networks of the wireless
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partnerships with other telecommunications networks, as well as the revenues that the wireless partnerships may receive for terminating calls on their networks. For some time in the past, and now in connection with the NBP, the FCC has been considering changes to the intercarrier compensation regime. The outcome of this consideration may affect the manner in which the wireless partnerships are charged or compensated for the exchange of traffic. The wireless partnerships are also subject to regulatory requirements including but not limited to number porting arrangements; universal service obligations; rules regarding subscriber privacy and customer proprietary network information; rules governing wireless resale and roaming obligations; rules requiring wireless service providers to configure their networks for electronic surveillance by law enforcement officials; telemarketing and truth-in-billing rules; and rules requiring that the carrier offer equipment and services that are accessible to and usable by persons with disabilities. Some of these requirements pose technical and operational challenges to which the wireless partnerships, and the industry as a whole, have not yet developed clear solutions. Moreover, many of these requirements are likely to be affected by the implementation of the NBP, and some are currently the subject of pending FCC or judicial proceedings. It is not possible at the current time to predict what changes will actually occur or how any that do occur will affect the Companys business, financial condition or results of operation. Although the FCC preempts states from regulating rates or entry into commercial mobile radio service, a state may impose regulations and requirements on wireless carriers in certain respects. States may manage public rights of way and can require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for the use of such rights of way. States may also impose competitively neutral requirements that are necessary for universal service, to protect the public safety and welfare, to ensure continued service quality and to safeguard the rights of consumers. The cellular licenses held by the wireless partnerships are subject to renewal upon the expiration of the initial period for which they were granted. These wireless licenses have been renewed. The Company also expects these licenses will again be renewed in the future due to the Companys adherence to FCC guidelines. The FCC looks at the level of service provided during the past license term and whether the licensee has substantially complied with applicable FCC rules and policies and the Communications Act. Other Items Real Estate Properties. Our real estate properties consist of the holdings of ICTC, which owns a total of twelve (12) acres of land at ten (10) separate sites, most of which are small installations used to house switches. ICTCs principal holding is its main office at Nome, ND, which contains 4,326 square feet of office and storage space. In addition, ICTC has 4,400 square feet of garage space and a total of 5,035 square feet utilized for its switching facilities. All of these properties are encumbered under mortgages held by CoBank. Other Patents, Licenses, Franchises. While we hold other licenses of various types, the Company does not believe they are significant to the focus of its basic business and ongoing operations, which are its RLEC companies complemented by its CLEC operations.
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ICTC GROUP, INC. Posted April 19th, 2011

Environmental Compliance. The capital expenditures, earnings and competitive position of the Company have not been materially affected by compliance with current federal, state and local laws and regulations relating to the protection of the environment. However, we cannot predict the effect of future laws and regulations on its environmental compliance or the costs thereof. Seasonality. No portion of the business of the Company is regarded as seasonal at a significant level. Dependence on Particular Customers. The Company does not believe that its business is dependent on any single customer or group of customers for local telephone service. However, most RLECs, including Inter-Community, received a significant amount of revenues in the form of access fees from IXCs. Bankruptcy of a significant IXC or of several IXCs in the same period could have a material adverse effect on the Company. We cannot predict which, if any, IXCs or other significant customers may go bankrupt in the future. Government Contracts. In some instances, Inter-Community provides service to the government under tariff and/or special contracts. Inter-Communitys government contracts are not material to its operations as a whole and the elimination of those contracts would not significantly impact its operations or financial results. Employees. The Company had a total of 13 employees at December 31, 2010, as compared to 12 employees at December 31, 2009. Legal proceedings. We are not party to any legal proceedings at this time. Other Agreements. Two agreements cover the separation of LICT from the Company: o Separation and Distribution Agreement - The major terms of the agreement provide that LICT and the Company release one another from, and shall indemnify one another for, any claims relating to their respective businesses after the distribution (other than any claims that may arise under the Tax-Sharing Agreement). This agreement also provides that the parties will cooperate with one another in fully effectuating the distribution and any related transactions. The agreement further provides that ICTC Groups employees will continue their employment without interruption and at their current compensation, and that ICTC Group will assume responsibility for their welfare plans and benefits. Tax-Sharing Agreement - The Tax-Sharing Agreement sets forth LICTs and ICTC Groups respective rights and obligations relating both to taxes imposed on their respective businesses prior to and after the distribution, and to taxes and other liabilities that could be imposed in connection with the distribution (and certain related transactions) if such transactions do not qualify for tax-free treatment under the Code.

Key Employees The following list of the Companys senior management sets forth all positions and offices with the Company held by each such person, and the principal occupations, employment or other service of these persons during past years.
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Name David S. Ahl

Positions Held ICTC Groups Chairman and CEO for more than five years. He is familiar with ICTC Groups operating assets in North Dakota and has had substantial experience in the telecommunications industry, from both wire line and wireless perspectives. He also has an extensive marketing background as well as general management experience. General Manager of Inter-Community. Mr. Andersen has over 30 years of experience in the telecommunications industry, all with Inter-Community Telephone Co. He is a current director of the North Dakota Telephone Association and has served two years as its President. He is also a current governor of Dakota Carrier Network, LLC and was a former director of the Western Telecommunications Alliance.

