UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

(X)    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ending December 31, 20172020

(  )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 19341934:

For the transition period from______to______from_____to_____.

Commission File Number: 0-3024

NEW ULM TELECOM,NUVERA COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

27 North Minnesota Street

New Ulm, Minnesota 56073

(Address of principal executive offices)

Registrant's telephone number, including area code:  (507) 354-4111

Securities registered pursuant to Section 12 (g) of the Act: 

Title of each className of each exchange on which registered

Common Stock - $1.66 par value                                                      OTCQB Marketplace

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o☐   No  x☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  Yes  o☐ No  x☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x☒  No  o☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x☒  No  o☐

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  Yes  x  No  o☐

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer”,filer,” “accelerated filer”,filer,” “non-accelerated filer”,filer,” “smaller reporting company” orand “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

o☐  Large accelerated filer  o☒  Accelerated filer  o☐  Non-accelerated filer  x☒  Smaller reporting company  o☐Emerging growth company     

If emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o☐  No  x☒

Securities registered pursuant to Section 12(b) of the Act:  None.

The aggregate market value of the registrant’s common stock held by non-affiliates computed by reference to the price at which the common stock was sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was $46,795,286.$79,137,314. This calculation is based upon the closing price of $11.90$18.38 of the stock on June 30, 2017,2020, as quoted on the OTCQB Marketplace. Without asserting that any director or executive officer of the registrant, or person owning 5% or more of the registrant’s common stock, is an affiliate, the shares of which they are the beneficial owners have been deemed to be owned by affiliates solely for this calculation.

As of March 15, 2018,16, 2021, the registrant had 5,160,0655,200,689 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement for the 20182021 Annual Meeting of Stockholders to be held on May 24, 201827, 2021 are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2017.2020.

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NOTE ABOUT FORWARD LOOKING STATEMENTS

The Securities and Exchange Commission (“SEC”)(SEC) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Certain statements in this Annual Report on Form 10-K, including those relating to the impact on future revenue sources, pending and future regulatory orders, continued expansion of the telecommunicationscommunications network and expected changes in the sources of our revenue and cost structure resulting from our entrance into new communications markets, are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements reflect, among other things, our current expectations, plans, strategies and anticipated financial results. There are a number of risks, uncertainties and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these circumstances are beyond our ability to control or predict. Moreover, forward-looking statements necessarily involve assumptions on our part. These forward-looking statements generally are identified by the words “believe”, “expect”, “anticipate”, “estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”, “would”,“believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “may,” “will, be”,” “would,” “seeks,” “targets,” “continues,” “should,” “will continue”be,” “will continue,” or similar expressions. Such forward-lookingThese statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of New Ulm Telecom,Nuvera Communications, Inc. and its subsidiaries (“NU Telecom,Nuvera,” the “Company,” “we” or “our” or “us”) to be different from those expressed or implied in the forward-looking statements. These risks and uncertainties may include, but are not limited to: i) unfavorable general economic conditions that could negatively affect our operating results; ii) substantial regulatory change and increased competition; iii) our possible pursuit of acquisitions could be expensive or not successful; iv) we may not accurately predict technological trends or the success of new products; v) shifts in our product mix may result in declines in our operating profitability; vi) possible consolidation among our customers; vii) a failure in our operational systems or infrastructure could affect our operations; viii) data security breaches; ix) possible replacement of key personnel; x) elimination of governmental network support we receive; xi) our current debt structure may change due to increases in interest rates or our ability to comply with lender loan covenants and xii) possible customer payment defaults. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this report. Furthermore, forward-lookingthese statements speak only as of the date they are made. Except as required under federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements. Undue reliance should not be placed on forward-looking statements. 

Website Access to SEC Reports

Our website at www.nutelecom.netwww.nuvera.net provides information about our products and services, along with general information about NU TelecomNuvera and its management and financial results. Copies of our most recent Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, can be obtained, free of charge, as soon as reasonably practical after these reports are electronically filed or furnished to the SEC. To obtain this information, visit our website noted above and select “About Us – Investors” to view NU TelecomNuvera SEC filings,” or call (844) 354-4111. The SEC also maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding public companies, including NU Telecom.Nuvera Communications, Inc. Any reports filed with the SEC may also be obtained from the SEC’s Reference Room at 100F Street, NE, Washington, DC 20549.

Code of Business Conduct and Ethics

Our Board of Directors (BOD) has adopted a Code of Business Conduct and Ethics that is applicable to all directors, the chief executive officer (CEO), chief financial officer (CFO) and to all other employees of NU Telecom.Nuvera. All employees of NU TelecomNuvera have undergone training on this Code of Business Conduct and Ethics. The information required by Item 406 of Regulation S-K is contained under “Code of Business Conduct” in the 2018definitive proxy statement (2021 Proxy StatementStatement) and is incorporated by reference. Our Board of DirectorsBOD has also adopted written charters for its committees that comply with the NASDAQ Global Select Market. Copies of the committee charters are available on our website above or by contacting us at (844) 354-4111.  

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PART I

Item 1.   Business

Company Overview and History

NU TelecomNuvera is a diversified communications company headquartered in New Ulm, Minnesota with more than 112115 years of experience in the local telephone exchange and telecommunicationscommunications business. We operate in one principal business segment: the TelecomCommunications Segment.

Our principal line of business is the operation of five local telephone companies or incumbent local exchange carriers (ILEC) and the operation of two competitive local exchange carriers (CLEC) telephoneseven communications companies. Our original business was founded in 1905 and consisted of the operation of a single ILECcommunications company (New Ulm Rural Telephone Company). In 1984, we changed our name to New Ulm Telecom, Inc. In 1986, we acquired our second ILEC,communications company, Western Telephone Company (WTC). In 1993, we acquired our third ILEC,communications company, Peoples Telephone Company (PTC). In 2008, we acquired our fourth ILEC,communications company, Hutchinson Telephone Company (HTC). In 2012, we acquired our fifth ILEC,sixth communications company, Sleepy Eye Telephone Company (SETC). In 2018, we acquired our seventh communications company, Scott-Rice Telephone Co. (Scott-Rice). Our businesses consist of connecting customers to our state-of-the-art, fiber-rich communications network, providing managed services, switched service and dedicated private lines, connecting customers to long distance service providers and providing many other services associated with our businesses. Our businesses also provide Internet protocol television (IPTV), cable television services (CATV), Internet access services, including high-speed broadband access, and long distance service. We also install and maintain communications systems to the areas in and around our service territories in southern Minnesota and northern Iowa. In 2002,2008 we formed a CLEC in the city of Redwood Falls, Minnesota and acquired our second CLEC in 2008,fifth communications company with the acquisition of HTC. This CLECcompany operates in and around the city of Litchfield, Minnesota.Minnesota and operates under less regulatory oversight than our other communications companies. In 2010, we acquired the cable TV system in the city of Glencoe and operate Glencoe under the Litchfield CLEC. Our CLECs offercommunications company. This company offers the same services as our ILECs.other communications companies. In 2000, we changed our marketing name to NU-Telecom and operated under that name in our markets. In 2018, we changed our marketing name to Nuvera and currently operate under that name in our markets.

Our operations are currently conducted through the following subsidiaries:

TelecomCommunications Segment

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We report the business operations of our five ILECs and two CLECsseven communications companies and their associated services as a single segment that we refer to as the TelecomCommunications Segment. 

