UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
      OF 1934

      For the quarterly period ended June 30, 2005.

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

      For the transition period from __________________ to _________________

                         Commission file number: 0-26525

                              BREDA TELEPHONE CORP.
        (Exact name of small business issuer as specified in its charter)

                  Iowa                                      42-0895882
     (State or other jurisdiction                        (I.R.S. Employer
   of incorporation or organization)                    Identification No.)

                  112 E. Main, P.O. Box 190, Breda, Iowa 51436
                    (Address of principal executive offices)

                                 (712) 673-2311
                          (Issuer's telephone number)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_|

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 31,048 shares of common stock,
no par value, at June 30, 2005.

    Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|

<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                           Breda Telephone Corporation
                                And Subsidiaries
                                    Breda, IA

                   Condensed Consolidated Financial Statements
                                 For the Periods
                          Ended June 30, 2005 and 2004
                      And the Year Ended December 31, 2004

<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         June 30,      December 31,
                                                                           2005            2004
                                                                       (Unaudited)
                                                                       -----------     ------------
<S>                                                                    <C>              <C>
                             ASSETS

CURRENT ASSETS
     Cash and cash equivalents                                         $ 1,024,552      $ 1,036,804
     Marketable securities                                                 319,307          232,645
     Accounts receivable                                                   697,809          656,036
     Interest receivable                                                    68,085           65,210
     Current portion of note receivable                                    144,000          144,000
     Inventory, at average cost                                             97,262          103,617
     Other                                                                  43,829           57,508
     Deferred income taxes                                                  55,637           49,143
                                                                       -----------      -----------
                                                                         2,450,481        2,344,963
                                                                       -----------      -----------

OTHER NONCURRENT ASSETS
     Marketable securities                                               5,715,562        5,417,170
     Investments in unconsolidated affiliates at equity                  4,969,098        4,679,772
     Other investments at cost                                             786,726          793,935
     Goodwill                                                              896,812          896,812
     Note receivable, less allowance of $172,974 in 2005 and 2004           78,333          121,577
                                                                       -----------      -----------
                                                                        12,446,531       11,909,266
                                                                       -----------      -----------

PROPERTY, PLANT AND EQUIPMENT                                            4,950,876        4,703,083
                                                                       -----------      -----------

TOTAL ASSETS                                                           $19,847,888      $18,957,312
                                                                       ===========      ===========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       2
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                            June 30,       December 31,
                                                                              2005             2004
                                                                           (Unaudited)
                                                                           -----------     ------------
<S>                                                                        <C>              <C>
                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Current portion of long-term debt                                     $   159,177      $   154,013
     Accounts payable                                                          645,748          272,507
     Accrued taxes                                                             319,182          198,969
     Other                                                                     115,016           78,019
                                                                           -----------      -----------
                                                                             1,239,123          703,508
                                                                           -----------      -----------

LONG-TERM DEBT, less current portion                                         1,398,547        1,479,448
                                                                           -----------      -----------

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES                              829,974          876,668
                                                                           -----------      -----------

STOCKHOLDERS' EQUITY
     Common stock - no par value, 5,000,000 shares authorized, 31,048
          and 31,170 shares issued and outstanding at $357 and $326
          stated values, respectively                                       11,084,136       10,161,420
     Retained earnings                                                       5,296,108        5,736,268
                                                                           -----------      -----------
                                                                            16,380,244       15,897,688
                                                                           -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                 $19,847,888      $18,957,312
                                                                           ===========      ===========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       3
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
                                                 For the Three Months Ended           For the Six Months Ended
                                                  2005               2004              2005             2004
                                               -----------       -----------       -----------       -----------
<S>                                            <C>               <C>               <C>               <C>
OPERATING REVENUES                             $ 1,703,508       $ 1,725,159       $ 3,660,274       $ 3,261,467
                                               -----------       -----------       -----------       -----------

OPERATING EXPENSES
     Cost of services                              817,979           684,645         1,686,640         1,335,193
     Depreciation and amortization                 220,590           258,658           465,616           500,430
     Selling, general, and administrative          501,527           432,701           991,661           922,851
                                               -----------       -----------       -----------       -----------
                                                 1,540,096         1,376,004         3,143,917         2,758,474
                                               -----------       -----------       -----------       -----------

OPERATING INCOME                                   163,412           349,155           516,357           502,993
                                               -----------       -----------       -----------       -----------

OTHER INCOME (EXPENSES)
     Interest and dividend income                  100,688           103,242           197,999           160,876
     Interest expense                              (29,325)          (32,018)          (59,340)          (64,682)
     Loss on note receivable                            --           (75,000)               --           (75,000)
     Income from equity investments                263,855           315,371           510,243           630,619
     Other, net                                    (13,299)           (7,432)          (16,461)          (10,565)
                                               -----------       -----------       -----------       -----------
                                                   321,919           304,163           632,441           641,248
                                               -----------       -----------       -----------       -----------

     INCOME BEFORE INCOME TAXES                    485,331           653,318         1,148,798         1,144,241
                                               -----------       -----------       -----------       -----------

     INCOME TAXES                                  166,084           247,313           404,498           409,645
                                               -----------       -----------       -----------       -----------

     NET INCOME                                $   319,247       $   406,005       $   744,300       $   734,596
                                               ===========       ===========       ===========       ===========

     INCOME PER COMMON SHARE                   $     10.26       $     12.93       $     23.89       $     23.34
                                               ===========       ===========       ===========       ===========
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       4
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                     Common Stock
                                            ------------------------------         Retained
                                               Shares            Amount            Earnings            Total
                                            ------------      ------------       -----------       ------------
<S>                                               <C>         <C>                <C>               <C>
Balance at December 31, 2003 (Audited)            31,694      $  9,603,282       $ 5,161,365       $ 14,764,647

     Comprehensive income:
        Net Income                                                                 1,393,675          1,393,675

     Dividends paid                                                                  (94,479)           (94,479)

     Common stock redeemed, net                     (524)         (166,155)                            (166,155)

     Stated value stock adjustment                                 724,293          (724,293)
                                            ------------      ------------       -----------       ------------

Balance at December 31, 2004 (Audited)            31,170        10,161,420         5,736,268         15,897,688

     Comprehensive income:
        Net Income                                                                   744,300            744,300

     Dividends paid                                                                 (218,190)          (218,190)

     Common stock redeemed, net                     (122)          (43,554)                             (43,554)

     Stated value stock adjustment                                 966,270          (966,270)
                                            ------------      ------------       -----------       ------------

Balance at June 30, 2005 (Unaudited)              31,048      $ 11,084,136       $ 5,296,108       $ 16,380,244
                                            ============      ============       ===========       ============
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       5
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                                                   2005              2004
                                                                                -----------       ---------
<S>                                                                             <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                 $   744,300       $ 734,596
     Adjustments to reconcile net income
      to cash provided by operating activities:
          Depreciation and amortization                                             465,616         500,430
          Deferred income taxes                                                     (50,383)         59,249
          Amortization of investment tax credits                                     (2,805)         (4,884)
          Amortization of investment premium/discount - net                          34,178          33,283
          Equity income in unconsolidated affiliates, net of distributions
           received of $557,634 and $198,978 in 2005 and 2004,
           respectively                                                              47,391        (431,632)
          Note receivable discount                                                   (3,473)         (5,764)
          Loss on impairment of note receivable                                          --          75,000
     Changes in assets and liabilities:
          (Increase) Decrease in assets                                             (24,614)          3,905
          Increase (Decrease) in liabilities                                        201,674         (23,374)
                                                                                -----------       ---------
          Net cash provided by operating activities                               1,411,884         940,809
                                                                                -----------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                                          (384,632)       (329,894)
     Purchase of investments                                                       (759,641)       (699,361)
     Purchase of equity investments                                                (290,000)             --
     Purchase of other investments - at cost                                             --             (43)
     Issuance of notes receivable                                                        --         (45,307)
     Proceeds from the sale of investments                                          340,409         180,585
     Proceeds from the sale of other investments - at cost                            7,209           6,749
     Repayment of notes receivable                                                       --          24,000
                                                                                -----------       ---------
          Net cash used in investing activities                                  (1,086,655)       (863,271)
                                                                                -----------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
     Repayment of long term debt                                                    (75,737)        (70,903)
     Common stock redeemed, net                                                     (43,554)       (155,071)
     Dividends paid                                                                (218,190)        (94,479)
                                                                                -----------       ---------
          Net cash used in financing activities                                 $  (337,481)      $(320,453)
                                                                                -----------       ---------
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       6
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2005 and 2004

<TABLE>
<CAPTION>
                                                              2005              2004
                                                          -----------       -----------
<S>                                                       <C>               <C>
Net Increase (Decrease) in Cash and Cash Equivalents      $   (12,252)      $  (242,915)

Cash and Cash Equivalents at Beginning of Period            1,036,804         1,205,550
                                                          -----------       -----------

Cash and Cash Equivalents at End of Period                $ 1,024,552       $   962,635
                                                          ===========       ===========

Supplemental Disclosures of Cash Flow Information
  Cash paid during the period for:
     Interest                                             $    59,340       $    64,682
     Income taxes                                         $   215,300       $   310,375
</TABLE>

         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.


                                       7
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

            In  the   opinion  of   management,   the   accompanying   condensed
            consolidated    financial   statements   contain   all   adjustments
            (consisting  of only normal  recurring  items)  necessary to present
            fairly the balance sheets and statements of stockholders'  equity as
            of June 30, 2005 and December 31, 2004 the  statements of income for
            the three  and six  months  ended  June 30,  2005 and 2004,  and the
            statements  of cash flows for the six months ended June 30, 2005 and
            2004.

            Certain  information and footnote  disclosures  normally included in
            annual financial  statements  prepared in accordance with accounting
            principles  generally  accepted in the United States of America have
            been  condensed  or omitted.  It is suggested  that these  financial
            statements be read in conjunction with the financial  statements and
            notes thereto  included in the  Company's  December 31, 2004 audited
            financial  statements.  The results of operations  for the three and
            six month period ended June 30, 2005 are not necessarily  indicative
            of the operating results of the entire year.

            Certain  reclassifications  have  been  made to the  2004  financial
            statements to conform with the 2005 presentations.

NOTE 2.     OPERATING SEGMENTS

            The Company  organizes its business into three reportable  segments:
            local  exchange  carrier  (LEC)  services,  broadcast  services  and
            internet service  provider (ISP) services.  The LEC services segment
            provides telephone, data services and other services to customers in
            local  exchanges.  The broadcast  services  segment  provides  cable
            television  services  to  customers  in Iowa and  Nebraska.  The ISP
            services  segment  provides  internet access to customers within the
            local exchanges and the surrounding areas.

            The Company's  reportable  business segments are strategic  business
            units that offer  different  products and services.  Each reportable
            segment  is  managed  separately   primarily  because  of  different
            products,  services and regulatory  environments.  LEC segments have
            been aggregated because of their similar characteristics.

            The segment's accounting policies are the same as those described in
            the summary of significant accounting policies.


                                       8
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.     OPERATING SEGMENTS (Continued)

<TABLE>
<CAPTION>
                                                      Local                             Internet
                 Six Months Ended                   Exchange                            Service
                  June 30, 2005                     Carrier          Broadcast          Provider             Total
                                                 ------------      ------------       ------------      ------------
<S>                                              <C>               <C>                <C>               <C>
Revenues
     External customers                          $  2,961,049      $    413,852       $    285,373      $  3,660,274
     Intersegment                                          --                --                 --                --
     Segment profit (loss)                            970,126           (96,821)          (129,005)          744,300

<CAPTION>
                                                    Local                               Internet
                 Six Months Ended                  Exchange                             Service
                   June 30, 2004                   Carrier           Broadcast          Provider           Total
                                                 ------------      ------------       ------------      ------------
<S>                                              <C>               <C>                <C>               <C>
Revenues
     External customers                          $  2,531,240      $    420,779       $    309,448      $  3,261,467
     Intersegment                                          --                --                 --                --
     Segment profit (loss)                            863,125          (113,740)           (14,789)          734,596

<CAPTION>
                                                     Local                             Internet
               Three months ended                  Exchange                             Service
                  June 30, 2005                     Carrier         Broadcast           Provider            Total
                                                 ------------      ------------       ------------      ------------
<S>                                              <C>               <C>                <C>               <C>
Revenues
     External customers                          $  1,352,890      $    207,280       $    143,338      $  1,703,508
     Intersegment                                          --                --                 --                --
     Segment profit (loss)                            491,117           (39,924)          (131,946)          319,247

<CAPTION>
                                                     Local                              Internet
               Three months ended                   Exchange                            Service
                  June 30, 2004                     Carrier          Broadcast          Provider           Total
                                                 ------------      ------------       ------------      ------------
<S>                                              <C>               <C>                <C>               <C>
Revenues
     External customers                          $  1,356,146      $    213,286       $    155,727      $  1,725,159
     Intersegment                                          --                --                 --                --
     Segment profit (loss)                            454,178           (51,569)             3,396           406,005

<CAPTION>
  Reconciliation of Segment Information               Three months ended                      Six Months Ended
                                                   June 30,          June 30,           June 30,          June 30,
                                                     2005               2004              2005              2004
                                                 ------------      ------------       ------------      ------------
<S>                                              <C>               <C>                <C>               <C>
REVENUES:
     Total revenues for reportable segments      $  1,703,508      $  1,725,159       $  3,660,274      $  3,261,467
     Other revenues                                        --                --                 --                --
                                                 ------------      ------------       ------------      ------------
               Consolidated Revenues             $  1,703,508      $  1,725,159       $  3,660,274      $  3,261,467
                                                 ============      ============       ============      ============

PROFIT:
     Total profit for reportable segments        $    319,247      $    406,005       $    744,300      $    734,596
     Other profit (loss)                                   --                --                 --                --
                                                 ------------      ------------       ------------      ------------
               Net Income                        $    319,247      $    406,005       $    744,300      $    734,596
                                                 ============      ============       ============      ============
</TABLE>


                                       9
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3.     NET INCOME PER COMMON SHARE

            Net income per common  share for June 30, 2005 and 2004 was computed
            by dividing  the weighted  average  number of shares of common stock
            outstanding  into the net income.  The  weighted  average  number of
            shares  of common  stock  outstanding  for the three and six  months
            ended June 30,  2005 and 2004 were  31,129 and 31,395 and 31,150 and
            31,480, respectively.