Keith Andersen

Industry Risk Factors Risks Related to Our Regulatory Environment We are subject to significant regulations that could change in a manner adverse to us. We operate in a heavily regulated industry, and the majority of our revenues are supported by regulations, including access revenue and Universal Service Fund support for the provision of telephone services in rural areas. As discussed above, the NPRM recently issued by the FCC, as well as the NBP, could ultimately effect fundamental changes in the financial structure and characteristics of the telecommunications industry. Moreover, existing laws and regulations applicable to us and our competitors may be, and have been, challenged in the courts, and could be changed by Congress or regulators in a manner adverse to us. In addition, any of the following have the potential to have a significant impact on us: Risk of loss or reduction of network access revenues. A significant portion of our revenues comes from network access charges, which are paid to us by intrastate and interstate long distance carriers for originating and terminating calls and for providing special access services which connect carriers to their end users in our service areas. In past years, several long distance carriers have declared bankruptcy. Future declarations of bankruptcy by carriers that utilize our access services could negatively impact our business, financial condition and results of operations. In addition, the amount of access charge revenues that we currently receive is based on rates set by federal and state regulatory bodies, and those rates could change in the future. From time to time, federal and state regulatory bodies conduct rate cases, earnings reviews, or make adjustments to average schedule formulas that may result in such rate changes. In addition, reforms of the federal and state access charge systems, combined with the development of competition, have caused the aggregate amount of access charges paid by long distance carriers to decrease. Significant changes in the access charge system, if not offset by a revenue replacement mechanism, could result in a significant decrease in our revenues. Decreases in or loss of access charges may or may not result in offsetting increases in local, or subscriber line, revenues. Regulatory developments of this type could adversely affect our business, financial condition and results of operations.
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Risk of loss or reduction of Universal Service Fund support. As discussed previously, we receive USF revenues from both the federal universal service support mechanisms to help fund our operations. The federal revenues include USF payments for local switching support, interstate common line support, safety net and high cost loop support. Any changes to the existing rules as proposed by the NPRM or the NBP or otherwise, could reduce the USF revenues we receive. Corresponding changes in state universal service support could likewise have a negative effect on the revenues we receive. Further, under current rules, the total USF payments to our rural operations will fluctuate based upon our rural company average cost per loop compared to the national average cost per loop, and our total payments may decline based on these comparisons. If we raise prices for services to offset losses of USF payments, the increased pricing of our services may disadvantage us competitively in the marketplace, resulting in additional potential revenue loss. Furthermore, any changes in the rules and regulations governing the distribution of such support or the manner in which USF contributions are obtained or calculated could have a material adverse effect on our business, financial condition or results of operations. Risk of loss of statutory exemption from burdensome interconnection rules imposed on incumbent local exchange carriers. Inter-Community is exempt from the 1996 Acts more burdensome requirements governing the rights of competitors to interconnect to ILEC networks and to utilize discrete network elements of the ILECs network at favorable rates. To the extent that state regulators may decide that some or all of these requirements should be imposed upon Inter-Community, we would be required to provide unbundled network elements to competitors in our service areas. As a result, more competitors could enter our traditional telephone markets than are currently active there, which could have a material adverse effect on our business, financial condition and results of operations. Risks posed by costs of regulatory compliance. Regulations create significant compliance costs for us, and are expected to continue to do so. With regard to the provision of intrastate services, Inter-Community is subject to certification, tariff filing and other ongoing regulatory requirements by state regulators. Our interstate access services are currently provided in accordance with tariffs filed with the FCC by the National Exchange Carrier Association (NECA). Challenges in the future to NECAs tariffs by regulators or delays in the Company obtaining certifications and regulatory approvals could adversely affect the rates that we are able to charge our customers. We are also subject to audits by both federal and state regulatory authorities, which may be costly and burdensome and may result in fines, penalties, refunds or other unfavorable and burdensome requirements. Our business also may be impacted by legislation or regulations imposing new or greater obligations related to assisting law enforcement, bolstering homeland security, minimizing environmental impacts, protecting customer privacy or addressing other issues that impact our business. For example, existing provisions of the Communications Assistance for Law Enforcement Act (CALEA) and FCC regulations implementing that legislation require communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance. We cannot predict whether or to what extent the FCC might modify its CALEA rules or any other rules, or what compliance with new rules might cost. Similarly, we cannot predict whether or to what extent federal or state legislators or regulators might impose new security, environmental or other obligations on our business.