The TelecomCommunications Segment operates five ILECs: New Ulm Telecom, Inc. (New Ulm),the following communications companies: Nuvera, HTC, PTC, Scott-Rice, SETC, and WTC, and two CLECs located in the cities of Redwood Falls, Litchfield and Glencoe, Minnesota. New Ulm,Nuvera, HTC, Scott-Rice, SETC, WTC, Litchfield and WTCGlencoe are independent telephonecommunications companies that are regulated by the Minnesota Public Utilities Commission at the state level, while PTC is an independent telephonecommunications company that is regulated by the Iowa Utilities Board at the state level. Our two CLECs arecommunications company located in Litchfield and Glencoe is currently not under the same level of regulatory oversight as our ILECs.communications companies. As of December 31, 20172020 we served 21,95420,170 access lines in the Minnesota communities of Bellechester, Courtland, Elko, Evan, Goodhue, Hanska, Hutchinson, Klossner, Litchfield, Mazeppa, New Market, New Ulm, Prior Lake, Redwood Falls, Sanborn, Savage, Searles, Sleepy Eye, Springfield and White Rock, as well as the adjacent rural areas of Blue Earth, Brown, Goodhue, McLeod, Meeker, Nicollet, Redwood, Rice, Scott and Wabasha counties in south central Minnesota. We also serve the community of Aurelia, Iowa as well as the adjacent rural areas surrounding Aurelia. The TelecomCommunications Segment also operates multiple IPTV and CATV systems in Minnesota (including the cities of Cologne, Courtland, Elko, Glencoe, Goodhue, Hanska, Hutchinson, Litchfield, Mayer, New Market, New Germany, New Ulm, Plato, Prior Lake, Redwood Falls, Sanborn, Savage, Sleepy Eye and Springfield) and one IPTV system in Aurelia, Iowa. These systems serve approximately 10,34610,873 customers.

The TelecomCommunications Segment derives its principal revenues from (i) localvoice service charges to its residential and business subscribers, (ii) access charges to Interexchange Carriers (IXCs) for providing the carriers access to our local phone networks and (iii) the provisioning of video and data services. We also receive revenue from long distance carriers for providing the billing and collection

None of long distance toll calls to our subscribers.

Neither our ILECs nor CLECscommunications companies are dependent upon any single customer or small group of customers. No single customer accounted for 10% or more of our consolidated revenues in any of the last two years.

We receive the majority of our revenues through the following revenue sources:

Data and Transport Services – We provide a variety of business communication services to small, medium and large business customers, including many services over our advanced fiberfiber-optic (fiber) network. The services we offer include scalable high speed broadband Internet access and voice over Internet protocol (VoIP) phone services, which range from basic service plans to virtual hosted systems. Our hosted VoIP package utilizes our soft switching technology and enables our customers to have the flexibility of employing new telephone advances and features without investing in a new telephone system. This package bundles localvoice service, calling features, IP business telephones and unified messaging, which integrates multiple technologies into a single system and allows the customer to receive and listedlisten to voice messages through e-mail. 

In addition to Internet and VoIP services, we also offer a variety of commercial data connectivity services in select markets including private line and Ethernet services to provide high bandwidth across point-to-point and multiple site networks.

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TableWe receive the majority of Contentsour revenues through the following sources:

Broadband Services Voice Service– BroadbandWe receive recurring revenue for basic voice services include revenuethat enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from residential customers for subscriptions to our VoIP, datamultiple voice service plans with a variety of custom calling features such as call waiting, call forwarding, caller identification and video products. We offer high speed internet access depending on the nature of the network facilities that are available, the level of service selected and the location.voicemail. Our VoIP digital phone service is also available as an alternative to the traditional telephone line.   

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Network Access – We offer multiple voiceprovide access services plans with customizable calling featuresto other communications carriers for the use of our facilities to terminate or originate long distance calls on our network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all of our customers for access to the public switched network. These monthly SLCs are regulated and voicemail.approved by the Federal Communications Commission (FCC). In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.   

Video Service  – We provide a variety of enhanced video services on a monthly recurring basis to our customers. Depending on geographical market availability, our video services range from limited basic service to advanced digital TV, which includes several plans each with hundreds of local, national music channels including premium and pay-per-view channels as well as video-on-demand service. Certain customers may also subscribe to our advanced video services, which consist of high-definition (HD) TV, digital video recorders (DVR) and or homeWhole Home DVR. Our Whole Home DVR allows customers the ability to watch recorded shows on any TV in the house, record multiple shows at one time and utilize an intuitive on-screen guide and user interface. Video subscribers also have access to our TV Everywhere service which allows subscriber access to full episodes of available shows, movies and live screens using a computer or mobile device.

Local Service – We receive recurring revenue for basic local services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. 

Network Access – We provide access services to other telecommunications carriers for the use of our facilities to terminate or originate long distance calls on our network. Additionally, we bill subscriber line charges (SLCs) to substantially all of our customers for access to the public switched network. These monthly SLCs are regulated and approved by the Federal Communications Commission (FCC). In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to the ILECs.   

Video – We provide a variety of enhanced video services on a monthly recurring basis to our customers. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with local CATV, satellite dish TV and off-air TV service providers. We serve seventeentwenty-two communities with our IPTV TV services and five communities with our CATV services.

Data Service – We provide high speed Internet to business and residential customers.customers depending on the nature of the network facilities that are available, the level of service selected and the location. Our revenue is earned based on the offering of various flat rate packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage.  

Alternative Connect America Cost Model (A-Cam)/Federal Universal Service Fund (FUSF) – Prior to 2017, we received FUSFThe Company currently receives funding based on the A-CAM, with the exception of Scott-Rice, which receives funding from the Federal Communications Commission (FCC). FUSF funding was established to overcome geographical differences in costsFUSF. Scott-Rice’s settlements from the National Exchange Carriers Association (NECA) pools are based on nationwide average schedules, which includes the pooling and redistribution of providing voice service and to enable all citizens to communicate over networks regardless of geographical location and/revenues based on a company’s actual or personal income. In our Form 10-Q for the quarter ended September 30, 2016, NU Telecom disclosed that we had elected the A-CAM for our Minnesota and Iowa operations, replacing our former legacy support. NU Telecom will receive A-CAM support for a period of ten years in exchange for meeting defined broadband build-out requirements.average costs. See pages 12-14below for a discussion regarding A-CAM and FUSF.

Other – Our customers are billed for toll and long-distance services on either a per call or flat-rate basis. This also includes the offering of directory assistance, operator service and long distance private lines. We also generate revenue from directory publishing through an outside vendor, sales and service of customer premise equipment (CPE), bill processing and other customer services. Our directory publishing revenue in our telephone directories recurs monthly. We also provide retail sales and service of cellular phones and accessories through Telespire, a national wireless provider. We resell these wireless services as TechTrendsNuvera Wireless, our branded product. We receive both recurring revenue for our wireless services, as well as revenue collected for the sale of wireless phones and accessories. 

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Strategy

Our vision is to position ourselves as a “one-stop” communications solutions provider. We believe our customers place a value on the fact that we are a local company whose goal is to meet our customers’their total communications needs. The success of this vision depends on the following strategies:

·      ●We market services to our residential customers either individually or as a bundled package. We offer a competitive, multi-service bundle of voice, high-speed Internet and IPTV. Data connections continue to increase as a result of consumer trends towards increased Internet usage and our enhanced product and service offerings.

·      ●Our consumer broadband speed allows us to continue to meet the needs of our customers and the demand for higher speed resulting from the growing trend of over-the-top content viewing. The availability of faster speeds also complements our wireless home networking (Wi-Fi) thatand supports our TV everywhere service and allows our subscribers to watch their favorite programs at home or away on a computer, smartphone or tablet.

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●We tailor our services to commercial customers by developing solutions to fit their specific needs. We provide services to a wide range of commercial customers from sole proprietors and other small businesses to multi-location corporations. Our business suite of services includes local and long-distance calling plans, hosted voice services using network servers, the added capacity for multiple phone lines, scalable broadband Internet, online back up and business directory listings.

·      ●We believe that we have several advantages over our competition, including a state-of-the-art, fiber-rich communications network, competitive pricing and costs, outstanding service quality, and a strong reputation, a high level of commitment to the communities we serve and a direct billing relationship with a vast majority of the customers we serve in our service territories. We manage the potential decline in Telecomcommunications network access and localvoice service revenues by offering value-added services such as higher Internet speeds, HD IPTV, DVR services, managed services, customized communications solutions, content, along with outstanding customer service as a competitive differentiator.

·      ●We have and will continue to upgrade our networks and enhance our products and services to take advantage of the latest technology including advanced high-bandwidth capabilities and services, expansion of our network for wholesale and retail customers, Fiber-to-the-Tower services for wireless carriers and last mile fiber builds to residential and business customers. We intend to continue to introduce new services that draw upon our core competencies and we believe are attractive to our target customers. In considering new services and market expansion, we look for market opportunities that we believe present growth opportunities.