NOTE 4.     STOCK VALUE ADJUSTMENT

            During May 2005, the board of directors authorized a $31 increase in
            the stated  value of each  share of common  stock from $326 to $357.
            There  were  31,170  shares  outstanding  at the  time of the  value
            adjustment, which reduced retained earnings by $966,270.

            During May 2004, the board of directors authorized a $23 increase in
            the stated  value of each  share of common  stock from $303 to $326.
            There  were  31,491  shares  outstanding  at the  time of the  value
            adjustment, which reduced retained earnings by $724,293.

               [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


                                       10
<PAGE>

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

            Breda organizes its business into three reportable  segments.  Those
            segments are local exchange carrier  services,  broadcast  services,
            and Internet  service  provider  services.  Breda has  organized its
            business into those segments because the segments are each strategic
            business units that are managed  separately and that offer different
            products and services in different regulatory environments.

            The local exchange carrier services segment provides telephone, data
            services,  and other  services to customers  in the local  exchanges
            served by Breda and its telephone subsidiaries.  Breda also provides
            long  distance  services  to its  customers  in the local  exchanges
            served  by  Breda  and its  telephone  subsidiaries.  The  broadcast
            services segment provides cable television  services to customers in
            a total of  eighteen  towns in Iowa  and one town in  Nebraska.  The
            Internet service provider  services segment provides Internet access
            to customers in the local exchanges and the surrounding areas and in
            the Carroll, Iowa market area through BTC, Inc.

            The segments in which Breda and its subsidiaries operate are as
            follows:

               Local Exchange Carrier
                   Breda
                   Prairie Telephone Co., Inc.
                   Westside Independent Telephone Company
                   BTC, Inc.

               Broadcast Services
                   Tele-Services, Ltd.

               Internet Service Provider
                   BTC, Inc.

            BTC, Inc. is a subsidiary of Prairie  Telephone.  BTC, Inc. provides
            Internet  services to its  customers  and to the customers of Breda,
            Prairie  Telephone  and  Westside   Independent  who  subscribe  for
            Internet  services.  BTC, Inc. is also a competitive  local exchange
            carrier  providing  local and long  distance  telephone  services to
            customers  in the  Carroll,  Iowa  market  area,  where Qwest is the
            incumbent local exchange carrier.

            Breda and its  subsidiaries  all  conduct  business  under the names
            "W.I.N." or "Western Iowa Networks".

            The following table reflects,  on a consolidated basis for Breda and
            its  subsidiaries,  the  approximate  percentage  of Breda's and its
            subsidiaries'  aggregate  revenue  which was derived  from the three
            segments described above and from investments during,  respectively,
            the second quarter of 2004 and the second quarter of 2005:


                                       11
<PAGE>

                                                    April to       April to
                                                    June           June
                                                    2004           2005
                                                    --------       --------

               Local Exchange Carrier(1)             78.6%          79.4%
               Broadcast(2)                          12.4%          12.2%
               Internet Service Provider(3)           9.0%           8.4%
                                                    -----          -----
                         Total                        100%           100%

      (1)   This segment  includes (i) flat monthly fees charged to  subscribers
            by Breda, Prairie Telephone,  Westside Independent and BTC, Inc. for
            basic local  telephone  services,  (ii) universal  services  funding
            amounts and access  charges  payable by long  distance  carriers for
            intrastate and interstate  exchange  services provided to those long
            distance  carriers,  (iii)  fees from long  distance  providers  for
            billing and  collection  services  for long  distance  calls made by
            subscribers,  (iv) per minute rates and calling plans rates for long
            distance services, and (v) monthly cellular commissions, advertising
            fees, and miscellaneous revenues.

      (2)   This  segment  includes  monthly  fees charged for basic and premium
            cable services.

      (3)   This segment includes monthly fees charged for Internet services.

Six-months ended June 30, 2005 Compared to Six-months ended June 30, 2004

NET INCOME

Consolidated  net  income  for the  six-month  period  ended  June 30,  2005 was
$744,300, which was a $9,704, or 1.3%, increase when compared to the $734,596 of
consolidated net income for the six-month period ended June 30, 2004.

The $9,704 increase in net income resulted from the following three factors:

      1)    Consolidated  operating  income,  which is Operating  Revenues  less
            Operating  Expenses,  generated  from  the  local  exchange  carrier
            segment,  the broadcast  services segment,  and the Internet service
            provider  segment  increased  $13,364,  or 2.7%,  for the  six-month
            period ended June 30, 2005,  when compared to the  six-month  period
            ended June 30, 2004.

      2)    Other income  (expense),  which  includes items such as interest and
            dividend income,  income from equity investments,  interest expense,
            and  gains  (losses)  on  the  sale  of  investments  and  property,
            decreased  $8,807,  or 1.4%, for the six-month period ended June 30,
            2005, when compared to the six-month period ended June 30, 2004.


                                       12
<PAGE>

      3)    Income taxes  decreased  $5,147,  or 1.3%, for the six-month  period
            ended June 30, 2005,  when  compared to the  six-month  period ended
            June 30, 2004.

OPERATING REVENUES

There was an increase in total operating revenues for the six-month period ended
June 30, 2005,  when  compared to the  six-month  period ended June 30, 2004, of
$398,807,  or 12.2%.  The segments making up total operating  revenues and their
contributions  to the $398,807  increase between the two periods are as follows:
local exchange carrier services - $429,809;  broadcast services - ($6,927);  and
Internet service provider services - ($24,075).

Local Exchange Carrier Services - $429,809

Local exchange  carrier  services  revenue  accounted for 80.9% of the operating
revenue in the six-month period ended June 30, 2005. The components of and their
contributions  to the  $429,809  increase  in local  exchange  carrier  services
revenue for the six-months  ended June 30, 2005, when compared to the six-months
ended June 30, 2004, are as follows:  local network services - $58,323;  network
access services - $129,635; long distance services - $35,098;  cellular services
- $182,978; and miscellaneous - $23,775.

Local network  services  revenues  increased  16.6% and network access  services
revenues  increased  9.2% in the  six-month  period  ended June 30,  2005,  when
compared to the  six-month  period  ended June 30,  2004.  The increase in local
network  services  revenues and some of the increase in network access  services
revenues were the result of new customers in the Carroll, Iowa market area which
were generated after BTC, Inc. began offering local exchange carrier services in
October 2003.  BTC,  Inc. has increased its customer base by 57% when  comparing
the  customer  count as of June 30, 2005,  to the customer  count as of June 30,
2004.

Breda  received  a  24-month  true-up  adjustment  in May 2004 in the  amount of
$148,362  from the NECA pool for the time period April 2002 through  April 2004,
which was  reflected  in the  network  access  services  revenues  in the second
quarter  of  2004.  This  adjustment  was  received  in  May  2004  after  Breda
incorporated  a line haul lease  agreement  that Breda had in place with another
independent  telephone  provider  during that time  period.  Breda  continues to
receive  additional  monthly  line  haul  compensation  from  the  NECA  pool of
approximately $6,000 per month because of this line haul lease arrangement. Most
of the network access services  revenues increase for the six-month period ended
June 30, 2005,  when compared to the six-month  period ended June 30, 2004,  was
generated by Breda's Internet customers in its southern Iowa exchanges who began
accessing Breda's Internet services in late 2004 through the use of toll trunks.
Breda provides  toll-free  numbers to its customers for Internet  access.  Breda
pays the underlying billed long distance charges, but Breda also receives access
revenue  generated by these toll calls  originating  and  terminating on Breda's
networks.  The overall  network access  revenue  increase was only $129,635 when
comparing the two six-month  periods  because,  as noted  previously,  Breda had
received a one-time adjustment in the six-month period ended June 30, 2004.


                                       13
<PAGE>

Breda has not experienced a material adverse effect from the  implementation  in
2003 of different methodologies for the support payment funding regulated by the
FCC.

Breda has had lower  access  revenues  since 2003  because  Qwest no longer pays
access revenue for traffic  originating  with a wireless carrier that uses Qwest
to deliver the traffic back to a number served by local exchange carriers,  such
as Breda, Prairie Telephone,  and Westside  Independent,  who participate in the
use of the switching and network facilities offered by Iowa Network Services.

Access charges constitute a substantial part of Breda's, Prairie Telephone's and
Westside  Independent's  revenues,  and a material  risk to them arises from the
regulation  of access  charge rates and  universal  service  funding by the FCC.
Breda  anticipates  continuing  pressure  for the  lowering of state and federal
access charge rates, so future  reductions in access charge rates may be likely.
The   universal   service   funds   are  also  now   being   paid  out  to  more
telecommunication  providers,  and  Breda  anticipates  that  there  may also be
changes in the future on how universal service funds are disbursed.

Breda's long distance services revenue continues to grow because of the increase
in its customer  base for those  services.  Breda  believes  that long  distance
services  should  continue  to be a  growth  area  for  Breda  in 2005 as  Breda
continues to market this service as both a stand-alone  service and as part of a
package  with  other  services,  such as  Internet  services.  There was a 41.8%
increase in long distance  services revenues for the six-month period ended June
30, 2005 when compared to the six-month period ended June 30, 2004. The increase
is a direct  reflection of the 36.5% increase in Breda's long distance  customer
base,  which has mainly resulted from new customers  taking this service as part
of a bundled service package which includes local exchange  service and Internet
service provider services in the Carroll, Iowa exchange area.

The  $182,978,  or 33.9%,  increase in cellular  sales revenue for the six-month
period ended June 30, 2005, when compared to the six-month period ended June 30,
2004, reflects the increased sales from all of Breda's service locations for the
six months ended June 30, 2005. Breda began offering two-year contracts, instead
of  one-year  contracts,  in  August  2002,  when  U.S.  Cellular  revamped  its
commission structure to encourage two-year contracts.  Breda generates retention
commissions when a customer extends the term of the customer's existing cellular
services  contract or enters into a new  contract  to  continue  the  customer's
cellular  services.  The  customers  with  one-year  contracts  expiring in 2003
continued to generate  retention  contracts,  but those  contracts and other new
contracts are now on a two-year term. Breda  accordingly  experienced a time gap
between when  customers  would  normally be entering  new  contracts if they had
one-year  contracts  versus when they would enter into new contracts if they had
two-year  contracts.  The change in contract length  therefore caused a delay in
new contract  sign-up for  retentionable  contracts  during 2004.  Customers may
migrate to new contracts without penalty once they have fulfilled eighty percent
of the  original  contract  term,  so the  first  customers  obtaining  two-year
contracts in 2002 were eligible for new  contracts  beginning in May and June of
2004. Breda experienced a significant increase in retention contracts during the
six-month  period ended June 30, 2005,  when  compared to the  six-month  period
ended June 30, 2004.  Breda  processed an  additional  477  retention  contracts
during the  six-month  period  ended June 30, 2005 as compared to the  six-month
period


                                       14
<PAGE>

ended June 30,  2004.  Breda also  experienced  some  increase in new  contracts
during this  six-month  period in 2005 and  attributes  the increase to some new
cellular plan options expanding  coverage areas and expanding the time frame for
free night and weekend minutes.

Miscellaneous  revenue  increased  $23,775,  or 15.6%,  for the six-month period
ended June 30, 2005, when compared to the six-month  period ended June 30, 2004.
This increase was the result of  additional  fiber lease rental  contracts  that
Breda had in place during the  six-month  period ended June 30, 2005 compared to
the  six-month  period  ended June 30,  2004,  as well as  additional  directory
advertising income.

Broadcast Services ($6,927)

Broadcast  services revenue  decreased $6,927, or 1.6%, for the six-month period
ended June 30, 2005, when compared to the six-month  period ended June 30, 2004.
Breda's  subsidiary,  Tele-Services,  Ltd.,  continues to face  competition from
satellite  providers  that can now  include  local  channels  in  their  package
offerings.  Tele-Services  experienced a 7.6% decrease in its customer base when
comparing  the six-month  period ended June 30, 2005,  to the  six-month  period
ended June 30,  2004.  The  decrease  in  broadcast  services  revenue  from the
decrease in Tele-Services'  subscriber base was, however,  mitigated by the rate
increases that  Tele-Services  implemented  during the latter part of the second
quarter and the beginning of third quarter of 2004 for the 11  communities  that
received  additional  channel options.  Another factor faced by Tele-Services is
the  declining  population  base  in  the  small  rural  communities  served  by
Tele-Services,  which adversely affects  Tele-Services'  current and prospective
customer  base.  Tele-Services  has combined  head-ends in Breda,  Arcadia,  and
Westside  in order to  reduce  its  operating  costs  through  consolidation  of
equipment  and  maintenance   costs.   Breda  is  continuing  to  explore  other
consolidation  opportunities  in the  other 16  communities  that are  served by
Tele-Services.  For example, Breda anticipates completing a fiber project in its
southern Iowa  telephone  exchanges in early fall of 2005 which will allow Breda
to combine its Sidney and Farragut cable TV headends.

Tele-Services  added channels in the latter part of the first quarter of 2004 in
many of the 19  communities  that are  served  by  Tele-Services.  Tele-Services
finalized and implemented most of those channel additions, and the corresponding
rate increases,  by May 1, 2004.  Local channels have been added to 6 additional
communities and Breda hopes to generate  customer loyalty through this avenue of
information on local community events,  as well as the weather,  and local news.
Breda also plans to implement paid advertising  opportunities for businesses and
individuals  on the  local  channels  in the  communities  that  have the  local
channels.