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Risk of loss from rate reduction. Inter-Community operates pursuant to intrastate rate of return regulation and is subject to state regulatory authority over its intrastate telecommunications service rates. State review of these rates could lead to rate reductions, which in turn could have a material adverse effect on our business, financial condition and results of operations. Regulatory changes in the communications industry could adversely affect our business by facilitating greater competition, reducing potential revenues or raising our costs. The 1996 Act provides for significant, ongoing changes and increased competition in the telecommunications industry, including competition for local communications and long distance services. This statute and the FCCs implementing regulations could be subjected to additional judicial review or affected by future rulings of the FCC, thus making it impossible to predict whether, on an ongoing basis, the legislation will have a material adverse effect on our business, financial condition or results of operations. In addition to the implementation of the NBP and the outcome of the FCCs February 8, 2011 NPRM proceeding, several other regulatory and judicial proceedings are underway or may soon be commenced that address issues affecting our operations and those of our competitors. We cannot predict the timeframe or outcome of these developments, nor there any assurance that these changes will not have a material adverse effect on us. Company Specific Risk Factors The Companys management and other employees are not under contractual or other obligation to remain in their employment. The Company is expected to have executive officers and craft employees (e.g., outside plant technicians, central office engineers, etc.) who will be responsible for its day-to-day management and operation, but who will not be contractually or otherwise obligated to continue in their employment for The Company. Most of The Companys current management team and other employees have been in place for a number of years, but these persons are not bound by employment contracts and may leave their current positions at any time without further obligation to The Company. If that were to occur, The Company would attempt to recruit replacement management and craft personnel with appropriate qualifications to meet its needs. However, it is not certain that The Company would be able to acquire experienced management or craft employees on favorable terms or in a timely fashion, if its current managers or employees decided to resign. The Company receives a portion of its income from distributions by entities in which it holds minority interests. The Company has minority investments and partnership interests in various entities from which it receives equity income. Any distributions from such entities (in the form of dividends or otherwise) will be made at the discretion of the general partner or majority interest holder of each such entity. Although these distributions comprise a relatively small portion of The Companys combined revenues and other income (approximately 6%), the Company will use such distributions to help meet its financial obligations generally and to help pay dividends, if it ultimately decides to pay dividends, on its common stock. If these distributions are decreased or terminated, it may be more difficult for The Company to meet its financial obligations and/or to pay dividends, if any, on its common stock. The Company has a significant amount of debt. The Company is carrying a significant amount of debt for a company of its size, scope and financial resources. Servicing this debt may impede or diminish the
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ICTC GROUP, INC. Posted April 19th, 2011

Companys ability to undertake or adequately fund other activities, and could thus hinder the operation or development of its business. The Companys businesses are subject to competition that may adversely impact them. The markets for the telephone and related communications services which comprise The Companys businesses are highly competitive in densely-populated areas, and that competition has been expanding into rural areas, including the areas served by The Company. Moreover, regulation and technological innovation can bring change quickly in the communications industry. These factors historically have had, and may in the future have, a significant and unpredictable impact on the competitive dynamics in each of the geographic and product/service markets where The Company operates or has interests. The Company faces competition from cellular telephone companies for voice service and this competition may soon expand to Internet access and other broadband services. Inter-Community also faces competition for Internet access services from cable television operations. Inter-Community expects that competition from each of these sources, as well as from new competitors, will expand and intensify in the future. Some of Inter-Communitys competitors have brand recognition and financial, personnel, marketing and other resources that are much more extensive than those of Inter-Community. In addition, consolidation and strategic alliances within the communications industry or the development of new technologies could adversely affect Inter-Communitys competitive position. The Company cannot predict the number, type or capabilities of competitors that will emerge, whether as a result of existing or new technologies, or from federal and state regulatory or legislative actions. However, increased competition from existing and new entities is very likely and could have a materially adverse effect on its businesses. ICTC may not be able to successfully integrate new technologies, respond effectively to customer requirements or provide new services. The communications industry in general, and the RLEC and CLEC segments where The Company operates in particular, are subject to rapid and significant changes in technology, frequent new service introductions and evolving industry standards. The Company cannot predict the effect of these changes on its competitive position or profitability. Technological developments may reduce its competitiveness and require unbudgeted upgrades or the procurement of additional products. These developments could be expensive as well as time-consuming and difficult to implement. In addition, new products and services arising out of technological and/or market evolution may reduce the attractiveness of the services the Company currently provides. If the Company fails to adapt successfully to technological changes or obsolescence, or fails to respond successfully to changes in the marketplace, its results could suffer. The Company may have difficulty raising additional capital to meet its business objectives. InterCommunity may need additional capital to meet its business objectives and develop its operations. Such additional capital may need to be in the form of debt, and Inter-Community may not be able to borrow or to raise sufficient additional capital at all or on terms that it considers acceptable. The inability to raise capital as needed or on favorable terms could adversely affect Inter-Communitys existing operations and its ability to expand or otherwise develop its businesses. A system failure could cause delays or interruptions of Inter-Communitys communications services, which could cause Inter-Community to lose customers.
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ICTC GROUP, INC. Posted April 19th, 2011

To be successful, Inter-Communitys communications operations must continue to provide their customers reliable service. Some of the risks to the reliability of those services include: Physical damage to communication lines, switches or other facilities; Power surges or outages; Software and hardware defects; and

Other environmental disruptions beyond the Companys control. These and other events may cause interruptions or delays in service, or reduced capacity to serve customers, either of which could cause Inter-Community to lose customers and/or incur expenses. Inter-Communitys competitive position could also be adversely affected by such disruptions or delays.

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