·      ●We continue to seek ways to improve our internal processes and gain operational efficiencies. While focusing resources on revenue growth and market share gains, we continually challenge our management team and employees at all levels to seek efficiencies and enhance our customers’ experience. We continue to invest in our networks and train our employees to achieve customer service excellence.

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·      ●Our current customer base provides a recurring revenue stream generating stable cash flow. Our focus remains on growing our services and supporting product lines so as to generate sufficient cash flow to fund our current operations, service our debt, fund our capital expenditure needs, pay dividends and expand our business. We have allocated resources to maintain and upgrade our network while focusing on optimizing returns by completing strategic capital outlays that will make our network more efficient and cost effective while providing the products and services that our customers desire in the markets we serve.

·      ●We intend to continue to pursue a disciplined process of evaluating acquisitions of businesses as well as organic growth opportunities of market expansion and/or products which are complementary to our business portfolio.  

●Across all of our service territories, we have successfully managed capital expenditures to optimize returns through disciplined planning and targeted investment of capital. For example, strategic investments in our networks allows significant flexibility to expand our commercial footprint, offer competitive products and services and provide services in a cost-efficient manner while maintaining our reputation as a high-quality service provider. We will continue to invest in strategic growth initiatives to enhance and expand our fiber network to new markets and customers in order to optimize new business, backhaul and wholesale opportunities.

●Commercial and carrier services are expected to be key growth areas in the future. We are focused on enhancing our broadband and commercial product suite and are continually enhancing our commercial product offerings to meet the needs of our business customers. We overbuilt our existing networks with advanced fiber networks in the commercial areas of New Ulm and Prior Lake and will overbuild Hutchinson in 2021. We tailor our services for business customers by developing solutions to fit their specific needs. Additionally, we are continuously enhancing our suite of managed and cloud services, which increases efficiency and enables greater scalability and reliability for businesses. We are utilizing multiple software platforms to gather relevant leads and for customer relations management.

●As consumer demands for bandwidth continue to increase, our focus is on enhancing our broadband services, and progressively increasing broadband speeds. We will begin an extensive Fiber-To-The-Home (FTTH) overbuild in portions of New Ulm in 2021. We offer speeds of up to 1 Gigabits per second (Gbps) in select areas where fiber is available, and up to 60 Megabits per second (Mbps) in areas where 1 Gbps is not yet available. As we continue to increase broadband speeds, we are also able to simultaneously expand the array of services and content offerings that the network provides.

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●In addition to Internet and VoIP services, we also offer a variety of commercial data connectivity services in select markets including Ethernet services; software defined wide area network (SD-WAN), a software-based network technology that provides a simplified management and automation of SD-WAN connections; multi-protocol label switching; and private line services to provide high bandwidth connectivity across point-to-point and multiple site networks. We offer a suite of cloud-based services, which includes a hosted unified communications solution that replaces the customer’s on-site phone systems and data networks, managed network security services and data protection services, including back-up and disaster recovery.

Competition

We compete in a rapidly evolving and highly competitive industry, and expect competition will continue to intensify as consolidations and mergers occur within the industry. Regulatory developments and technological advances over the past several years have increased opportunities for alternative communications service providers, which in turn have increased competitive pressures on our business. These alternative providers often face fewer regulations and have lower cost structures than we do. In addition, several of our competitors have consolidated with other communication providers and as a result are generally larger, have more financial and business resources and have greater geographical reach to provide services. Our competitive advantages include: our strong commitment and presence in the communities we serve, knowledge of these markets, our experienced localvoice service and support team, and our ability to offer more flexible communications solutions than our larger competitors.

The long-range effect of competition on the delivery of communications services and equipment will depend on technological advances, regulatory actions at both the federal and the state levels, court decisions, and possible additional future federal and state legislation. Past federal and state legislation have tended to expand competition in the telecommunicationscommunications industry. 

Alternatives to our service include customers leasing private line switched voice and data services in or adjacent to our service territories that permit the bypassing of our communications facilities. In addition, microwave transmission services, wireless communications, fiber-optic/fiber/coaxial cable deployment, VoIP, satellite and other services also permit the bypassing of our local exchange network. These alternatives to local exchange service represent a potential threat to our long-term ability to provide local exchange services at economical rates.

In order to meet the competition present in our industry, our businesseswe have deployed new technology to enable our local exchange networks to capture operating efficiencies and to provide additional new services to our new and existing customer base. These new technologies include the latest release of digital switching technology for all of our switches and the installation of a Common Channel Signaling System No. 7 (SS7) out-of-band system for all of our access lines. Our businessesWe have also connected fiber rings (redundant route designs that allow traffic to be re-routed in the event of network problems) that protect our local networks and enable them to provide a reliable level of service to our customers. The value of our local network is also enhanced by the ability of our operating companies to offer access to high-speed Internet with broadband access to our access lines. Broadband technology allows customer access to high-speed Internet and traditional voice connectivity over the same connection. In addition, our businesses have further enhanced our networks to allow the offering of video services over the same facilities that provide our customers with voice and Internet access. This technology is available to approximately 89%95% of our access lines.

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We compete as a CLEC in the cities of Redwood Falls, Litchfield and Glencoe, Minnesota. CenturyLinkThis communications company is currently not under the same level of regulatory oversight as our communications companies. Lumen Technologies is the existing ILECcommunications company in these markets. Competition also exists in the other communities and areas served by our businessesus for traditional telephone service from wireless communications providers and we also expect competition to increase from service providers offering VoIP. We experience competition in the Minnesota communities of Elko, Glencoe, Hutchinson, Litchfield, New Market, New Ulm, Prior Lake, Redwood Falls, Savage, Sleepy Eye and Springfield in the provisioning of video services. Comcast is the existing incumbent provider of video services in the New Ulm market. Mediacom is the existing incumbent provider of video services in the Elko, Hutchinson, Litchfield, New Market, Prior Lake, Redwood Falls, Savage, Sleepy Eye and Springfield markets. Several other communications providers compete with us in our markets in providing Internet services. Our businessesWe have responded to these competitive pressures by creating active programs to market our products, bundle our services and enhance our infrastructure to create higher customer value.  

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We are experiencing competition for some of our other services from IXCs, such as customer billing services, dedicated private lines and network switching. The provisioning of these services is contractual in nature and is primarily directed by the IXCs. Other services, such as directory advertising, operator services and cellular communications are open to competition, based primarily on service and customer experience.

Materials and Supplies

The materials and supplies that are necessary for the operation of our businessesoperations are available from a variety of sources. We are not dependent on any particular supplier or group of affiliated suppliers for our equipment needs.

Regulation

The following summary provides a high-level overview, but may not include all present and proposed federal, state and local legislation and regulations affecting the telecommunicationscommunications industry. Some legislation and other regulations are currently the subject of judicial proceedings, legislative hearings and administrative proposals that could change the manner in which this industry operates. At this time, we cannot predict the outcome of any of these developments or their potential impact on us. Regulation can change rapidly in the telecommunicationscommunications industry and these changes could have an adverse effect on us in the future.

Overview

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), rules and regulations of the SEC and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities.

The services we offer are subject to varying levels of regulatory oversight. Federal and state regulatory agencies share responsibility for enforcing statutes and rules relative to the provision of communications services. Our interstate telecommunicationscommunications services are subject to regulation by the FCC. Intrastate services are governed by the relevant state regulatory commission. The Telecommunications Act of 1996 (TA96) and the rules enacted under it also gave oversight of interconnection arrangements and access to network elements to the state commissions. Our TV services are governed by FCC rules and municipal franchise agreements. There are also varying levels of regulatory oversight depending on the nature of the services offered or if the services are offered by an ILEC or CLEC.a communications company.

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Our CLEC businesses providecommunications company located in Litchfield and Glencoe provides services with less regulatory oversight than our ILECcommunications companies. A company must file for CLEC or interexchange authority to operate with the appropriate public utility commission in each state it serves. Our CLECs providecommunications company located in Litchfield and Glencoe provides a variety of services to both residential and business customers in multiple jurisdictions.