Internet Services ($24,075)

Internet services revenue decreased  $24,075,  or 7.8%, for the six-month period
ended June 30, 2005, when compared to the six-month  period ended June 30, 2004.
The decrease is directly  attributable  to the decrease in BTC,  Inc.'s Internet
service  customer  base,  which is the  result  of the  intense  competition  by
multiple  suppliers in the Carroll,  Iowa,  market  area.  Breda began  bundling
Internet  services  with long  distance  services  and  lowered  its pricing for
Internet


                                       15
<PAGE>

services in 2001 in response to competitive pressures.  Breda has continued with
these programs in 2003, 2004 and 2005. The programs have,  however,  resulted in
reduced Internet revenues given the lower pricing by Breda for Internet services
under those  programs.  Breda is gaining  high-speed  Internet  customers in the
Carroll,  Iowa area because BTC, Inc. is offering bundled services packages that
include Internet  services,  as well as local telephone and other  communication
services. While new customers subscribing for those bundled services have helped
stem the decrease in Internet services revenue occurring in 2005, Breda was also
forced by competitive pressures to reduce its pricing on its high speed Internet
services as of October 1, 2004.  This price  decrease is  reflected  in Internet
services revenue during the six-month period ended June 30, 2005.

OPERATING EXPENSES

There was an increase in total operating expenses of $385,443, or 14.0%, for the
six-month  period ended June 30, 2005,  when  compared to the  six-month  period
ended June 30, 2004. The components making up operating expenses are as follows:
cost of  services,  depreciation  and  amortization,  and  selling,  general and
administrative expenditures.

Cost of services  increased  $351,447,  or 26.3%, for the six-month period ended
June 30, 2005,  when compared to the six-month  period ended June 30, 2004.  The
major  components of the increase in cost of services  resulted  from  increased
cellular services costs of $148,191,  increased long distance provisioning costs
of $22,381 and increased Internet provisioning costs of $114,476.  Plant related
costs and  programming  costs for broadcast  services for the  six-month  period
ended June 30, 2005, also increased by $56,998,  or 10.2%, and $9,401,  or 5.3%,
respectively, when compared to the six-month period ended June 30, 2004.

Breda is no longer  dependent on purchasing  specialized  circuits from Qwest in
order to provide  Internet  service in the  Carroll,  Iowa  market.  Breda began
offering local exchange carrier  services in the Carroll,  Iowa area through its
subsidiary,  BTC,  Inc., in October  2003.  In order to provide  local  exchange
carrier services in the Carroll,  Iowa market, Breda had to install circuits and
trunks  between the  present  independent  local  exchange  carrier  (Qwest) and
Breda's switch.  Breda is able to provide Internet service to the Carroll,  Iowa
market over those same trunks,  which has  significantly  reduced and stabilized
Breda's  underlying  circuit  cost  to  provide  Internet  services.   As  noted
previously,  Breda is now provisioning the access to Breda's Internet  customers
in its southern Iowa exchanges over toll trunks.  Breda's provisioning  expenses
for  these  trunks  increased  Breda's  Internet  provisioning  costs by  almost
$115,000 for the  six-month  period ended June 30,  2005,  when  compared to the
six-month period ended June 30, 2004, where there was no corresponding  expense.
As noted  previously,  Breda also now  generates  access  revenue as a result of
these  Internet  customers  accessing  Breda's  Internet  service  over  Breda's
networks.  As also previously  noted,  Breda experienced a 41.8% increase in its
long  distance  services  revenue.  Since Breda is a reseller  of long  distance
services,  its  corresponding  cost of  purchasing  those  services  for  resale
directly correlates to the increased customer base and usage for those services.

Breda's  cellular  services  revenues had  increased  33.9% during the six-month
period ended June 30,  2005,  and the  corresponding  cellular  costs  increased
because of the added labor,


                                       16
<PAGE>

benefit,  and inventory  costs which were  associated  with managing and selling
those  services.  Breda also  experienced an increase in the average cost of the
phones  purchased  to  provide  access to the new  features  rolled  out by U.S.
Cellular in the six-month period ended June 30, 2005.

The increase in plant specific costs  includes the one-time  installation  costs
that Breda pays to Qwest for the  provisioning  of the  underlying  loop so that
Breda can offer competitive local telephone service in the Carroll,  Iowa market
area.  These  charges  are paid to Qwest for each new  customer  that BTC,  Inc.
obtains.  Breda also pays monthly loop  charges to Qwest for each  customer,  as
well as a loop-sharing monthly fee for those customers who subscribed to Breda's
Internet service but retain their local phone service with Qwest. Breda received
a retroactive  adjustment  for increased loop pricing from Qwest back to October
2004. The cost of utilities,  repairs and maintenance,  payroll  expenses,  long
distance costs,  cable TV programming,  and key system costs, all contributed to
the increased cost of services for the six-month period ended June 30, 2005.

Depreciation  and  amortization  expense  decreased  $34,814,  or 7.0%,  for the
six-month  period ended June 30, 2005,  when  compared to the  six-month  period
ended June 30, 2004.  Breda's telephone service plant assets are beginning to be
fully depreciated,  which results in a decrease in depreciation and amortization
expense when  comparing  these two  six-month  periods.  Breda has incurred over
$500,000 of new capital  expenditures during the six-month period ended June 30,
2005,  for the  purchase  and  installation  of a switch  in its  Carroll,  Iowa
exchange. These expenditures have been recorded as Plant Under Construction, and
accordingly  will not be  depreciated  until the  project is  completed  and the
switch is operational.  Breda  anticipates  that this switch will be operational
for tandem  switching  purposes by September  2005, and will be operational  for
switching the calls of BTC,  Inc.'s present  Carroll,  Iowa customers by October
2005.

Selling, general and administrative expenses increased $68,810, or 7.5%, for the
six-month period ended June 30, 2005, when compared to the same six-month period
in 2004.  Customer  operations  decreased  $18,775,  or 4.4%,  for the six-month
period ended June 30, 2005, when compared to the same six-month  period in 2004.
Corporate operations increased $76,993, or 18.0%, for the six-month period ended
June 30,  2005,  when  compared to the  six-month  period  ended June 30,  2004.
General  taxes  increased  $10,592,  or 15.8%,  when  comparing  these same time
periods.  The decreased  customer  operations costs were mainly  attributable to
decreased labor, benefits, and advertising costs to service customers during the
six-month  period  ended June 30, 2005.  The  increase in  corporate  operations
expense for the  six-month  period  ended June 30,  2005,  when  compared to the
six-month period ended June 30, 2004, was due to increased staffing, payroll and
benefit  costs,  as well  as  accounting  and  professional  fees  to  meet  the
regulatory  requirements  of the industry and the Sarbanes  Oxley Act.  Property
taxes also increased  $10,592,  or 15.8%, in the six-month period ended June 30,
2005, when compared to the six-month period ended June 30, 2004.


                                       17
<PAGE>

OPERATING INCOME

The net result of the operating revenue and operating expenses was a increase of
$13,364,  or 2.7%, in operating  income for the six-month  period ended June 30,
2005, when compared to the same six-month period in 2004.

OTHER INCOME (EXPENSE)

Other income (expense)  decreased  $8,807,  or 1.4%, during the six-month period
ended June 30, 2005,  when compared to the same  six-month  period in 2004.  The
decrease was mainly  attributable to three items. The first item is interest and
dividend income, which increased $37,123, or 23.1%, when comparing the six-month
period ended June 30, 2005,  to the  six-month  period ended June 30, 2004.  The
increase in interest and dividend income was due to the increased investments in
both temporary  investments  and marketable  securities on which Breda generates
interest  income.  Also,  two of Breda's  subsidiaries,  Prairie  Telephone  and
Westside  Independent,  received  dividends from an investment  totaling $35,392
during the six-month period ended June 30, 2005. The investment generated $4,374
during the six-month period ended June 30, 2004.

The second item is income from equity investments,  which decreased $120,376, or
19.1%,  during the  six-month  period ended June 30, 2005,  when compared to the
same six-month  period in 2004. The income from equity  investments  reported on
Breda's financial  statements is Breda's pro-rata share of the net income or net
loss of each equity investment, based on Breda's percentage of ownership in each
equity investment. The increase in equity investments reported on Breda's income
statement  for the  six-month  period ended June 30, 2005 is a reflection of the
net  increases  and  decreases  in the net  operating  income of Breda's  equity
investments.  Most of Breda's equity  investments are in cellular  partnerships.
The cellular  partnerships have been under market pressure from carriers such as
AT&T, Sprint and Verizon, to renegotiate their roaming contracts at lower rates.
As a result, the cellular  partnerships making up Breda's equity investments are
receiving  less roaming  revenue,  even though the number of  customers  and the
minutes of use have increased.  Breda anticipates that these downward  marketing
pressures on roaming rates will continue for the foreseeable future.

The third item is a positive  adjustment  to Other Income  (Loss) of $75,000 for
the six-month  period ended June 30,2005 when  compared to the six-month  period
ended June 30,  2004.  A $75,000  loss on a note  receivable  had been  recorded
during the six-month period ended June 30, 2004. Since there is no corresponding
item  during  the  six-month  period  ended June 30,  2005,  there is a positive
$75,000 adjustment when comparing the two six-month periods.

INCOME BEFORE INCOME TAXES

Income before income taxes increased  $4,557,  or .4%, for the six-month  period
ended June 30, 2005, when compared to the six-month  period ended June 30, 2004.
The $4,557 increase was the result of a $13,364 increase in operating income and
an $8,807 decrease in other income (expense).


                                       18
<PAGE>

INCOME TAXES

Income taxes decreased  $5,147, or 1.3%, for the six-month period ended June 30,
2005,  when  compared  to the same  period  in 2004.  The  increase  is a direct
reflection of the operating income and other income (expenses)  generated in the
six-month  period ended June 30, 2005. The effective tax rate in 2005 was 35.2%,
versus 35.8% in 2004.  The  effective  tax rate differs from the U.S.  statutory
rate due to state income taxes, and the proportion of investments with state tax
exemptions.

NET INCOME

Net income  increased  $9,704,  or 1.3%, for the six-month period ended June 30,
2005, when compared to the same period in 2004.

Liquidity and Capital Resources at Twelve-months ended December 31, 2004

Cash Flows

Cash flows from  operations  continue to be a steady  source of funds for Breda.
Cash provided from  operations for the  twelve-month  periods ended December 31,
2004 and December 31, 2003, was,  respectively,  $2,223,960 and $2,414,760.  The
cash flows from operations for the  twelve-month  period ended December 31, 2004
were primarily  attributable  to a positive net income of  $1,393,675,  plus the
addition of non-cash  expenses of $1,628,397  from  depreciation,  amortization,
deferred income taxes,  amortization of investment tax credits,  note receivable
discount,  loss on  impairment  of note  receivable,  and  cumulative  effect of
accounting change, which were then offset by $737,497 of non-cash, equity income
in  unconsolidated  affiliates.  The net increase in assets and  liabilities  of
$60,615 was also subtracted from net income to generate the net cash provided by
operating activities of $2,223,960.

The cash flows from  operations for the  twelve-month  period ended December 31,
2003 were primarily  attributable  to a positive net income of $1,189,506,  plus
the addition of non-cash expenses of $1,382,873 from depreciation, amortization,
deferred  income  taxes,  amortization  of  investment  tax  credits,  and notes
receivable  discount,  which were then offset by $362,616  of  non-cash,  equity
income in unconsolidated  affiliates. The net decrease in assets and liabilities
of  $204,997  was also added to  generate  the net cash  provided  by  operating
activities of $2,414,760.

Cash used in investing  activities was $1,987,889  for the  twelve-month  period
ended  December 31,  2004,  and  $1,617,133  for the  twelve-month  period ended
December  31,  2003.  Capital  expenditures  relating to ongoing  business  were
$585,873 for the twelve-month period ended December 31, 2004, and $1,008,124 for
the  twelve-month  period ended  December 31, 2003. A building was purchased for
the relocation of Breda's and BTC, Inc.'s Carroll,  Iowa services and operations
for $246,000 in January 2003.  Breda  received  $160,000 in February 2003, as an
early payoff of a building  contract note receivable.  Capital used in investing
activities in 2003 included an additional $125,500 investment in RSA #1, Ltd. by
Prairie  Telephone in


                                       19
<PAGE>

November 2003. Breda expects capital expenditures for non-building  expenditures
in 2005 to be higher than those made in 2004 because Breda has determined to add
switching capabilities to its Carroll, Iowa marketing area.

Prairie  Telephone  advanced an  additional  $45,307 on its notes  receivable to
Desktop Media,  L.L.C.  during the twelve-month  period ended December 31, 2004.
Prairie Telephone also received payment on the outstanding Desktop Media, L.L.C.
note  receivable of $52,333  during the  twelve-month  period ended December 31,
2004. Principal payments on the Desktop Media, L.L.C. note receivable of $48,000
had also been made during the  twelve-month  period ended  December 31, 2003, in
addition to the $160,000 early payoff of a contract  receivable by the purchaser
of Breda's former office building.

Cash used in financing activities was $404,817 for the twelve-month period ended
December 31, 2004, and $624,811 for the  twelve-month  period ended December 31,
2003.  During the twelve-month  period ended December 31, 2004, cash was used to
repay $144,183 of borrowings from the RTFC, to redeem common stock for $166,155,
and to pay dividends to the shareholders of $94,479.  Breda used cash in 2003 to
repay $134,981 of RTFC long-term debt, to redeem common stock for $391,394,  and
to pay dividends to the  shareholders of $98,436.  Breda funds the redemption of
its stock from its cash flows from  operations.  Breda  redeemed  524 shares and
1,306 shares in, respectively, 2004 and 2003.

Working Capital

Working  capital was  $1,641,455  as of December 31,  2004,  compared to working
capital of  $1,839,172 as of December 31, 2003.  The ratio of current  assets to
current liabilities was 3.3 to 1.0 as of December 31, 2004, and 4.0 to 1.0 as of
December 31, 2003.