Federal Regulatory Framework

All carriers must comply with the Federal CommunicationsFCC Act of 1934 (FCA34) as amended that requires, among other things, that our interstate services be provided at just and reasonable rates and on non-discriminatory terms and conditions. The TA96 amended the FCA34 and has had a dramatic effect on the competitive environment in the telecommunicationscommunications industry. In addition to these laws, we are also subject to rules promulgated by the FCC and could be affected by any regulatory decisions or orders they issue.

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The TA96 and Local Competition

The primary goal of the TA96 and the FCC’s rules promulgated under it was to open local telecommunicationscommunications markets to competition while enhancing universal service. To some extent, Congress pre-empted the local authority of states to oversee local telecommunicationscommunications services.

The TA96 imposes a number of requirements on all local telecommunicationscommunications providers including:

·         ●To interconnect directly or indirectly with other carriers; 

·         ●To allow others to resell services;

·         ●To provide for number portability to allow end-users to retain their telephone number when changing providers;

·         ●To ensure dialing parity;

·         ●To ensure that competitor customers have non-discriminatory access to telephone numbers, operator services, directory assistance and directory listing services; and

·         ●To allow competitors access to telephone poles, ducts, conduits and rights-of-way, and to establish reciprocal compensation arrangements for the transport and termination of telecommunicationscommunications traffic.

Access Charges

Access charges refer to the compensation received by local exchange carriers (LECs) for the use of their networks by an IXC. We provide two types of access services: special access and switched access. Special access is provided through dedicated circuits that connect other carriers to our network and is structured on a flat monthly fee basis. Switched access rates that are billed to other carriers are based on a per-minute of use fee basis. The FCC regulates prices that our businesseswe charge for interstate access charges. There has been a trend toward lowering the rates charged to carriers accessing local networks and the application of a SLC as a flat rate on end-user bills. Regulation, competition, carriers optimizing their network costs and lower demand for dedicated lines have resulted in lower access rates and overall lower minutes of use on our network, which has affected our network access revenues.  

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Interstate access rates are established by the nationwide pooling of companies known as the National Exchange Carriers Association (NECA).NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms and conditions. Revenues are pooled and redistributed on the basis of each company’s actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by IXCs. We believe this trend will continue. 

Each of our ILECs determined interstate access charges under rate of return regulation, whereby they earned a fixed return over and above operating costs. The specific process of setting interstateIntrastate access rates was governed by FCC rules, which applies only to service providersare filed with fewer than 50,000 lines. Three of our ILECs (HTC, PTC and WTC) utilized an average schedule process and the concept of pooling with other ILECsregulatory commissions in NECA to arrive at rates and fair compensation. Our other two ILECs (New Ulm and SETC) arrived at their interstate rates through a study of their own individual interstate costs. Minnesota and Iowa utility commissions regulated the intrastate access rates for all five of our ILECs in their respective states.Iowa.

Wireline Interstate

Our ILECcommunications companies participated in the NECA common line pool where end-user common line funds collected were pooled. A portion of our ILECcommunications companies’ revenue was based on settlements distributed from this pool. Our ILECcommunications companies also participated in the NECA traffic-sensitive pool. These pool settlements were adjusted periodically.

Interstate accessAccess rates for CLECsour communications company located in Litchfield and Glencoe were established according to an order issued by the FCC in 2001. Under that order, the switched access rates charged by a competitive carrier can be no higher than the rates charged by the ILECcommunications company with whom the CLEC competes,we compete, unless the CLEC qualifieswe qualify for the Rural Exemption.

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Intercarrier Compensation and (FUSF)FUSF Reform 

The FCC released the National Broadband Plan in April 2010 recommending significant changes to the access charge policy and processes. This was followed on November 18, 2011, by FCC Order 11-161 (the Transformation Order), with comprehensive rules reforming all forms of intercarrier compensation and implementing a new support mechanism for the deployment of broadband. Generally, the intercarrier compensation reform sets forth a path towards a “bill & keep” regime which eliminates compensation for termination of traffic received from another carrier. The timeline for this transition had numerous steps depending on the type of traffic exchanged and the regulated status of the affected LEC.    

These rules have been clarified in several orders on Reconsideration and have had an impact on our companies by reducing our terminating intercarrier compensation, including intrastate and interstate access charges.  

The FCC Transformation Order also confirmed the applicability of access charges on VoIP traffic and eliminated reciprocal compensation charges for termination of local wireless traffic. Despite these changes IXCs and others are still quite aggressive in disputing carrier access charges and/or the applicability of access charges to their traffic.

Due to the combination of rate reforms instituted by the FCC, competitive substitution by wireless and other carriers and decreased use of the switched network, the aggregate amount of interstate network access charges paid by long distance carriers to access providers such as our company, has decreased and we project that this decline will continue. For the year ended December 31, 2017, Telecom2020, communications network access revenue represented 17.7%9.4% of our operating revenue, down from 25.9%11.7% for the year ended December 31, 2016.2019. This excludes any funding received from FUSF and the A-CAM for broadband funding (see page 14below for more information).

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Universal Service

FUSF

The FUSF was originally established to overcome geographic differences in costs of providing voice service and to enable all citizens to communicate over networks regardless of geographical location and/or personal income. The FCC established universal service policies at the national level under terms contained in the Telecommunications Act of 1934. The TA96 requires explicit FUSF mechanisms and enlarged the scope of universal service to include four distinct programs:

·       ●High-Cost program that supports local carriers operating in high-cost regions of the country to ensure reasonably based telephone rates;  

·       ●Lifeline (low-income) Subscribers program that includes the Link Up and Lifeline programs that provide support for service initiation and monthly fees and have eligibility based on subscriber income;

·       ●Rural Health Care Providers program that supports telecommunicationcommunication services used by rural health care providers and provides them with toll free access to an Internet service provider; and

·       ●Schools and Libraries program, also called the E-Rate program that provides support funding to schools and libraries for telecommunicationscommunications services, Internet access and internal connections.

In its Transformation Order released November 18, 2011, the FCC adopted rules which dramatically reform the universal service program and intercarrier compensation regime. These rules eliminated the legacy Local Switching support, but also provide for a new Connect America Fund (CAF) support for rate of return carriers to make up some of their access revenue reductions and provide direct support to PriceCap carriers (i.e. the larger, national LECs such as Verizon and AT&T) for broadband build outs. The new rules have caused rates for end users to increase as intercarrier compensation is reduced and the legacy mandate for ubiquitous voice service shifts toward broadband availability as a key outcome of the program. 

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FUSF high-cost payments are distributed by NECA and are only available to carriers that have been designated as an eligible telecommunications carrier (ETC) by a state commission. Each of our ILECscommunications companies has been designated as an ETC. CLECs areOur communications company located in Litchfield and Glencoe is also eligible to be designated as ETCs if they meetit meets the requirements of the program and meet a public interest standard as determined by the appropriate state regulatory agency. Our CLECs arecommunications company located in Litchfield and Glencoe is currently not receiving FUSF support. All ETCs must certify annually to the Universal Service Administrative Company or their appropriate state regulatory commission that the funds they receive from the FUSF are being used in the manner intended. The states must then certify to the FCC which carriers have met this standard. The Transformation Order expands the information that must be reported to the State Commissions to include information on broadband availability, plans for expansion to unserved and underserved areas, in addition to information about voice services. To some extent, these levels of scrutiny make the receipt of a consistent level of FUSF payments each year more difficult to predict.   

For the year ended December 31, 2017,2020, we received an aggregate of $1,434,439$3,135,119 from FUSF, consisting of $1,474,388$1,700,248 of CAF support and consisting$1,345,316 of $3,136 for a combination of high cost loop support and safety net additive.  In addition, we were assessed $43,085 in trueups to prior year disbursements from the Federal common line support funding mechanism.Broadband Loop Support. Our net FUSF in 20172020 comprised 3.1%4.8% of our total revenue for the year. For the year ended December 31, 2016,2019, we received an aggregate of $3,634,555$3,212,066 from FUSF, consisting of $40,244 for a combination$1,696,443 of high cost loopCAF support and safety net additive, $1,925,483$1,498,644 of Federal common line support and $1,668,828 of CAF support.Broadband Loop Support.  Our net FUSF in 20162019 comprised 8.6%4.9% of our total revenue for the year. We receive no State universal service funding as the states in which we operate have not established state universal service funding mechanisms. 

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Effective January 1, 2017 we no longer receive funding fromIn 2019, the FUSF based on the pooling and redistribution of revenues based on a company’s actual or average costs as described above, but has instead,Company elected to receive funding based onfrom A-CAM, with the A-CAM as described below.exception of Scott-Rice, which still receives funding from the FUSF.  

A-CAM

The FUSF was established as part of the TA96 and provides subsidies to telecommunicationscommunications providers as means of increasing the availability and affordability of advanced telecommunicationscommunications services. In 2011, significant reform was introduced, including the creation of the CAF, to help modernize the FUSF and promote support of these telecomcommunications services in the nation’s high-cost areas. In 2016, the FCC announced additional reform to further transition the CAF from supporting the provision of voice services to the provision of broadband services. On March 30, 2016, the FCC issued a Report and Order (2016 Order) that adopts the following changes to the FUSF for rate-of-return carriers:

·         ●Establishes a voluntary cost model;

·         ●Creates specific broadband deployment obligations; 

·         ●Provides a mechanism for support of broadband-only deployment; 

·         ●Gradually reduces the authorized rate-of-return from 11.25 percent to 9.75 percent;

·         ●Eliminates support in those local areas served by unsubsidized competitors;

·         ●Establishes “glide-path” transition periods for all the new changes; and

·         ●Maintains the $2 billion budget established by the 2011 Transformation Order.

While the 2011 FUSF Transformation Order established CAF Phase I and CAF Phase II as high-cost support mechanisms for the price-cap carriers (i.e., the larger, national LECs such as Verizon and AT&T), it was not as specific about how subsidies would change for the rate-of-return carriers (i.e., the smaller LECs, including all rural LECs). In contrast, the 2016 Order focusesfocused on the rate-of-return carriers, announcesannounced specific changes to existing funding mechanisms as well as a new funding mechanism, and providesprovided rural telecommunicationscommunications providers with greater certainty about future support.

One of the major changes introduced by the 2016 Order iswas the creation of the A-CAM, a new CAF support mechanism for rate-of-return carriers. Utilization of the A-CAM iswas voluntary; and rate-of-return carriers may have instead choosechose to continue relying on the legacy support mechanism known as interstate common line support, (ICLS), but nowthen modified and renamed CAF Broadband Loop Support (CAF-BLS).Support. Each carrier mustneeded to decide which support mechanism to elect, and must choosehave chosen one or the other, per state.

In our Form 10-Q forOn February 25, 2019, the quarter ended September 30, 2016, NU Telecom disclosed that we had elected the A-CAM for our Minnesota and Iowa operations, replacing our former ICLS. NU Telecom will receiveFCC issued Public Notice DA 19-115, which contained revised offers of A-CAM support for a periodand associated revised service deployment obligations. On February 27, 2019, the Company’s BOD authorized and directed the Company to accept the FCC’s revised offer of ten years in exchange for meeting defined broadband build-out requirements. AtA-CAM support and the time of NU Telecom’s election, the FCC had not yet determined the final award numbers.

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Consistent with the stated disclosure in our Form 10-Q, NU Telecom notified the FCC that we would continue to elect the A-CAM program.revised associated service deployment obligations. Under the report that accompaniedrevised FCC offer Notice, the FCC December 20, 2016 Public Notice, NU-Telecom wouldCompany will be entitled to annually receive (i) $391,896$596,084 for ourits Iowa operations and (ii) $6,118,567$8,354,481 for ourits Minnesota operations. The Company will receive the revised A-CAM offer over the next 10 years starting in 2019. The Company will use the annual $6.5 millionsupport that we receiveit receives through the A-CAM program to meet ourits defined broadband build-out obligations.obligations, which the Company is currently completing. A letter of acceptance to elect the revised A-CAM support was filed by the Company with the FCC on March 8, 2019. The A-CAM payments will replaceFCC accepted the Company’s former ICLS payments. In 2016 NU Telecom received $1,965,727letter on March 11, 2019. 

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Build-out obligations: A-CAM carriers under the former ICLS program.original A-CAM program must complete deployment of 10 Mbps downstream/1 Mbps upstream service to a number of eligible locations equal to 40 percent of fully funded locations by the end of 2020, to 50 percent of fully funded locations by the end of 2021, to 60 percent of fully funded locations by the end of 2022, to 70 percent of fully funded locations by the end of 2023, to 80 percent of fully funded locations by the end of 2024, to 90 percent of fully funded locations by the end of 2025, and to 100 percent of fully funded locations by the end of 2026.  A-CAM carriers who elected additional funding and additional obligations under the revised A-CAM program must complete deployment of 25 Mbps downstream/3 Mbps upstream service to a number of eligible locations equal to 40 percent of fully funded locations by the end of 2022, to 50 percent of fully funded locations by the end of 2023, to 60 percent of fully funded locations by the end of 2024, to 70 percent of fully funded locations by the end of 2025, to 80 percent of fully funded locations by the end of 2026, to 90 percent of fully funded locations by the end of 2027, and to 100 percent of fully funded locations by the end of 2028. As of December 31, 2020, Nuvera has completed the deployment of 10/1 service to 91.9% of its funded locations and 25/3 service to 50.3% of its funded locations.  

Privacy and Data Security Regulation

The FCA34 generally restricts the nonconsensual collection and disclosure to third parties of telecommunicationcommunication company customers’ personally identifiable information by telecommunicationcommunication companies, except for rendering service, conducting legitimate business activities related to the service, and responding to legal requests. We are also subject to various state and federal regulations that provide protections for customer proprietary network information (CPNI) related to our voice services. The FCC expects broadband Internet access service providers such as us to take reasonable, good faith steps to comply with existing statutory requirements to protect broadband CPNI and plans to propose new privacy and data security rules for broadband Internet service providers. The FCC has recently imposed substantial civil penalties and remediation obligations on several companies for alleged privacy and data security violations.

The Federal Trade Commission exercises authority over privacy protections, generally, using its existing authority over unfair and deceptive acts or practices to apply greater restrictions on the collection and use of personally identifiable and other information relating to customers. It also has undertaken numerous enforcement actions against parties that do not provide sufficient security protections against the loss of unauthorized disclosure of this type of information. We also are subject to stringent data security and data retention requirements on website operators and online services. Other privacy-oriented laws have been extended by courts to online video providers and are increasingly being used in privacy lawsuits, including class actions, against providers of video materials online.

We are also subject to state and federal laws and regulations regarding data security that primarily apply to sensitive personal information that could be used to commit identity theft. Most states have security breach notification laws that generally require a business to give notice to consumers and government agencies when certain information has been disclosed, due to a security breach, and the FCC has adopted security breach rules for voice services. Several states have also enacted general data security requirements to safeguard consumer information, including the proper disposal of consumer information.

The National Institute of Standards and Technology, in cooperation with other federal agencies and owners and operators of United States critical infrastructure, have developed a voluntary framework that provides a prioritized, flexible, repeatable, performance-based and cost-effective approach to cybersecurity risk. It is compendiums of existing cross-sector cyber-defense processes, practices and protocols that can help companies identify, assess and manage their cyber risks and vulnerabilities, and several governmental agencies have encouraged compliance with this framework. Additionally, in December 2015, Congress enacted the Cybersecurity Act of 2015, which is intended to encourage and facilitate the sharing of security threat and defensive measure information with government agencies and other companies, in order to strengthen the country’s overall cybersecurity protections. Finally, there are pending legislative proposals that could impose new requirements on owners and operators of critical infrastructure and the FCC is considering expanding its cybersecurity guidelines or adopting new cybersecurity requirements.    