Breda had a $115,828  decrease in current assets during the twelve-month  period
ended December 31, 2004,  when compared to the year ended December 31, 2003. The
decrease in current  assets was mainly  attributable  to a $297,644  decrease in
cash and temporary  investments and a $92,494  increase in accounts  receivable.
Cash was used to purchase $1,488,816 in long-term investments. Customer accounts
receivable  as of  December  31,  2004  were  comparable  to  customer  accounts
receivable as of December 31, 2003. The $92,494 increase in accounts  receivable
was  mainly  attributable  to the  increased  amounts  owed  to  Breda  and  its
subsidiaries  from  interexchange  carriers  for the use of Breda's  networks to
carry the interexchange carrier traffic to Breda's end users. Almost half of the
increase in the interexchange  carrier receivable was attributable to AT&T. AT&T
initiated  a billing  dispute and  requested  verification  of billed  rates for
Breda's telephone  services which were provided in the Carroll,  Iowa area since
October 2003.  Breda has proved that Breda billed AT&T according to the tariffed
rates,  and AT&T has  notified  Breda that AT&T will pay the  disputed  charges.
Other current  assets  increased  $32,101 during the  twelve-month  period ended
December 31, 2004, when compared to the  twelve-month  period ended December 31,
2003.  Other  current  assets are made up of prepaid  expenses  such as computer
maintenance  fees, and employee  benefit  premiums which are paid in advance for
2005, in the latter part of 2004.  While the cash outlay  occurred in 2004,  the
expense will be recorded in 2005.  Breda has  determined  to enter the satellite
Internet  business by offering the National Rural  Telephone


                                       20
<PAGE>

Coop  product  called   Wildblue.   Breda  has  recorded  the  $18,000   service
participation  fee,  which was  required for  participation  and paid on May 20,
2004,  as an Other  Current  Asset until such time as the program is launched in
2005.

Noncurrent assets,  which mainly consist of longer-term  investments,  increased
$1,993,544 during the twelve-month period ended December 31, 2004, when compared
to the  twelve-month  period ended December 31, 2003.  Prairie  Telephone loaned
$500,000 to Desktop  Media,  L.L.C.  on May 2, 2001,  and advanced an additional
$45,307  on  June 9,  2004 to fund  operational  expenses  until  revenues  were
collected for services provided. This note is shown net of unamortized discounts
of $6,423 and  $16,866,  respectively,  December 31, 2004 and December 31, 2003,
net of principal  repayments of $52,333 and $48,000  respectively,  December 31,
2004 and December  31, 2003,  and net of an allowance of $172,974 as of December
31, 2004.  $121,577 is included in long-term note  receivables,  and $144,000 is
included in short-term note  receivables as of December 31, 2004.  Breda's other
investments at cost decreased $63,212 for the twelve-month period ended December
31, 2004,  when  compared to the  twelve-month  period ended  December 31, 2003,
because Prairie Telephone's  investment in Desktop Media, L.L.C. is now reported
with the investments in unconsolidated  affiliates at equity instead of with the
investments reported at cost. On September 17, 2003 Prairie Telephone had signed
a principal  deferral  agreement with Desktop Media,  L.L.C.  which deferred the
principal  payments due in the months of September  through  December  2003, and
which also provided that Prairie Telephone's  ownership in Desktop Media, L.L.C.
would be  increased  from 10% to 17% if at any  time in the  year  2004  Desktop
Media,  L.L.C. was not able to generate a minimum  sustainable monthly profit of
$36,000 or was unable to make a regularly scheduled  principal payment.  Both of
those  stipulations  were not met in the  first  quarter  of 2004,  and  Prairie
Telephone  accordingly  acquired an  additional  7% ownership of Desktop  Media,
L.L.C.

Investments in  unconsolidated  affiliates at equity increased  $737,497 for the
twelve-month  period ended December 31, 2004, when compared to the  twelve-month
period ended December 31, 2003. This increase  represents Breda's pro rata share
of the net  income  or net loss of each  equity  investment,  based  on  Breda's
percentage of ownership in each equity investment during the twelve-month period
ended December 31, 2004.

Current liabilities increased $81,889 for the twelve-month period ended December
31, 2004,  when  compared to the  twelve-month  period ended  December 31, 2003.
Accounts payable  increased  $38,705,  and represented a timing  difference from
when  invoices  were  received  to when they were  paid.  Almost  $22,000 of the
accounts  payable  increase was for programming fees invoices which had not been
received in time to be paid before  December 31, 2004.  Accrued taxes  increased
$92,377 for the  twelve-month  period ended December 31, 2004,  when compared to
the year ended  December  31,  2003.  The increase was caused by the increase in
accruals for federal and state income taxes as of December 31, 2004.

Common stock had a net increase of $558,138 during the twelve-month period ended
December 31, 2004, when compared to the  twelve-month  period ended December 31,
2003.  The net  overall  increase  resulted  from the  decrease in the number of
outstanding  shares  through the  redemption of 524 shares of common stock at an
aggregate  redemption price of


                                       21
<PAGE>

$166,155, and the restatement of the outstanding shares of stock on May 18, 2004
to a per share  price of $326,  or a total  adjustment  of  $724,293.  The prior
redemption  value had been $303 per share.  The increase of $574,903 in retained
earnings during the  twelve-month  period ended December 31, 2004, when compared
to the  twelve-month  period ended  December 31, 2003,  is the net effect of the
$94,479 in dividends  paid on April 1, 2004, the  year-to-date  net income as of
December 31, 2004 of $1,393,675,  and the $724,293 stated value stock adjustment
for the outstanding shares on May 18, 2004.

Breda anticipates that Breda's  operational,  investing and financing activities
will continue to mirror the  activities of 2004,  and that Breda's needs will be
funded internally through operations and temporary investments.

Liquidity and Capital Resources at Six-months ended June 30, 2005

Cash Flows

Cash flows from  operations  continue to be a steady  source of funds for Breda.
Cash provided from operations for the six-month  periods ended June 30, 2005 and
June 30, 2004, was,  respectively,  $1,411,884 and $940,809. The cash flows from
operations  for  the  six-month  period  ended  June  30,  2005  were  primarily
attributable  to a positive  net income of  $744,300,  plus the net  addition of
non-cash expenses of $490,524 from depreciation,  amortization,  deferred income
taxes,  amortization  of  investment  tax credits,  amortization  of  investment
premium/discount,  note  receivable  discount  and  non-cash,  equity  income in
unconsolidated  affiliates.  The net  increase  in  liabilities  over  assets of
$177,060  was also  added to net income to  generate  the net cash  provided  by
operating activities of $1,411,884.

The cash flows from operations for the six-month period ended June 30, 2004 were
primarily  attributable to a positive net income of $734,596,  plus the addition
of non-cash  expenses  of $582,314  from  depreciation,  amortization,  deferred
income taxes, amortization of investment tax credits, amortization of investment
premium/discount,  and notes  receivable  discount,  which  were then  offset by
$431,632 of  non-cash,  equity  income in  unconsolidated  affiliates.  The note
receivable  impairment of $75,000 was added to net income,  and the net decrease
in liabilities versus assets of $19,469 was subtracted, to generate the net cash
provided by operating activities of $940,809.

Cash used in investing  activities was $1,086,655 for the six-month period ended
June 30,  2005,  and  $863,271  for the  six-month  period  ended June 30, 2004.
Capital  expenditures  relating  to  ongoing  business  were  $384,632  for  the
six-month  period ended June 30, 2005,  and  $329,894 for the  six-month  period
ended June 30, 2004. In March 2005,  Prairie Telephone  purchased 5,000 units of
Bug Tussel Wireless, L.L. C. for $200,000, which is included in the $290,000 for
purchase of equity  investments.  The  remaining  $90,000 of  additional  equity
investments  were  additional  investments in two of Breda's PCS investments for
the buildout of towers to provide  service in the service areas covered by Breda
and its partners.  Subsequent to June 30, 2005,  but prior to the filing of this
report,  Prairie Telephone purchased an additional 2,462.264 units of Bug Tussel
Wireless, L.L.C. for $113,264.15.  Prairie Telephone now has a 9.75% interest in
Bug Tussel  Wireless,  L.L.C.  During the six-month  period ended June 30, 2004,


                                       22
<PAGE>

Breda received  repayment on its notes  receivable to Desktop Media,  L.L.C.  of
$24,000. Breda's capital expenditures for non-building expenditures in 2005 will
be higher than those made in 2004 because Breda is adding switching capabilities
to its  Carroll  marketing  area.  Breda  anticipates  the  completion  of  this
switching  project  in  October  2005,  and has to  date  incurred  Plant  Under
Construction expenditures for this project of $528,107.

Cash used in financing  activities  was $337,481 for the six-month  period ended
June 30, 2005, and $320,453 for the six-month period ended June 30, 2004. During
the six-month period ended June 30, 2005, cash was used to repay $75,737 of long
term  debt,  to pay  dividends  to the  shareholders  of $7 per  share  totaling
$218,190,  and to redeem  common stock for  $43,554.  Breda used cash during the
six-month period ended June 30, 2004 to repay $70,903 of RTFC long-term debt, to
pay  dividends to the  shareholders  of $3 per share  totaling  $94,479,  and to
redeem common stock for $155,071.  Breda funds the  redemption of its stock from
its cash flows from operations.

Working Capital

Working capital was $1,211,358 as of June 30, 2005,  compared to working capital
of  $1,641,455 as of December 31, 2004.  The ratio of current  assets to current
liabilities  was 2.0 to 1.0 as of June 30,  2005,  and 3.3 to 1.0 as of December
31, 2004.

Breda had a $105,518  increase in current  assets  during the  six-month  period
ended June 30, 2005,  when  compared to the year ended  December  31, 2004.  The
increase  in current  assets was mainly  attributable  to a $12,252  decrease in
cash, a $86,662  increase in  temporary  investments  and a $41,773  increase in
accounts receivable.  Cash was used during the six-month period ended June, 2005
to purchase  short-term and long-term  investments and to fund the new switching
capabilities in BTC, Inc.'s Carroll, Iowa operations.  Accounts receivable as of
June 30, 2005 increased  because of the increased number of customers  generated
through BTC, Inc.'s entry into the Carroll,  Iowa, market, and because Breda and
its subsidiaries  have finalized  contracts with five wireless  carriers and are
now  able to bill  for the  transport  of  these  wireless  minutes  on  Breda's
networks.  Amounts owed to Breda and its subsidiaries from wireless carriers for
the use of Breda's  networks to carry the wireless  traffic to Breda's end users
was  $51,177  as of  June  30,  2005.  A  portion  of  the  increase  was in the
interexchange carrier receivable and is attributable to one carrier, AT&T. Breda
continues  to work with AT&T in an attempt to receive  payment on one  remaining
billing dispute,  which involves payment for a special access circuit.  Dialogue
is continuing with AT&T on the resolution of that dispute. The remaining current
assets, which include inventories, other current assets, interest receivable and
deferred income taxes, had a net decrease of $10,665 during the six-month period
ended June 30, 2005,  when compared to the year ended  December 31, 2004.  Other
current  assets are made up of prepaid  expenses  such as  computer  maintenance
fees, and employee  benefit premiums which are paid in advance for a future time
period,  and will normally be expensed within a twelve-month time period.  Breda
has determined to enter the satellite Internet business by offering the National
Rural  Telephone  Coop product called  Wildblue.  Breda has recorded the $18,000
service  participation fee, which was required for participation and paid on May
20, 2004,  as an Other  Current Asset until such time as the program is launched
in 2005.


                                       23
<PAGE>

Noncurrent assets,  which mainly consist of longer-term  investments,  increased
$537,265  during the six-month  period ended June 30, 2005, when compared to the
year ended  December  31, 2004.  Prairie  Telephone  loaned  $500,000 to Desktop
Media, L.L.C. on May 2, 2001, and advanced an additional $45,307 on June 9, 2004
to  fund  operational  expenses  until  revenues  were  collected  for  services
provided.  This note is shown net of unamortized discounts of $2,950 and $6,423,
respectively,  June 30, 2005 and December 31, 2004; net of principal  repayments
of $100,333 as of  December  31,  2004;  net of an  allowance  of $172,974 as of
December 31, 2004; and net of an allowance for Desktop equity loss of $46,717 as
of June 30,  2005.  $78,333 is  included  in  long-term  note  receivables,  and
$144,000 is included in short-term note receivables as of June 30, 2005.

Breda's other  investments  at cost  decreased  $7,209 for the six-month  period
ended June 30, 2005, when compared to the twelve-month period ended December 31,
2004.  This  amount  represents  the  redemption  of  RTFC  subordinated   stock
certificates  equal to five percent of the  principal  payments made by Breda on
its long term debt in 2004.

Investments in  unconsolidated  affiliates at equity increased  $289,326 for the
six-month  period ended June 30, 2005,  when compared to the year ended December
31, 2004. This increase  represents  Breda's pro rata share of the net income or
net loss of each equity investment,  based on Breda's percentage of ownership in
each equity investment during the six-month period ended June 30, 2005.

Prairie Telephone's investment in Desktop Media, L.L.C. is now reported with the
investments  in  unconsolidated   affiliates  at  equity  instead  of  with  the
investments  reported at cost.  Prairie  Telephone  signed a principal  deferral
agreement  with Desktop Media,  L.L.C.  on September 17, 2003 which deferred the
principal  payments due in the months of September  through  December  2003, and
which also provided that Prairie Telephone's  ownership in Desktop Media, L.L.C.
would be  increased  from 10% to 17% if at any  time in the  year  2004  Desktop
Media,  L.L.C. was not able to generate a minimum  sustainable monthly profit of
$36,000 or was unable to make a regularly scheduled  principal payment.  Both of
those  stipulations  were not met in the  first  quarter  of 2004,  and  Prairie
Telephone  accordingly  acquired an  additional  7% ownership of Desktop  Media,
L.L.C.

Current  liabilities  increased $535,615 for the six-month period ended June 30,
2005,  when  compared to the year ended  December  31,  2004.  Accounts  payable
increased $373,241,  and represented a timing difference from when invoices were
received to when they were paid.  $369,085 of the accounts  payable increase was
costs  associated  with the  switching  project  in BTC,  Inc.'s  Carroll,  Iowa
exchange.  These invoices had been  received,  but not paid as of June 30, 2005.
Accrued taxes increased  $120,213 for the six-month  period ended June 30, 2005,
when  compared to the year ended  December 31, 2004.  The increase was caused by
the increase in accruals for federal and state income taxes as of June 30, 2005,
and is based on Breda's taxable income for the six-month  period ending June 30,
2005, net of tax estimates already paid.