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Network Architecture and Technology

We have made significant investments in our technologically advanced telecommunicationscommunications networks and continue to enhance and expand our network by deploying technologies to provide additional capacity to our customers. As a result, we are able to deliver high-quality, reliable data, video and voice services in the markets we serve. Our wide-ranging network and extensive use of fiber provide an easy reach into existing and new areas. By bringing the fiber network closer to the customer premises, we can increase our service offerings, quality and bandwidth services. Our existing network enables us to efficiently respond and adapt to changes in technology and is capable of supporting the rising customer demand for bandwidth in order to support the growing amount of wireless data devices in our customer’s homes and businesses.

Our networks are supported by advanced 100% digital switches, with a core fiber network connecting all of our remote exchanges. We continue to enhance our copper cable network to increase bandwidth in order to provide additional products and services to our marketable homes. In addition to our copper cable plant enhancements, we have deployed fiber-opticfiber cable extensively throughout our network, resulting in a 100% fiber backbone network that supports all of the inter-office and host-remote links.links, as well as the majority of business parks within our service areas. In addition, this fiber infrastructure provides the connectivity required to provide video service, Internetbroadband and long-distance services to our residential and commercial customers. Our fiber network utilizes fiber-to-the-homeFTTH and fiber-to-the-node networks to offer bundled residential and commercial services.

We operate fiber networks which we own or have entered into long-term leases for fiber network access. At December 31, 2017,2020, our fiber-opticfiber network consisted of approximately 1,4011,764 route miles, including 824875 transport route miles and 577889 local route miles.

We intend to continue to make strategic enhancements to our network including improvements in overall network reliability and increases to our broadband speeds. We offer data speeds of up to 1 Gbps in select markets, and up to 60 Mbps in markets where 1 Gbps is not yet available, depending on the geographical region. Over the last two years, we upgraded broadband speeds to nearly 1,500 homes and small businesses primarily across Minnesota and 36 homes and small businesses in Iowa as part of our A-CAM and overbuild initiatives and since 2015 expanded the availability of our 1 Gbps fiber network in Border-to-Border fiber grant areas to nearly 1,000 homes and small businesses. 

Through our extensive fiber network, we are also able to support the increased demand on wireless carriers for data bandwidth. In all the markets we serve, we have launched initiatives to support fiber backhaul services to cell sites. As of December 31, 2020, we had 20 cell sites in service and an additional 13 future sites pending completion. We also provide fixed wireless broadband service to homes and small businesses from 41 towers, six of which utilized Citizens Broadband Radio Service (CBRS) spectrum. Having secured 21 licenses in 12 CBRS spectrum counties in Minnesota and Iowa for 10 years, we plan to add more than 10 towers in 2021 and additional towers beyond 2021. This allows us to offer high-speed Internet to unserved, under-served and hard to serve rural areas.

Environmental Regulation

We are subject to federal, state and local laws and regulations governing the use, storage, disposal of, and exposure to, hazardous materials, the release of pollutants into the environment and the remediation of contamination. We could be subject to environmental laws that impose liability for the entire cost of cleanup at a contaminated site, regardless of fault or the lawfulness of the activity that resulted in contamination. We believe that our operations are in compliance with all applicable environmental laws and regulations.

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Employees

As of March 1, 20182021 we had 134194 full-time equivalent employees dedicated to NU TelecomNuvera’s operations. In addition, as of March 1, 20182021 we had an additional 1210 full-time equivalent employees that are employed by NU TelecomNuvera but are dedicated to IES. IES is a minority equity subsidiary of NU TelecomNuvera and NU TelecomNuvera acts as the managing entity for IES.

Intellectual Property

We have trademarks, trade names and licenses that we believe areIntellectual property is necessary for the operation of our business as we currently conduct it. We dooperations but is not consider our trademarks, trade names or licenses to be material to the operation of our business.

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Executive Officers of the Registrant

The names and ages of all our executive officers and the positions held by them as of March 1, 2018,2021, are as follows:

Our executive officers are appointed annually and serve at the discretion of our Board of Directors.BOD. Mr. Otis,Zerbe, President and Chief Executive Officer;CEO; Ms. Bornhoft, Vice-President, Chief Operating OfficerCOO and Corporate Secretary; and Mr. Kawlewski, Chief Financial OfficerCFO and Treasurer have written employment contracts. There are no familial relationships between any director and executive officers.

Mr. OtisZerbe has been President and Chief Executive OfficerCEO since 1985.September of 2019. Prior to that time, he wasserved as Vice President of Sales for Frontier Communications Corporation until March 2019, where he held positions of increasing responsibility since joining Frontier in 2011. Prior to his employment with Frontier, Mr. Zerbe had more than 20 years of sales, marketing and management experience in the Office Manager/Controller from 1979 to 1985.communications industry, with companies such as Spanlink, Cisco Systems, SBC, AT&T and IBM. Mr. OtisZerbe serves as Chairman of the Board for SMB, IES and BBV, all equity subsidiaries of ours. In addition, Mr. Otis sitsZerbe serves on the Board of Governors of SMB and FiberComm, LC, also an equity subsidiarysubsidiaries of ours.

Ms. Bornhoft has been Vice President, Chief Operating OfficerCOO and Corporate Secretary since 1998. Ms. Bornhoft has been employed with usthe Company since 1990. Ms. Bornhoft serves as a board member for BBV, in addition to serving as President for both IES and BBV, allboth equity subsidiaries of ours.

Mr. Kawlewski has been Chief Financial OfficerCFO and Treasurer since 2009. Mr. Kawlewski also serves as the Treasurer for IES and BBV, allboth equity subsidiaries of ours.

Mr. Anderson has been the Chief Business Development Officer since 2017.

Item 1A.          Risk Factors.Factors.

Not required for a smaller reporting company.

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Item 1B.  Unresolved Staff Comments

Not required for a smaller reporting company.

Item 2.   Properties

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Our business isWe are primarily focused on the provision of communication services and our properties are used primarily for administrative support and to house and safeguard our operating equipment. On December 31, 2017,2020, our gross property, plant and equipment totaled $155,825,178$208,864,278 (net balance of $41,949,833)$70,478,650).

Our corporate headquarters are located at 27 North Minnesota Street, New Ulm, Minnesota. We also own office facilities and related equipment for administrative personnel, central office buildings and operations in Minnesota and Iowa.

In addition to land and structures, our property consists of equipment necessary for the provision of communication services including central office equipment, CPE and connections, pole lines, towers, remote terminals, aerial and underground cable and wire facilities and associated outside plant for use in providing our services, telephone switches, fiber-opticfiber networks and communications network equipment, vehicles, furniture and fixtures, computers and other equipment. Our extensive fiber-optic network is primarily owned by us, but we also have indefeasible rights to use and long-term leasing commitments to complement our owned network. We also own various communications equipment that we lease to subscribers.

In addition to plant and equipment we wholly-own, we utilize poles, towers, cable and conduit systems jointly-owned with other entities and lease space on facilities tofrom other entities. These arrangements are in accordance with written agreements customary in the industry. We also have appropriate easements, rights of way and other arrangements for the accommodation of our pole lines, underground conduits, aerial and underground cables and wires. 

We believe our properties are suitable and adequate to provide modern and effective communications services within our service areas, including local dial-tone, long distance service, broadband, TV and dedicated and switched long-haul transport. We also believe our properties and equipment are adequately insured. See Note 47 – “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K for descriptions of the mortgages and collateral relating to the above referenced properties. See Note 1 – “Summary“Business Description and Summary Of Significant Accounting Policies” and Note 25 – “Property, Plant and Equipment” to the Consolidated Financial Statements of this Annual Report on Form 10-K for a description of our depreciation policies and information relating to the above referenced properties and equipment and their respective depreciation.

Item 3.   Legal Proceedings

Other than routine litigation incidental to our business,us, there are no pending material legal proceedings to which we are a party or to which any of our property is subject.  

Item 4.   Mine Safety Disclosures

Not Applicable.

PART II

Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is quoted on the OTCQB Marketplace under the symbol "NULM."NUVR." As of March 1, 20182021 there were 1,3351,259 registered stockholders and approximately 617953 beneficial owners of NU TelecomNuvera stock. The following table sets forth the end-of-day high and low prices for our common stock quoted on the OTCQB Marketplace during 2017 and 2016. The OTCQB Marketplace quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily reflect actual transactions.