                                       24
<PAGE>

Common stock had a net increase of $922,716  during the  six-month  period ended
June 30, 2005,  when compared to the year ended  December 31, 2004. The increase
resulted  from the  decrease  in the number of  outstanding  shares  through the
redemption  of 122 shares of common  stock at an aggregate  redemption  price of
$43,554,  and the restatement of the outstanding shares of stock on May 17, 2005
to a per share  price of $357,  or a total  adjustment  of  $966,270.  The prior
redemption  value had been $326 per share.  The decrease of $440,160 in retained
earnings  during the six-month  period ended June 30, 2005, when compared to the
year ended December 31, 2004, is the net effect of the $218,190 dividend paid on
April 1, 2005, the year-to-date net income as of June 30, 2005 of $744,300,  and
the $966,270 stated value stock adjustment for the outstanding shares on May 17,
2005.

Breda anticipates that Breda's  operational,  investing and financing activities
will  continue to mirror the  activities  of 2004,  and its needs will be funded
internally through operations and temporary investments.

Three-months ended June 30, 2005 Compared to Three-months ended June 30, 2004

NET INCOME

Consolidated  net  income for the  three-month  period  ended June 30,  2005 was
$319,247, which was a $86,758, or 21.4 %, decrease when compared to the $406,005
of consolidated net income for the three-month period ended June 30, 2004.

The $86,758 decrease in net income resulted from the following three factors:

      4)    Consolidated  operating  income,  which is Operating  Revenues  less
            Operating  Expenses,  generated  from  the  local  exchange  carrier
            segment,  the broadcast  services segment,  and the Internet service
            provider segment decreased  $185,743,  or 53.2%, for the three-month
            period ended June 30, 2005, when compared to the three-month  period
            ended June 30, 2004.

      5)    Other income  (expense),  which  includes items such as interest and
            dividend income,  income from equity investments,  interest expense,
            and  gains  (losses)  on  the  sale  of  investments  and  property,
            increased  $17,756,  or 5.8%, for the three-month  period ended June
            30, 2005,  when  compared to the  three-month  period ended June 30,
            2004.

      6)    Income taxes decreased $81,229, or 32.8%, for the three-month period
            ended June 30, 2005, when compared to the  three-month  period ended
            June 30, 2004.

OPERATING REVENUES

There was a decrease in total  operating  revenues  for the  three-month  period
ended June 30,  2005,  when  compared to the  three-month  period ended June 30,
2004, of $21,651,  or 1.3%. The segments making up total operating  revenues and
their  contributions  to the  $21,651


                                       25
<PAGE>

decrease between the two periods are as follows: local exchange carrier services
-  ($3,256);  broadcast  services -  ($6,006);  and  Internet  service  provider
services - ($12,389).

Local Exchange Carrier Services - ($3,256)

Local exchange  carrier  services  revenue  accounted for 79.4% of the operating
revenue in the  three-month  period ended June 30, 2005.  The  components of and
their  contributions  to the $3,256 decrease in local exchange  carrier services
revenue  for  the  three-months  ended  June  30,  2005,  when  compared  to the
three-months  ended June 30,  2004,  are as follows:  local  network  services -
$24,954;  network  access  services  -  ($12,793);   long  distance  services  -
($43,741); cellular services - $27,326; and miscellaneous - $998.

Local network  services  increased  13.8% and network access  services  revenues
decreased 1.7 % in the three-month  period ended June 30, 2005, when compared to
the  three-month  period  ended June 30,  2004.  The  increase in local  network
services  revenues was the result of new  customers in the Carroll,  Iowa market
area,  which were  generated  after BTC,  Inc.,  began  offering  local exchange
carrier services in October 2003. BTC, Inc. has increased its customer base over
50% when comparing the customer count as of June 30, 2005, to the customer count
as of June 30, 2004.

Breda  received  a  24-month  true-up  adjustment  in May 2004 in the  amount of
$148,362  from the NECA pool for the time period April 2002 through  April 2004,
which was  reflected  in the  network  access  services  revenues  in the second
quarter  of  2004.  This  adjustment  was  received  in  May  2004  after  Breda
incorporated  a line haul lease  agreement  that Breda had in place with another
independent  telephone  provider  during that time  period.  Breda  continues to
receive  additional  monthly  line  haul  compensation  from  the  NECA  pool of
approximately  $6,000 per month  because  of this line haul  lease  arrangement.
Breda's overall access revenues  increased by approximately  $117,000 during the
three-month  period  ended June 30,  2005,  when  compared to the same period in
2004, from increased  originating and  terminating  access revenues  received on
toll traffic generated by its Internet service  subscribers in its southern Iowa
exchanges to reach  Breda's  Internet  service  equipment in Breda,  Iowa.  This
method of provisioning allowed Breda to offer its own Internet services to these
customers instead of reselling the Iowa Network Services Internet product. There
was not, however, any corresponding one-time adjustment,  as was received during
the  three-month  period  ended June 30,  2004,  so the overall  network  access
revenues decreased $12,793 when comparing these two three-month periods.

Breda has not experienced a material adverse effect from the  implementation  in
2003 of different methodologies for the support payment funding regulated by the
FCC.  However,  Breda's  has seen some  decline in its  overall  minutes of use,
because of increased  cell phone usage by its  customers  to make long  distance
calls.  Breda has had lower access  revenues in both 2003 and 2004 because Qwest
no longer pays access revenue for traffic  originating  with a wireless  carrier
that uses Qwest to deliver the traffic back to a number served by local exchange
carriers,  such as Breda,  Prairie  Telephone,  and  Westside  Independent,  who
participate in the use of the switching and network  facilities  offered by Iowa
Network Services.  Breda has negotiated  wireless  agreements with five wireless
carriers and has begun billing and


                                       26
<PAGE>

receiving  payments from these five carriers.  While the overall payment rate is
significantly  less than what Breda originally  received in access revenues from
interexchange  carriers for this  traffic,  Breda has billed over $40,000 to the
wireless carriers with whom it has signed contracts.  There was no corresponding
revenue during the three-month time period ended June 30, 2004.

Access charges constitute a substantial part of Breda's, Prairie Telephone's and
Westside  Independent's  revenues,  and a material  risk to them arises from the
regulation  of access  charge rates and  universal  service  funding by the FCC.
Breda  anticipates  continuing  pressure  for the  lowering of state and federal
access charge rates, so future  reductions in access charge rates may be likely.
The   universal   service   funds   are  also  now   being   paid  out  to  more
telecommunication  providers,  and  Breda  anticipates  that  there  may also be
changes in the future on how universal service funds are disbursed.

Breda's long distance  services revenue continues to show some growth because of
the increase in its customer base for those  services.  Breda believes that long
distance services should continue to be a growth area for Breda in 2005 as Breda
continues to market this service as both a stand-alone  service and as part of a
package  with  other  services,  such as  Internet  services.  There was a 91.9%
decrease in long distance  services  revenues for the  three-month  period ended
June 30, 2005 when compared to the  three-month  period ended June 30, 2004. The
decrease is a reflection of an eliminating entry made in the three-month  period
ended June 30, 2005, to correct the year-to-day  reporting of income and expense
items between  Breda,  Prairie  Telephone and BTC, Inc. for the purchase of long
distance services from BTC, Inc. by Breda and Prairie Telephone.

The $27,326,  or 9.5%,  increase in cellular  sales revenue for the  three-month
period ended June 30, 2005, when compared to the  three-month  period ended June
30, 2004, reflects the increased sales from all of Breda's service locations for
the three months ended 2005. Breda began offering two-year contracts, instead of
one-year  contracts,  in August 2002, when U.S. Cellular revamped its commission
structure to encourage two-year contracts. Breda generates retention commissions
when a customer extends the term of the customer's  existing  cellular  services
contract or enters  into a new  contract to  continue  the  customer's  cellular
services.  The customers with one-year  contracts  expiring in 2003 continued to
generate  retention  contracts,  but those contracts and other new contracts are
now on a two-year term.  Breda  accordingly  experienced a time gap between when
customers  would  normally  be  entering  new  contracts  if they  had  one-year
contracts  versus when they would enter into new  contracts if they had two-year
contracts.  The  change  in  contract  length  therefore  caused  a delay in new
contract sign-up for retentionable  contracts during 2004. Customers may migrate
to new contracts  without penalty once they have fulfilled eighty percent of the
original contract term, so the first customers  obtaining  two-year contracts in
2002 were  eligible for new contracts  beginning in May and June of 2004.  Breda
experienced some increase in retention  contracts during the three-month  period
ending June 30, 2005,  when compared to the  three-month  period ending June 30,
2004.

Miscellaneous  revenue  increased  $2,288,  or 3.2%, for the three-month  period
ended June 30,  2005,  when  compared to the  three-month  period ended June 30,
2004.  This increase was the


                                       27
<PAGE>

result of additional fiber lease rental contracts that Breda had in place during
the  three-month  period  ended June 30, 2005 when  compared to the  three-month
period ended June 30, 2004.

Broadcast Services ($6,006)

Broadcast services revenue decreased $6,006, or 2.8%, for the three-month period
ended June 30,  2005,  when  compared to the  three-month  period ended June 30,
2004.  Breda's  subsidiary,  Tele-Services  continues to face  competition  from
satellite  providers  that can now  include  local  channels  in  their  package
offerings.  Tele-Services  experienced a 7.8% decrease in its customer base when
comparing the three-month  period ended June 30, 2005, to the three-month period
ended June 30,  2004.  The  decrease  in  broadcast  services  revenue  from the
decrease in Tele-Services'  subscriber base was, however,  mitigated by the rate
increases that  Tele-Services  implemented  during the latter part of the second
quarter and the beginning of third quarter of 2004 for the 11  communities  that
received  additional  channel options.  Another factor faced by Tele-Services is
the  declining  population  base  in  the  small  rural  communities  served  by
Tele-Services,  which adversely affects  Tele-Services'  current and prospective
customer  base.  Tele-Services  has combined  head-ends in Breda,  Arcadia,  and
Westside  in order to  reduce  its  operating  costs  through  consolidation  of
equipment  and  maintenance   costs.   Breda  is  continuing  to  explore  other
consolidation  opportunities  in the  other 16  communities  that are  served by
Tele-Services.  For example, Breda anticipates completing a fiber project in its
southern Iowa  exchanges in early fall of 2005 which will allow Breda to combine
its Sidney and Farragut cable TV headends.

Tele-Services  added channels in the latter part of the first quarter of 2004 in
many of the 19  communities  that are  served  by  Tele-Services.  Tele-Services
finalized and implemented most of those channel additions, and the corresponding
rate increases,  by May 1, 2004.  Local channels have been added to 6 additional
communities and Breda hopes to generate  customer loyalty through this avenue of
information on local  community  events,  as well as the weather and local news.
Breda also plans to implement paid advertising  opportunities for businesses and
individuals  on the  local  channels  in the  communities  that  have the  local
channels,  and is in the process of upgrading its software and operating systems
on its local channel equipment.

Internet Services ($12,389)

Internet services revenue decreased $12,389, or 8.0%, for the three-month period
ended June 30,  2005,  when  compared to the  three-month  period ended June 30,
2004.  The  decrease is directly  attributable  to the  decrease in BTC,  Inc.'s
Internet  service  customer  base,  which  decrease is the result of the intense
competition by multiple suppliers in the Carroll, Iowa, market area. Breda began
bundling  Internet  services with long distance services and lowered its pricing
for Internet  services in 2001 in response to competitive  pressures.  Breda has
continued  with  these  programs  in 2003,  2004 and 2005.  The  programs  have,
however,  resulted in reduced Internet revenues given the lower pricing by Breda
for Internet services under those programs. Breda is gaining high-speed Internet
customers  in the Carroll  Iowa area  because  BTC,  Inc.  is  offering  bundled
services packages that include Internet services, as well as local telephone and
other communication services.  While new customers subscribing for those bundled
services have helped stem the decrease in Internet services revenue occurring in
2005,


                                       28
<PAGE>

Breda was also forced by competitive pressures to reduce its pricing on its high
speed Internet  services as of October 1, 2004. This price decrease is reflected
in Internet services revenue during the three-month period ended June 30, 2005.

OPERATING EXPENSES

There was an increase in total operating expenses of $164,092, or 11.9%, for the
three-month  period ended June 30, 2005, when compared to the three-month period
ended June 30, 2004. The components making up operating expenses are as follows:
cost of  services,  depreciation  and  amortization,  and  selling,  general and
administrative expenditures.

Cost of services increased $133,334,  or 19.5%, for the three-month period ended
June 30,  2005,  when  compared to the  three-month  period ended June 30, 2004.
Three  components of the increase in cost of services  resulted  from  increased
cellular services costs of $46,827,  decreased long distance  provisioning costs
of $39,845 and increased  plant related costs of $4,031.  Internet  provisioning
costs and programming  costs for broadcast  services for the three-month  period
ended  June  30,  2005,  were  $114,572,   or  178.5%,   and  $7,749,  or  8.6%,
respectively.  Breda is no longer dependent on purchasing  specialized  circuits
from Qwest in order to provide  Internet  service in the  Carroll,  Iowa market.
Breda began offering local exchange carrier  services in the Carroll,  Iowa area
through its  subsidiary,  BTC,  Inc., in October 2003. In order to provide local
exchange  carrier  services in the Carroll,  Iowa  market,  Breda had to install
circuits  and trunks  between the present  independent  local  exchange  carrier
(Qwest) and Breda's  switch.  Breda is able to provide  Internet  service to the
Carroll, Iowa market over those same trunks, which has significantly reduced and
stabilized  Breda's  underlying  circuit cost to provide Internet  services.  As
noted  previously,  Breda is also now purchasing long distance services in order
to  provision  its own  Internet  service  to  customers  in its  southern  Iowa
exchanges. Breda's cost of Internet services increased by $114,572 because of an
adjustment  allocating this  provisioning cost to Breda's Internet services that
was done in the three-month  period ended June 30, 2005, and for which there was
no corresponding expense for the three-month period ended June 30, 2004. Breda's
cellular  services revenues  increased 9.5% during the three-month  period ended
June 30, 2005, and the  corresponding  cellular costs  increased  because of the
added labor,  benefit,  and inventory  costs which were associated with managing
and selling  those  services.  Breda  continued to experience an increase in the
average  cost of the  phones  purchased  to provide  access to the new  features
rolled out by U.S.  Cellular in the three-month  period ended June 30, 2005. The
increase in plant specific costs also includes the one-time  installation  costs
that Breda pays to Qwest for the  provisioning  of the  underlying  loop so that
BTC, Inc. can offer telephone  service in the Carroll,  Iowa market area.  These
charges are paid to Qwest for each new customer that BTC, Inc. obtains. The cost
of utilities,  repairs and maintenance,  payroll expenses,  long distance costs,
cable TV  programming,  and key system costs,  all  contributed to the increased
cost of services for the three-month period ended June 30, 2005.