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The Company’s Articles of Incorporation restrict any one individual or entity from beneficially owning more than seven percent of the outstanding capital stock of the corporation. Specific details of this restriction are contained in Article III of the Company’s Articles of Incorporation.  

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Issuer Purchases of Equity Securities

Repurchases of Nuvera common stock are made to support the Company’s stock-based employee compensation plans and for other corporate purposes. In May 2019, Nuvera announced the adoption of a $4.0 million stock repurchase program running through the end of 2021. Under the stock repurchase program, repurchases can be made from time to time using a variety of methods, including through open market purchase or in privately negotiated transactions in compliance with the rules of the SEC and other applicable legal requirements.

Issuer Purchases of Equity Securities (registered pursuant to Section 12 of the Exchange Act)

Dividends and Restrictions

On May 6, 2020, the Company’s BOD decided that, given the continuing uncertainty about the severity and duration of the Coronavirus (COVID-19) pandemic and its potential effect on the country’s economy generally and on the Company’s future sales and profitability specifically, as well as the Company’s need to preserve its liquidity and capital resources, the Company would (i) suspend declaring and paying a dividend in the second quarter of 2020 and (ii) temporarily suspend future purchases under its Stock Repurchase Program.   

On August 25, 2020, the Company’s BOD determined that it would (i) continue to suspend declaring and paying a dividend in the third quarter of 2020 and (ii) continue to temporarily suspend future purchases under its Stock Repurchase Program. The Company will continue to monitor the COVID-19 pandemic and make decisions about future dividends and stock repurchases as more information becomes available.   

On November 30, 2020, the Company’s BOD determined that it would (i) declare and pay a dividend in the fourth quarter of 2020 and (ii) resume purchases under its Stock Repurchase Program. The Company announced that it had successfully adjusted its operations including securing sufficient operating funds during a time of market uncertainty and can now look forward to recovering with the nation and return as an even stronger company and community in 2021.     

We declared a quarterly dividend of $0.10$0.13 per share for the first and fourth quarters of 2020, which totaled $674,171 for the first quarter and $675,883 for the fourth quarter. We declared a quarterly dividend of $0.13 per share for the second, third and fourth quarters of 20172019 and $0.095$0.12 per share for the first quarter of 2017,2019, which totaled $516,007$674,092 per quarter for the third and fourth quarters, $515,636$674,805 for the second quarter and $488,242 for the first quarter. We declared a quarterly dividend of $0.09 per share for the second, third and fourth quarters of 2016 and $0.0875 per share for the first quarter of 2016, which totaled $462,544 per quarter for the second, third and fourth quarters and $447,724$621,031 for the first quarter. A quarterly cash dividend of $0.10$0.13 per share will be paid on March 15, 20182021 to stockholders of record at the close of business on March 5, 2018.2021.

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We expect to continue to pay quarterly dividends during 2018,2021, but only if and to the extent declared by our Board of DirectorsBOD on a quarterly basis and subject to various restrictions on our ability to do so (described below). Dividends on our common stock are not cumulative.

There are security and loan agreements underlying our current CoBank, ACB (CoBank) credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. See below and Note 47 – “Long-Term Debt” to the Consolidated Financial Statements of this Annual Report on Form 10-K for additional information.

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,100,000$2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents), is greater than 2.502.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.502.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements. On MarchDecember 31, 20162020 our Total Leverage Ratio fell below 2.50,2.00, thus eliminating any restrictions on our ability to pay cash dividends to our stockholders. Our current Total Leverage Ratio at December 31, 20172020 is 1.47.  1.92.   

Our Board of DirectorsBOD reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions. The cash requirements of our current dividend payment practices are in addition to our other expected cash needs. Should our Board of DirectorsBOD determine a dividend will be declared, we expect we will have sufficient availability from our current cash flows from operations to fund our existing cash needs and the payment of our dividends. In addition, we expect we will have sufficient availability under our revolving credit facility to fund dividend payments in addition to any fluctuations in working capital and other cash needs.

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Item 6.   Selected Financial Data

Not required for a smaller reporting company.

Item 7.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our historical financial statements and the related notes contained elsewhere in this report.

Overview

NU TelecomNuvera has a state-of-the-art; fiber-rich communications network and offers a diverse array of communications products and services. Our businessesWe provide local telephone service and network access to other telecommunicationscommunications carriers for connections to our networks. In addition, we provide long distance service, broadband Internet access, video services, and managed and hosted solutions services.

Our operations consist primarily of providing services to customers for a monthly charge. Because many of these services are recurring in nature, backlog orders and seasonality are not significant factors. Our working capital requirements include financing the construction of our networks, which consists of switches and cable, data, IP and digital TV.networks. We also require capital to maintain our networks and infrastructure; fund the payroll costs of our highly skilled labor force; maintain inventory to service capital projects, our network and our telephone equipment customers; pay dividends and provide for the carrying value of trade accounts receivable, some of which may take several months to collect in the normal course of business.

Executive SummaryImpact of COVID-19 on Our Business

Highlights:

·       Effective January 1, 2017Through year-end of 2020, the Company no longer receives funding from the FUSFCOVID-19 pandemic has had significant impacts on our business. We continue to operate with some modifications because, based on the poolingvarious published standards to date, the work our employees are performing, particularly with respect to providing communication services required by our customers is critical, essential and redistributionlife-sustaining.

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Table of revenues basedContents

We took actions intended to protect our employees and our customers that adversely affected our results.

●First, we restricted public access to our offices and halted all customer in-location service installations and performed those installations remotely, which resulted in lower sales and installations through the third quarter of 2020. Many of our locations have re-opened to the public but with restrictions which has caused lower customer traffic and lower sales;

●Second, many of our customers either closed their locations or operated at significantly diminished capacity as a result of local and national actions taken, such as stay-at-home mandates that reduced business activity, which negatively impacted sales and increased our customer churn for our legacy voice and video products;

●Third, the COVID-19 pandemic has increased traffic on our networks as the State of Minnesota had issued executive orders requiring remote-learning for schools, the shutdown of non-essential businesses and a work-from home order for many workers in multiple industries;

●Fourth, although we have seen an increase in customers for our internet product including increased demand for higher bandwidth speeds that increase has not been able to offset the loss in customers we have experienced in our legacy voice and video products. We also expect that due to the number of job losses due to the COVID-19 pandemic that a number of our customers may have difficulty in paying for their existing services which will affect our ability to ultimately collect from and retain those customers; and

●Fifth, social actions taken to mitigate the effects of the pandemic produced increased costs for us through significant demand for personal protection equipment and sanitation products to protect our employees and customers.

In the second and third quarters of 2020 many of the markets in which we operate had begun to ease restrictions that were in place earlier in the period. This had two effects.

●The first was to improve the outlook in the sales and installation of our internet products; and

●The second was that the increased traffic on our networks has somewhat eased as we had made substantial investments in 2020 to accommodate the increased traffic we had seen on our networks due to the pandemic.

In the fourth quarter of 2020 viral infections had begun to increase again and the State of Minnesota issued an order to shut down a number of businesses in the state and has also implemented a mandatory mask requirement for all state residents. Subsequently, in early 2021, the State of Minnesota had reopened a number of businesses on a company’s actuallimited basis. As a result, there remains significant uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic. Factors deriving from the COVID-19 response that have or average costs,may negatively impact sales and gross margins in the future include, but has instead, elected to receive funding basedare not limited to: limitations on the A-CAM. See page 14ability of our suppliers and content providers to manufacture, or procure from manufactures, the products and services we sell, or to meet delivery and installation requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of carriers to deliver our products or our inability to install our products; limitations on the ability of our customers to conduct business and purchase our products and services; and limitations on the ability of our customers to pay us on a timely basis.

With respect to liquidity, we continue to evaluate and limit costs and spending across our organization. This includes limiting or eliminating discretionary spending and non-essential capital investment expenditures. As of the end of 2020, we have our entire $10M bank revolver available for use in the event that the need arises. We will continue to actively monitor the situation and may take further actions that alter our operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders.