Depreciation  and  amortization  expense  decreased  $38,068,  or 14.7%, for the
three-month  period ended June 30, 2005, when compared to the three-month period
ended June 30, 2004.  Breda's telephone service plant assets are beginning to be
fully depreciated,  which results in an offsetting  decrease in depreciation and
amortization  expense against the depreciation  expense


                                       29
<PAGE>

for  investments  in plant assets when  comparing the two  three-month  periods.
Breda  anticipates  its  depreciation  expense  will  increase  after the switch
project is  completed in Carroll,  Iowa,  in the fall of 2005.  The  approximate
$500,000 of capital  expenditures  which have  already  been  incurred  for this
project will not be depreciated until the switch is operational.

Selling,  general and administrative  expenses increased $68,826,  or 15.9%, for
the  three-month  period  ended  June  30,  2005,  when  compared  to  the  same
three-month period in 2004. Customer  operations  increased $7,068, or 3.6%, for
the  three-month  period  ended  June  30,  2005,  when  compared  to  the  same
three-month period in 2004.  Corporate  operations  increased $56,448, or 28.0%,
for the three-month period ended June 30, 2005, when compared to the three-month
period ended June 30, 2004.  General  taxes  increased  $5,310,  or 15.9%,  when
comparing these same time periods.  The increased customer operations costs were
mainly  attributable to increased  labor,  benefits,  and  advertising  costs to
service  customers  during  the  three-month  period  ended June 30,  2005.  The
increase in corporate  operations  expense for the three-month period ended June
30, 2005, when compared to the  three-month  period ended June 30, 2004, was due
to  increased   accounting  and   professional   fees  to  meet  the  regulatory
requirements of the industry and the Sarbanes Oxley Act,  increased  labor,  and
related benefits costs for a now fully-staffed,  administrative labor force, and
because of the  payment of 2004  management  bonuses  during  this time  period.
Property taxes also increased $5,310, or 15.9%, in the three-month  period ended
June 30, 2005, when compared to the three-month period ended June 30, 2004.

OPERATING INCOME

The net result of the operating revenue and operating expenses was a decrease of
$185,743,  or 53.2%, in operating  income for the three-month  period ended June
30, 2005, when compared to the same three-month period in 2004.

OTHER INCOME (EXPENSE)

Other income (expense) increased $17,756, or 5.8%, during the three-month period
ended June 30, 2005, when compared to the same  three-month  period in 2004. The
$2,554,  or 2.5%,  increase  in  interest  and  dividend  income  was due to the
increased investments in both temporary investments and marketable securities on
which Breda generates interest income.

Equity investments  decreased $51,516,  or 16.3%,  during the three-month period
ended June 30, 2005, when compared to the same  three-month  period in 2004. The
equity  investments  shown on Breda's  financial  statements is Breda's pro-rata
share of the net income or net loss of each equity investment,  based on Breda's
percentage  of  ownership  in each  equity  investment.  The  decrease in equity
investments  reported on Breda's  income  statement for the  three-month  period
ended June 30, 2005 is a reflection  of the net  increases  and decreases in the
net  operating  income of Breda's  equity  investments.  Most of Breda's  equity
investments are in cellular  partnerships.  The cellular  partnerships have been
under  market  pressure  from  carriers  such as AT&T,  Sprint and  Verizon,  to
renegotiate  their roaming  contracts at lower rates. As a result,  the cellular
partnerships  making up Breda's  equity  investments  are receiving less roaming
revenue,  even  though  the  number of  customers  and the  minutes  of use have
increased.


                                       30
<PAGE>

Breda anticipates that these downward marketing  pressures on roaming rates will
continue for the foreseeable future.

A third item had a significant  effect on the overall $17,756  increase in other
income  (expense)  during  the  three-month  period  ended June 30,  2005,  when
compared to the same three-month period in 2004. That item was a $75,000 loss on
a note receivable,  which was recorded during the three-month  period ended June
30,  2004,  and for which there was no  corresponding  entry in the  three-month
period ended June 30, 2005.  Breda had reviewed its investment in Desktop Media,
L.L.C.,  which is evidenced by a note receivable on Breda's  balance sheet,  and
recorded an allowance and loss on this note receivable in the approximate amount
of the principal  payments that Breda had not received  during the  twelve-month
period ended December 31, 2004, and the six-month period ended June 30, 2004.

INCOME BEFORE INCOME TAXES

Income before income taxes  decreased  $167,987,  or 25.7%,  for the three-month
period ended June 30, 2005, when compared to the  three-month  period ended June
30,  2004.  The  $167,987  decrease  was the  result of a $185,743  decrease  in
operating income and a $17,756 increase in other income (expense).

INCOME TAXES

Income taxes decreased $81,229,  or 32.8%, for the three-month period ended June
30,  2005,  when  compared to the same period in 2004.  The decrease is a direct
reflection of the decreased  income  generated in the  three-month  period ended
June 30, 2005.  The effective tax rate in 2005 was 34.2%,  versus 37.9% in 2004.
The effective tax rate differs from the U.S.  statutory rate due to state income
taxes, and the proportion of investments with state tax exemptions.

NET INCOME

Net income decreased  $86,758,  or 21.4%, for the three-month  period ended June
30, 2005, when compared to the same period in 2004.

Other Activities and Issues

Access charge  revenues  constitute a substantial  part of Breda's  consolidated
revenues,   and  the   regulation   of  access   charge  rates  by  the  Federal
Communications  Commission and the Iowa Utilities  Board creates a material risk
to Breda and its subsidiaries.

The FCC issued a press  release on February 10, 2005, in which the FCC announced
its unanimous  adoption of a Further  Notice of Proposed  Rulemaking,  which was
released on March 3, 2005. The FCC had begun this process in 2001,  when the FCC
initiated  a  proceeding  to  identify  a  unified   approach  to   intercarrier
compensation by offering a bill and keep proposal,  known as COBAK.  The current
intercarrier  compensation  system  distinguishes  between  different  types  of
carriers and services, such as local and long-distance or wireless and


                                       31
<PAGE>

wireline,  and the FCC's press release  indicated  that the FCC plans to replace
the current  system with a unified  intercarrier  compensation  system.  The FCC
initiated a rule making  proceeding  to consider  this matter and the  questions
that  the  FCC  are  examining  include  the  effect  that  any  change  in  the
compensation  system will have on consumers and the universal  service fund. The
FCC has indicated that it will be particularly receptive to any plans that offer
expanded  choices  and  lower  rates to rural  consumers.  The FCC is using  the
rulemaking proceeding to seek comment on various plans, which have been proposed
or supported by various participants in the industry.

Breda is a member of two industry  associations who have filed comments with the
FCC  in  the  Intercarrier  Compensation  Docket.  The  Rural  Iowa  Independent
Telephone  Association  ("RIITA")  filed  comments  in May 2005  which  not only
expressed  concern that all of the filed plans would result in financial  losses
to rural independent  telephone  companies,  but also urged the FCC to recognize
the differences between rural independent companies and large urban companies by
developing an intercarrier compensation plan that explicitly provides for issues
facing rural independents;  run economic models of any intercarrier compensation
scheme and fully  evaluate  its impact on small  companies  as  required  by the
Regulatory  Flexibility  Act to  determine  the  impact  of the  scheme on rural
independent  carriers;  maintain  universal  service as required  under  federal
telecommunication  laws;  and to provide an adequate  return on  investment  for
rural telecommunications carriers.

The  Iowa   Telecommunications   Association   ("ITA")  filed  comments  in  the
Intercarrier Compensation Docket on July 20, 2005, and also pointed out that the
costs and nature of rural service areas are very  different  from those of large
regional  carriers.  The ITA had also  reviewed  the  filings of dozens of other
parties in this docket and in its filing made  comments and listed out the areas
where  the ITA  agreed  and  disagreed  with  those  filings.  One of the  plans
submitted  to the  FCC was  filed  by the  National  Association  of  Regulatory
Utilities  Commissioners   ("NARUC").   The  Iowa  Utility  Board's  Manager  of
Telecommunications  Policy  is the  chair of the  various  utility  board  staff
persons from around the country who serve on the NARUC Committee on Intercarrier
Compensation.  The ITA and RIITA have also provided support to this committee by
co-sponsoring  attendance of local industry experts at a NARUC committee meeting
to provide information on the need for impact studies,  and to share information
on the  compensation  issues in rural  companies  versus the regional  carriers.
Breda  and  its  subsidiaries   will  be  sharing   financial   information  and
participating in intercarrier compensation analysis studies within the industry,
so that realistic impact studies can be completed on the various proposals under
consideration by the FCC.

Breda cannot predict at this time which proposal may be viewed more favorably by
the FCC, or how long the rule making  process  might take.  Breda does  believe,
however,  that changes in interstate  access charge rates may occur, and that if
any of the plans known today are adopted, as currently proposed,  there would be
substantial reductions in Breda's access revenues.  Since access charge revenues
constitute a substantial portion of Breda's total consolidated revenues, this is
an area of material risk to Breda and its subsidiaries.

The National Exchange Carrier Association  ("NECA") has filed updates to the FCC
Tariff No. 5 that will be applicable to interstate traffic on July 1, 2005. This
tariff is Breda's legal  billing


                                       32
<PAGE>

authority for its interstate  access service  charges.  The rates in this tariff
are normally  updated twice a year and become  effective on July 1st and January
1st of each year. The tariffed rates effective July 1, 2005,  reflect an overall
10.2% decrease in the traffic  sensitive  switched access category,  and a 12.3%
decrease  in the  traffic  sensitive  special  access  category.  The  ITA  also
submitted the NECA Access Service Tariff Number 1 changes to the IUB on July 11,
2005,  and these  intrastate  access  charge  rates  will  become  effective  on
September 1, 2005.  Since the  intrastate  access charge rates are also based on
the NECA interstate access charge rates, Breda will experience a decrease in its
network access revenue for both interstate and intrastate access revenue.

Breda  and its  subsidiaries  are also  subject  to risk  regarding  changes  in
intrastate  access  charge rates  because  concerns have been raised by the Iowa
legislature  and the IUB regarding  intrastate  rates,  and whether  alternative
intrastate intercarrier compensation mechanisms should be investigated.  A joint
task  force  comprised  of  representatives  from  the  Iowa  Telecommunications
Association and the Rural Iowa Independent  Telephone  Association was formed in
the spring of 2003 to compile data from local  telephone  companies,  which data
was  to be  used  to  document  and  study  the  cost  of  access  and  to  make
recommendations  regarding Iowa access rates. Two industry consulting firms were
involved  with  this  task  force,  and the  committee  looked  not  only at the
justification of the present intrastate access rates received by local telephone
companies, but also at other revenue recovery alternatives. The joint task force
completed  its  initial  study in May 2004 and found  that the  overall  results
showed costs both higher and lower than the current intrastate access rates, and
that the cost per minute for  intrastate  access  fell within a range of $.02 to
$.16. The task force is updating this  information when applicable and continues
to work with members of the Iowa  Telecommunications  Association  and the Rural
Iowa  Independent  Telephone  Association  on the issues and  elements  of their
research.

Breda does not believe  that any  increase in  intrastate  access  rates will be
recommended  by the task force and that, at best,  intrastate  access rates will
stay the same. It is also possible,  however,  that intrastate access rates will
be lowered,  and that if that occurs,  it will have a negative impact on Breda's
and its subsidiaries' operating income. Breda does not believe, however, that it
is  possible to predict at this time  whether  intrastate  access  rates will be
lowered,  or if intrastate access rates are lowered,  the amount of the decrease
in those rates.  It is therefore  uncertain at this time whether this issue will
result in an adverse effect on Breda's  operating income.  Breda does,  however,
anticipate  continuing  pressure for the lowering of  intrastate  access  charge
rates.

Universal  service  funding is also an  important  part of Breda's  consolidated
revenues,  and the regulation of universal service funding by the FCC is another
area of material risk to Breda and its subsidiaries. The universal service funds
are also now being  paid out to more  telecommunications  providers  than in the
past. Breda anticipates that there may be changes in the future on how universal
service  funds are  disbursed  among the  numerous  eligible  telecommunications
providers.

Another  revenue  recovery issue present in the industry since April of 1999 has
been  the  nonpayment  of  access  revenue  by  wireless   carriers  on  traffic
originating and terminating  within


                                       33
<PAGE>

the same major trading area.  Breda and other local  exchange  carriers were not
receiving  payment  for the  termination  of this  wireless  traffic  over their
networks to the end user. A number of actions were taken by various participants
in the industry to attempt to address this issue, including the appointment of a
joint task force of  industry  representatives  and the Iowa  Telecommunications
Association,  the submission of a proposed model wireless  termination tariff to
the  IUB by  the  Rural  Iowa  Independent  Telephone  Association  and  certain
proceedings  before  the  IUB  seeking  compensation  for  terminating  wireless
traffic.  In late February of 2005, the FCC issued an order which  provided,  in
general,  that existing  tariffs  regarding the termination of wireless  traffic
would not be illegal and that collections  under those tariffs could be retained
by rural  independent  telephone  companies,  but that new tariffs  would not be
valid  and  that  rural  independent  telephone  companies  would  need to reach
negotiated  agreements to exchange wireless traffic. The primary result of those
actions with respect to Breda was Breda entering into agreements with Sprint, US
Cellular,  i-wireless and Midwest Wireless for each of Breda, Prairie Telephone,
Westside  Independent and BTC, Inc. The agreements with Sprint,  US Cellular and
i-wireless  became  effective  as of May  1,  2004,  and  the  Midwest  Wireless
agreement  became  effective  January  27,  2005.  Breda  also  entered  into an
agreement  with  Verizon  for each of  Breda,  Prairie  Telephone  and  Westside
Independent  on June  1,  2005,  but  the  agreements  were  made  retroactively
effective as of May 1, 2004.  Verizon would not sign an agreement with BTC, Inc.
because BTC,  Inc. is a  competitive  local  exchange  carrier.  The  agreements
generally  provide for compensation for the termination of wireless traffic only
on a going forward basis.  The agreements  also provide for  significantly  less
revenue per minute,  compared to receiving  interstate  access revenue,  and are
reciprocal compensation  agreements,  which means generally that each of the two
carriers  receives  compensation  from the other  carrier for the  transport and
termination  on each  carrier's  network  facilities  of wireless  traffic  that
originates on the network facilities of the other carrier.

Breda was notified on July 19, 2005, that the ITA Wireless  Termination Team had
reached an agreement with Verizon Wireless for payment of past  compensation for
minutes  terminated  from April 1999 through  March 31, 2004.  Breda signed this
agreement  on July 29,  2005,  for each Breda,  Prairie  Telephone  and Westside
Independent,  and has billed  Verizon  Wireless for these  minutes  based on the
settlement  rate.  Breda's  portion  of the total  compensation  package of over
$700,000  that  Verizon  Wireless  agreed  to pay was  $20,190.  Breda  does not
anticipate  recovering any  compensation for the termination of wireless traffic
for any time periods prior to the date of its agreements with the other wireless
carriers.

Telephone services providers like Breda, Prairie Telephone, Westside Independent
and BTC, Inc. are subject to competition  from other  providers.  As a result of
the  Telecommunications  Act of 1996, telephone companies are no longer afforded
exclusive  franchise  service areas.  Under that Act,  competitors can now offer
telephone services to Breda's,  Prairie Telephone's,  Westside Independent's and
BTC,  Inc.'s  subscribers,  and also  request  access to their lines and network
facilities  in order to offer any type of service  that can be provided  through
those lines and facilities.  The Act and the regulations  promulgated by the FCC
and state regulatory agencies to implement various parts of the Act could have a
material adverse effect on Breda,  Prairie Telephone,  Westside  Independent and
BTC, Inc. because they open up Breda,  Prairie Telephone,  Westside  Independent
and BTC, Inc. to competition that they were not subject to in the past.


                                       34
<PAGE>

There were various occurrences in 2004 which serve as examples of the increasing
competition in Iowa. For example,  in October of 2004 the IUB issued an order to
MCC Telephony of Iowa which will allow MCC Telephony of Iowa to provide  service
in any area of Iowa where any MCC Telephony of Iowa affiliates own and operate a
cable  system and offer high speed  cable  modems.  MCC  Telephony  of Iowa is a
subsidiary of Mediacom.  Another  example of the increasing  competition in Iowa
was the various  deregulation  actions  that were taken by the IUB during  2004,
which included the deregulation of approximately 21 exchanges.

There are numerous  telephone  companies  which have filed to provide  telephone
services  throughout all of Iowa, and Breda anticipates that more of those types
of filings  will be made by other  telephone  companies.  To date,  however,  no
company has chosen to compete in any of Breda's, Prairie Telephone's or Westside
Independent's service areas. Breda does not know the plans of any companies, but
Breda currently  believes the  possibility of any company  entering any of those
service areas in 2005 is small.

BTC, Inc.,  however,  provides  telephone  services in the Carroll,  Iowa market
area, and there are already other companies providing telephone services in that
area. Breda also believes that there will be additional local exchange  carriers
entering the Carroll, Iowa market area in 2005. For example,  Mediacom, which is
the 9th largest  cable  television  operator in the United  States and the local
cable  provider in the  Carroll,  Iowa  market,  has  expressed  an intention to
provide a phone service offering through Mediacom's partnership with Sprint. MCC
(a Mediacom subsidiary) filed a voice exchange tariff and service territory maps
with the IUB on December 27,  2004,  and the IUB approved the tariff and maps on
March 14, 2005.  The providing of voice exchange  tariffs and service  territory
maps are usually the last steps  required by the IUB before a provider  actually
begins  providing  service.  The IUB also  granted MCC a  certificate  of public
convenience to offer service in numerous areas  throughout  Iowa. Breda believes
that Mediacom and MCC will roll out their voice offering along with a high-speed
internet  offering in the Carroll,  Iowa market,  and Mediacom has recently been
quoted as indicating  that it will begin deploying those services in Iowa in the
near future.

Breda also anticipates that it will face new competition from other providers of
newer VoIP  (voice over  internet  protocol)  technologies,  such as Vonnage and
Skype, in all of its exchanges.  Breda  anticipates that Mediacom's and any such
other  offerings  will result in a reduction of revenue.  A reduction in revenue
will also result if any other  telephone  companies  at some point  determine to
provide services in any of Breda's, Prairie Telephone's,  Westside Independent's
or BTC, Inc.'s service areas.

Breda,  Prairie Telephone,  Westside  Independent and BTC, Inc. continue to face
ever-increasing competition in providing dial-up and high-speed internet access.
For example,  Breda has been experiencing  price-point  competition for Internet
services from Iowa Telecom in three  communities  since the late fourth  quarter
2000,  and Breda has lost Internet  customers in those three  communities.  BTC,
Inc. is experiencing  intense pricing and free services competition in providing
internet access in its Carroll, Iowa market. There are at least five competitors
in this relatively small market area, and BTC, Inc. experienced a 19.2% decrease
in its dial-up  customer base in this market during the calendar year 2004. BTC,
Inc.  had


                                       35
<PAGE>

experienced an 18.9% decrease in its dial-up customer base in the Carroll,  Iowa
market area in 2003, and a 15.5% decrease in 2002.

Breda  continues to  investigate  new  technology  and product  offerings in the
Internet field that it can provide to its customers, or that could be considered
value-added features to its already existing product.  For example,  Breda began
offering  a dial-up  accelerator  product in June 2004,  which  allows  Internet
service  providers,  such as BTC,  Inc.,  to deliver  data  services  over their
existing dial-up and wireless networks at up to six times the normal speed. This
type  of  service  would  be  considered  an  upgrade  from  dial-up,  but not a
replacement for the high speed Internet  service.  Based on the initial customer
demand for this service, Breda anticipates that there will be good future demand
for this product from its dial-up customers.

In May 2005, Breda began to offer its dial-up and high-speed  Internet customers
a  value-added  product  which  eliminates  customer  problems  due to  Internet
security threats.  This product is fully-automated and integrated,  and protects
against viruses,  spyware,  popups, and automatically  installs tested Microsoft
Security patches, and performs diskeeper functions.  Breda also anticipates that
there will be good future demand for this product from its Internet customers.

Breda  entered into a marketing  and  distribution  agreement  with the National
Rural  Telecommunications  Cooperative on May 13, 2004, for the  distribution of
satellite and high speed  Internet  service.  One reason Breda entered into this
agreement  was so that Breda would have a means to provide  high speed  Internet
service to its rural customers, who may otherwise lack the opportunity to obtain
high speed Internet service through existing  broadband  options,  such as cable
modem, DSL, and wireless,  because of distance and location factors.  NRTC has a
master distribution agreement with WildBlue Communications,  Inc., through which
NRTC has obtained rights to market, promote, sell and distribute satellite-based
Internet  access  services and related  products to end users in the continental
United States,  including through NRTC's eligible members,  such as Breda. Breda
also entered  into an agreement  with  DIRECTV,  Inc. to offer direct  broadcast
satellite  service (video) in conjunction with its satellite  Internet  service.
The Anik F2 satellite  was launched by August 30, 2004,  and WildBlue is testing
its  gateways.  The testing for Breda's  gateway was completed by June 30, 2005,
but Breda and the rest of the  distributors  have been delayed in the rollout of
this product because of equipment  shortages.  Breda's  marketing  campaign will
originate  on  September 1, 2005,  and Breda  anticipates  that it will be begin
installation of units in September 2005.

Breda  still  believes,  however,  that it will need to  continue  to pursue new
marketing  approaches  in order to attempt to retain and  increase  its Internet
customer base, and that there will be continuing  competitive pressures to lower
dial-up rates and to provide higher speed Internet access.

Breda  expects  the  overall  potential  customer  base for  Internet  access to
continue to increase,  but it is becoming more  difficult to predict if Breda or
its subsidiaries  will experience any increases in their Internet  customer base
given the increasingly  competitive  pressures in this area. It is also possible
that Breda and its subsidiaries  might continue to experience  declines in their
Internet customer base. Also, as noted above,  competitive  pressures  regarding
pricing


                                       36
<PAGE>

may lead to little or no growth, or even declines, in Internet service revenues,
even if Breda is successful in increasing its Internet customer base.

Prairie Telephone became a 10% owner of Desktop Media, L.L.C. on May 2, 2001. At
that time, Breda received its help desk services for Breda's Internet  customers
from Desktop Media, L.L.C. Breda now uses Caleris, Inc. to provide its help desk
services. Prairie Telephone also loaned $500,000 to Desktop Media, L.L.C. on May
2, 2001, and advanced an additional  $45,307 on June 9, 2004 to fund operational
expenses until service revenues were collected.  On September 17, 2003,  Prairie
Telephone signed a principal deferral agreement with Desktop Media, L.L.C. which
deferred the principal  payments due in the months of September through December
2003,  and which also  provided  that Prairie  Telephone's  ownership in Desktop
Media, L.L.C. would be increased from 10% to 17% if at any time in the year 2004
Desktop Media,  L.L.C.  was not able to generate a minimum  sustainable  monthly
profit  of  $36,000,  or was  unable  to make a  regularly  scheduled  principal
payment.  Both of these  stipulations were not met in the first quarter of 2004,
and Prairie Telephone accordingly acquired an additional 7% ownership of Desktop
Media, L.L.C.

Prairie Telephone authorized the initiation of a default process against Desktop
Media, L.L.C. in February 2005, and Prairie Telephone,  along with the other two
lenders,  had  been  proceeding  internally  with  this  legal  action.  Prairie
Telephone and the other two lenders are now considering additional options prior
to further pursuing legal actions.  Prairie Telephone does not know at this time
the outcome of these actions.

As noted previously,  in March 2005, Prairie Telephone  purchased 5,000 units of
Bug Tussel Wireless,  L.L.C. for $200,000,  which gave Prairie Telephone a 7.87%
ownership interest. Subsequent to June 30, 2005, but prior to the filing of this
report,  Prairie Telephone purchased an additional 2,462.264 units of Bug Tussel
Wireless, L.L.C. for $113,264.15.  Prairie Telephone now has a 9.75% interest in
Bug Tussel Wireless, L.L.C. Bug Tussle Wireless, L.L.C. is located in Green Bay,
Wisconsin,  and its operating  plan involves  erecting  tower sites for wireless
services.

Breda believes that its present cash position along with its anticipated  normal
operating  revenues will generate  sufficient  working capital for Breda and its
subsidiaries to meet their current operating needs and maintain historical fixed
asset addition levels.

Cautionary Statement on Forward Looking Statements

Various  discussions  and  statements  in this  quarterly  report are or contain
forward  looking  statements  that  involve  and are  subject to various  risks,
uncertainties and assumptions.  Forward looking statements include,  but are not
limited  to,  statements  with  respect  to  financial  results  and  condition;
anticipated  future  trends in  business,  revenues or net  income;  projections
concerning   operations  and  cash  flow;   business,   growth  and  acquisition
opportunities and strategies;  management's plans and intentions for the future;
competitive  position;  and  other  forecasts,  projections  and  statements  of
expectation.   Words   such  as   "expects,"   "estimates,"   "plans,"   "will,"
"anticipates," "contemplates," "forecasts," "predicts," "projects," "prospects,"


                                       37
<PAGE>

"possible,"  "hopeful,"  "intends,"  "believes,"  "seeks,"  "should,"  "thinks,"
"objectives" and other similar expressions or variations of those words or those
types of  words  help  identify  forward  looking  statements.  Forward  looking
statements are made based on numerous and varied estimates,  projections, views,
beliefs,  strategies  and  assumptions  made  or  existing  at the  time of such
statements  and are not  guarantees  of future  results  or  performance.  Breda
disclaims  any  obligation  to update or revise any forward  looking  statements
based on the occurrence of future  events,  the receipt of new  information,  or
otherwise.

Actual future performance, outcomes and results may differ materially from those
expressed  in forward  looking  statements  as a result of  numerous  and varied
factors, risks and uncertainties, some that are known and some that are not, and
nearly all of which are beyond the  control of Breda and its  management.  It is
not possible to predict or identify all such factors,  risks and  uncertainties,
but some of the  factors,  risks and  uncertainties  affecting  forward  looking
statements include, but are not limited to, the following:

      o     adverse changes by the Federal Communications  Commission,  the Iowa
            Utilities Board or other regulatory authorities to the access charge
            rates  that can be  charged  by Breda and its  subsidiaries  to long
            distance carriers or to the rules and other  requirements  regarding
            access  charge rates or access  charges,  whether  instituted by the
            regulatory  authorities  or at the  request or by reason of court or
            other actions taken by long  distance  carriers or other  interested
            persons;

      o     technological advances in the telecommunications,  cable and related
            industries,  which are always  occurring  and at an ever  increasing
            rate,  and any  one or  more  of  which  may  replace  or  otherwise
            adversely  affect  in  a  material  way  the  existing  technologies
            utilized by Breda and its subsidiaries;

      o     changes in employee relations,  including the loss of a key employee
            or employees;

      o     industry  conditions and  occurrences,  including  bankruptcies  and
            insolvencies of long distance  carriers (such as Global Crossing and
            WorldCom),  and consolidations in the  telecommunications  and cable
            industries,  which generally result in competitors  which are larger
            and better financed and with greater geographic reach, allowing them
            to compete over broader areas and more effectively;

      o     economic  conditions  at the  national,  regional and local  levels,
            which are  always  somewhat  uncertain  given  that  many  different
            tangible  and  intangible  factors  and  occurrences  can affect the
            economy;

      o     political conditions and occurrences at the international, national,
            regional and local levels, including rumors about, or threats and/or
            actual acts of, terrorism or war;


                                       38
<PAGE>

      o     the general emotions and psychology of the economy,  the markets and
            consumers, which can at times seem to be totally unrelated to actual
            economic or market conditions or other more tangible factors;

      o     litigation;

      o     inaccurate assumptions or predictions by management;

      o     the  ability  to  enter  into  and  maintain  agreements  which  are
            necessary to provide  services,  and on terms which are favorable to
            Breda;

      o     ever  increasing  costs and expenses  which are necessary to Breda's
            and its  subsidiaries'  businesses  but which are outside of Breda's
            control, such as health and other insurance costs;

      o     new third parties entering into Breda's or any of its  subsidiaries'
            marketing or service areas;

      o     acts or omissions of existing and/or new competitors and other third
            parties,  including  offering  lower  prices  or new  or  substitute
            products or services and their use of new marketing  strategies  and
            approaches;

      o     the risks  associated with  technological  requirements,  technology
            substitution and changes and other technological developments;

      o     changes  in  or  more  governmental  laws,  rules,   regulations  or
            policies;

      o     reductions in or other changes to governmental programs assisting or
            affecting the telecommunications,  cable and related industries, and
            in  particular  programs  which aid  providers of those  services to
            rural areas;

      o     the  continued  availability  of  financing,  and on terms which are
            favorable to Breda,  and the cost of financing and  consequences  of
            leverage; and

      o     the  effects  of  ever  increasing  and  changing   competition  and
            relationships  with  other  carriers  and other  parties,  including
            competition   or   relationships   which  result  in  Breda  or  its
            subsidiaries  having to develop new pricing  for  services,  such as
            interexchange  access charges and wireless  access  charges,  or new
            marketing strategies or new product offerings,  and the related risk
            that  Breda or its  subsidiaries  will not be able to  respond  on a
            timely or profitable basis to competitive changes or pressures.

This section  should also be read in conjunction  with the financial  statements
and related notes included in Item 1 of Part I of this quarterly report.


                                       39
<PAGE>

Item 3.     Controls and Procedures.

            The principal  executive officer and the principal financial officer
            of Breda have  evaluated  the  effectiveness  of Breda's  disclosure
            controls and  procedures as of the end of the period covered by this
            quarterly  report,  and they  have  concluded  that  the  disclosure
            controls and  procedures  have been  effective  for the purposes for
            which they are intended.

            No change in  Breda's  internal  control  over  financial  reporting
            occurred during the period covered by this quarterly report that has
            materially  affected,  or is reasonably likely to materially affect,
            Breda's internal control over financial reporting.

                           PART II - OTHER INFORMATION

Item 1.     Legal Proceedings.

            As of the date of this quarterly report,  Breda was not aware of any
            pending legal  proceeding to which Breda was a party or to which any
            of  Breda's  property  was  subject,  other  than  for  any  routine
            litigation,  if any, that was incidental to its business.  As of the
            date  of  this  quarterly  report,  Breda  was not  aware  that  any
            governmental  authority was  contemplating  any  proceeding  against
            Breda or any of its property.

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds.

            Breda did not issue any shares of its shares of common  stock during
            the period of April 1, 2005 through June 30, 2005.

            The following table provides information regarding Breda's purchases
            of its common stock from shareholders  during the period of April 1,
            2005 through June 30, 2005.


                                       40
<PAGE>

        SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
                                                                Total Number of     Maximum Number (or
                                                                Shares Purchased    Approximate Dollar
                                                                   as Part of        Value) of Shares
                         Total Number of                            Publicly         that May Yet Be
                             Shares           Average Price     Announced Plans    Purchased Under the
        Period            Purchased(1)      Paid per Share(2)    or Programs(1)    Plans or Programs(1)
--------------------------------------------------------------------------------------------------------
<C>                      <C>                <C>                       <C>                  <C>
Month #1 (April 1,       -0- Shares of
2005-April 30, 2005      Common Stock       N/A                       -0-                  -0-
--------------------------------------------------------------------------------------------------------
Month #2 (May 1,         -0- Shares of
2005-May 31, 2005)       Common Stock       N/A                       -0-                  -0-
--------------------------------------------------------------------------------------------------------
Month #3 (June 1,        122 Shares of
2005-June 30, 2005)      Common Stock       $357 per Share            -0-                  -0-
--------------------------------------------------------------------------------------------------------
Total                           122                 --                -0-                  -0-
--------------------------------------------------------------------------------------------------------
</TABLE>

            (1)   All of the  shares of common  stock  were  purchased  by Breda
                  pursuant to the redemption right or the right of first refusal
                  granted  to Breda in its  Amended  and  Restated  Articles  of
                  Incorporation,  or pursuant to the unsolicited  request of the
                  shareholder  in  question.  Breda  does not have any  publicly
                  announced  plans or programs  with respect to purchases of its
                  common stock.

            (2)   All of the shares of common  stock were  purchased by Breda at
                  the $357 per share  redemption price that was announced by the
                  board of directors at, and which became  effective at, the May
                  17, 2005 annual meeting of Breda's shareholders.

            There was one transfer of shares of Breda's  common stock during the
            period of April 1, 2005  through June 30, 2005 with respect to which
            Breda did not exercise  Breda's  right of first  refusal to purchase
            the shares.  The transfer  involved 28 shares,  which were sold by a
            director  of  Breda to  another  shareholder  of Breda  for $357 per
            share.

Item 3.     Defaults Upon Senior Securities.

            There  was  no  material  default  or  any  material   arrearage  or
            delinquency  by Breda of the type required to be reported under this
            Item during the period of April 1, 2005 through June 30, 2005.


                                       41
<PAGE>

Item 4.     Submission of Matters to a Vote of Security Holders.

            The annual meeting of the  shareholders of Breda was held on May 17,
            2005. The only matters voted upon by the  shareholders at the annual
            meeting  were  the  election  of two  directors  for  Breda  and the
            ratification  of the  appointment  of Breda's  auditors for the year
            2005.

            Breda's board of directors  consists of seven members,  divided into
            three  classes  based upon the length of their term.  Each member of
            the board of directors is elected to a three year term and until his
            or her successor is elected, or until his or her death,  resignation
            or removal.  The terms of office of the directors are staggered,  so
            that three of the  directors'  terms expire in one year,  two expire
            the next year, and two expire the following year.

            The term of two of  Breda's  directors  expired  at the 2005  annual
            meeting of the shareholders,  and, as indicated, one of the purposes
            of the annual meeting of the  shareholders of Breda was to elect two
            directors.  The directors  whose term expired at the annual  meeting
            were  Clifford  Neumayer and Dave Grabner.  Mr.  Neumayer had served
            three consecutive  terms as a director,  and under Breda's policies,
            Mr.  Neumayer  must be off the board of  directors  for at least one
            year.

            There were two nominees for the two director positions. The nominees
            were Dave Grabner and Daniel Nieland,  and they were both elected to
            serve  as  directors  of  Breda  until  the  annual  meeting  of the
            shareholders of Breda to be held in the year 2008.

            The number of votes cast for, against or withheld, and the number of
            abstentions and broker  non-votes,  with respect to the two nominees
            for election as a director of Breda was as follows:

                                           Against                       Broker
             Name               For      or Withheld    Abstentions    Non-Votes
             ----               ---      -----------    -----------    ---------
             Dave Grabner       180           --            --            --
             Daniel Nieland     188           --            --            --

            The other  directors  whose term of office as a  director  continued
            after the  annual  meeting  of the  shareholders  are the  following
            individuals:

                           Dean Schettler                John Wenck
                           Rick Anthofer                 Neil Kanne
                           Charles Thatcher

            The only other matter voted upon by the  shareholders  at the annual
            meeting was the ratification of Kiesling Associates,  LLP as Breda's
            auditors for the year 2005. The number of votes cast for, against or
            withheld,  and the  number  of  abstentions  and  broker  non-votes,
            regarding this matter was as follows:


                                       42
<PAGE>

               For        Against or Withheld    Abstentions    Broker Non-Votes
               ---        -------------------    -----------    ----------------

               162                  9                 49              --

Item 5.     Other Information.

            There were no  material  changes  during the period of April 1, 2005
            through June 30, 2005 to the procedures by which the shareholders of
            Breda may recommend nominees to Breda's board of directors.

            Breda's board of directors determines the purchase price payable for
            newly issued shares of Breda's common stock and the redemption price
            that will be paid by Breda if Breda elects to redeem a shareholder's
            shares in any of the  circumstances  in which Breda has the right to
            purchase  those  shares.  The board of  directors  has  historically
            established  the issuance price and the redemption  price based upon
            the book value of Breda.  Prior to 2002,  the issuance price and the
            redemption price was set at  approximately  75% of the book value of
            Breda.  Since 2002, the issuance price and the redemption  price has
            been set at approximately  70% of the book value of Breda. The board
            of directors  has  historically  made this  determination  in March,
            April or May of each  year,  based  upon  Breda's  then most  recent
            year-end audited financial  statements.  Breda's fiscal year ends on
            December  31.  The price is then  generally  announced  and  becomes
            effective  at the annual  shareholders  meeting  for that year.  The
            issuance  price and the  redemption  price as so  determined  by the
            board  of  directors  then  generally  applies  until  the  board of
            directors makes a new  determination  and announces the new price at
            the  next  annual  shareholders  meeting.  The  board  of  directors
            followed  those  historical  practices  and announced a new issuance
            price and  redemption  price of $357 per  share at the May 17,  2005
            annual meeting of the shareholders. The board of directors currently
            intends  to  continue  to  address  this  issue on an  annual  basis
            consistent  with the  above-described  historical  practices  of the
            board of directors.  The board of directors has,  however,  departed
            from the above-described  historical  practices from time to time in
            the past,  and the board of directors  may  determine to depart from
            those historical practices from time to time again in the future.

            Charles  Thatcher was elected as the  President of Breda at the June
            14, 2005 meeting of the board of  directors.  Clifford  Neumayer had
            been the  President  of Breda  since June of 2003.  Each  officer of
            Breda must also be a director, and Mr. Neumayer's term as a director
            expired at the May 17, 2005 annual  meeting of the  shareholders  of
            Breda.  Mr.  Neumayer  had  served  three  consecutive  terms  as  a
            director,  and under Breda's policies,  Mr. Neumayer must be off the
            board of  directors  for at least one year.  Breda does not  believe
            that  Mr.  Thatcher's  election  as the  president  of  Breda  was a
            material  event  given,  among  other  things,  that the  day-to-day
            business of Breda is conducted  and managed by Mr.  Boeckman and Ms.
            Morlok, and it is not contemplated that the election of Mr. Thatcher
            as the  president  of Breda  will have any  material  effect  on, or
            result in any material  change in, the management or the business or
            affairs of Breda or any of its subsidiaries. The other officers that
            were  elected at the June 14, 2005 meeting of the board of directors
            are as follows:  (i) Dave Grabner was elected as the Vice  President
            of Breda,  (ii) Rick Anthofer was elected as the Treasurer of Breda,
            and (iii) John Wenck was re-elected as the Secretary of Breda.


                                       43
<PAGE>

Item 6.     Exhibits.

            A list of the exhibits  included as part of this quarterly report is
            set forth in the  Exhibit  Index  which  immediately  precedes  such
            exhibits and is incorporated herein by this reference.

               [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


                                       44
<PAGE>

                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      BREDA TELEPHONE CORP.


Date: August 12, 2005.                By: /s/ Robert Boeckman
                                          --------------------------------------
                                          Robert Boeckman, Chief Operations
                                          Officer and Co-Chief Executive Officer


Date: August 12, 2005.                By: /s/ Jane Morlok
                                          --------------------------------------
                                          Jane Morlok, Chief Financial Officer
                                          and Co-Chief Executive officer


                                       45
<PAGE>

                                  EXHIBIT INDEX
                             Exhibits to Form 10-QSB
                        Three Months Ended June 30, 2005
                              BREDA TELEPHONE CORP.

Description of Exhibit                                                      Page
----------------------                                                      ----

3.    Articles of Incorporation and Bylaws

      3.1   Amended and Restated Articles of Incorporation of
            Breda Telephone Corp. (Filed as Exhibit 3.1 to
            Breda's Registration Statement on Form 10-SB, and
            incorporated herein by this reference.)

      3.2   Amended and Restated Bylaws of Breda Telephone Corp.
            (Filed as Exhibit 3.2 to Breda's Form 10-QSB for the
            quarterly period ended June 30, 2004 and filed August
            13, 2004, and incorporated herein by this reference.)

10.   Material Contracts

      10.1  Employment Agreement dated July 1, 2003 between Breda
            and Robert Boeckman. (Filed as Exhibit 10.1 to
            Breda's Form 10-QSB for the quarterly period ended
            June 30, 2003 and filed August 12, 2003, and
            incorporated herein by this reference.)

      10.2  Employment Agreement dated July 1, 2003 between Breda
            and Jane Morlok. (Filed as Exhibit 10.2 to Breda's
            Form 10-QSB for the quarterly period ended June 30,
            2003 and filed August 12, 2003, and incorporated
            herein by this reference.)

*31.  Rule 13a-14(a)/15d-14(a) Certifications

      31.1  Rule 13a-14(a) Certification of Chief Operations                 E-1
            Officer and Co-Chief Executive Officer

      31.2  Rule 13a-14(a) Certification of Chief Financial
            Officer and Co-Chief Executive Officer                           E-2

<PAGE>


*32.  Section 1350 Certifications

      32.1  Section 1350 Certification of Chief Operations                   E-3
            Officer and Co-Chief Executive Officer

      32.2  Section 1350 Certification of Chief Financial                    E-4
            Officer and Co-Chief Executive Officer

*Included with this filing.