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The full extent to which the COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect on our customers and customer demand for and ability to pay for our services; disruptions or restrictions on our employees’ ability to work and travel; interruptions or restrictions related to the provision of our services, including impacts on content delivery networks and; and any stoppages, disruptions or increased costs associated with our operations. During the COVID-19 crisis, we may not be able to provide the same level of customer service and product installation, that our customers are used to which could negatively impact their perception of our service resulting in an increase in service cancellations. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders.  While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we believe that it is important to share where our company stands today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses.

Executive Summary

Highlights:

●On April 16, 2020, Nuvera received a $2,889,000 loan under the Small Business Administration’s (SBA) Payroll Protection Program (PPP). The PPP is designed to provide a direct incentive for small businesses to keep their workers employed during the COVID-19 crisis. The SBA will forgive loans if all employees are kept on the payroll for a discussionrequired period under the program starting April 16, 2020 and the loan funds are used for payroll, rent and utilities. Nuvera has retained employment of all employees through this period and followed all the SBA rules regarding the A-CAM.this loan. The Company applied for debt forgiveness in August, 2020. See Note 20 – “Subsequent Events” for information regarding PPP loan forgiveness.

·       On December 1, 2015●In January 2020, the Company was awarded a broadband grant from the Minnesota State Department of Employment and Economic Development (DEED) announced NU Telecom as one of the companies that. The grant will receive state grants for broadband development. The State announced a total of $11 million in grants through the Border-to-Border Broadband Development Grant Program. The winners came out of a pool of 44 grant applicants requesting more than $29 million. NU Telecom wasprovide up to receive $115,934 of the $244,125, or 47.5%,36.5% of the total project costs to build fiber connections to 24 homes and businesses in an area northeastcost of Goodhue. NU Telecom completed the project in late 2016. At December 31, 2017 the Company has received $115,934 from this grant.

·       On January 12, 2017 the DEED announced NU Telecom as one of the companies that will receive state grants for broadband development. NU Telecom received three of the forty-two grants announced by Lieutenant Governor Tina Smith. A total of $34 million was awarded by DEED with the aim of providing reliable, affordable high-speed internet to more than 16,000 households, more than 2,000 businesses and more than 70 community institutions throughout the state. NU Telecom will receive $850,486 of the $1,889,968, or 45%, of the total project costs to buildbuilding fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the rural areasCompany’s service area. The Company is eligible to receive $730,000 of Hanskathe approximately $2,000,000 total project costs. The Company will provide the remaining 63.5% matching funds. Construction and Mazeppa and in and around Bellechester. Construction on one of theexpenditures for these projects began in the spring of 2017 and2020. We have not yet received any funds for these projects as of December 31, 2020.    

●On August 29, 2019, the constructionCompany entered into a second interest rate swap agreement (IRSA) with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank at August 29, 2019. The swap effectively locked in a significant portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the other two projects begandebt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

●On August 27, 2019, the Company announced that it had hired Glenn H. Zerbe as CEO of the Company effective Tuesday, September 3, 2019. Mr. Zerbe most recently served as Vice President of Sales for Frontier Communications Corporation, where he held positions of increasing responsibility since joining Frontier in 2011. Prior to his employment with Frontier, Mr. Zerbe had more than 20 years of sales, marketing and management experience in the summer of 2017. Grant funds will be received by NU Telecomcommunications industry, with companies such as work progressesSpanlink, Cisco Systems, SBC, AT&T and costs are provided to DEED. AtIBM. Mr. Zerbe replaced former CEO Bill D. Otis who announced his retirement on April 15, 2019. Mr. Otis’s actual retirement date was effective December 31, 2017 we had received $51,223.98 from this grant.     2019. Mr. Otis will continue to provide consulting services to ensure a smooth and successful leadership transition. Mr. Otis will also continue to serve on the BOD after the effective date of his retirement. The Company recognized approximately $1.06 million of one-time expenses associated with the transition of the new CEO and payments to a former executive officer in 2019.

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·       ●On November 24, 2017February 27, 2019, the DEED announced NU Telecom as oneCompany’s BOD authorized and directed the Company to accept the FCC’s revised offer of A-CAM support and the companies thatrevised associated service deployment obligations. Under the revised FCC offer Notice, the Company will be entitled to annually receive (i) $596,084 for its Iowa operations and (ii) $8,354,481 for its Minnesota operations. The Company will receive state grants forthe revised A-CAM offer over the next 10 years starting in 2019. The Company will use the additional support that it receives through the A-CAM program to continue to meet its defined broadband development. NU Telecom received twobuild-out obligations, which the Company is currently completing. A letter of acceptance to elect the thirty-nine grants announcedrevised A-CAM support was filed by Lieutenant Governor Tina Smith. A total of $26.4 million was awarded by DEEDthe Company with the aim of providing reliable, affordable high-speed internet to nearly 10,000 households, more than 2,000 businesses and more than 60 community institutions throughoutFCC on March 8, 2019. The FCC accepted the state. NU Telecom will receive $736,598 of the $1,727,998, or 42.6%, of the total project costs to build fiber connections to homes and businesses in the rural areas of Hanska and White Rock. ConstructionCompany’s letter on the projects is expected to begin in the spring of 2018. Grant funds will be received by NU Telecom as work progresses and costs are provided to DEED.    March 11, 2019.  

·       ●Net income in 20172020 totaled $9,954,236,$9,835,812, which was a $7,099,749,$1,505,833, or 248.7%18.1% increase compared to 2016.2019. This increase was primarily due to a reduction in our corporate taxes due to the revaluation of our deferred tax assetsdecreased operating expenses and liabilities, which was a result of the 2017 Tax Cuts and Jobs Act tax reform legislation. In addition, the net income also increased due to an increase in operating revenues,decreased interest expense, partially offset by an increase indecreased operating expenses,revenues and increased income taxes, all of which are described below.

·       ●Consolidated revenue for 20172020 totaled $46,889,181,$64,911,071, which was a $4,570,035 or 10.8% increase$30,270 decrease compared to 2016.2019. This increasedecrease was primarily due to an increasedecreases in our A-CAM funding support based on the Company’s election to receive funding under A-CAM (see page 14),network access and increased video and data revenues. These increases werevoice service revenue, partially offset by a decreaseincreases in local service, network access and other non-regulateddata revenues, all of which are described below.  

Business Trends

Included below is a synopsis of business trends management believes will continue to affect our businessus in 2018.2021.

Voice and switched access revenues are expected to continue to be adversely impacted by future declines in access lines due to competition in the telecommunicationscommunications industry from CATV providers, VoIP providers, wireless, other competitors, emerging technologies and emerging technologies.the on-going effects of COVID-19. As we experience access line losses, our switched access revenue will continue to decline consistent with industry-wide trends. A combination of changing minutes of use, carriers optimizing their network costs, and lower demand for dedicated lines and downward rate pressures may affect our future voice and switched access revenues. Access line decreaseslosses totaled 1,6021,880 or 6.8%8.53% in 20172020 compared to 20162019 due to the reasons mentioned above.

The expansion of our state-of-the-art; fiber-rich communications network, growth in broadband customer sales along with continued migration to higher connectivity speeds and the sales of Internet value-added services such as on-line data backup, and hosted and managed service solutions are expected to continue to offset the revenue declines from the access line trends discussed above.

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To be competitive, we continue to emphasize the bundling of our products and services. Our customers have the option to bundle local phone, high-speed Internet, long distance and video services. These bundles provide our customers with one convenient location to obtain all of their communications and entertainment options, a convenient billing solution and bundle discounts. We believe that product bundles positively impact our customer retention, and the associated discounts provide our customers the best value for their communications and entertainment options. We have a state-of-the-art, fiber-rich broadband network, which, along with the bundling of our voice, Internet and video services allows us to meet customer demands for products and services. We continue to focus on the research and deployment of advanced technological products that include broadband services, wireless services, private line, VoIP, digital video, IPTV and hosted and managed services.

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We continue to evaluate our operating structure to identify opportunities for increased operational efficiencies and effectiveness. This involves evaluating opportunities for task automation, network efficiency and the balancing of our workforce based on the current needs of our customers.

Financial results for the TelecomCommunications Segment for the years ended December 31, 20172020 and 20162019 are included below: