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, 2001.

[_]  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                                    (IRS Employer
of incorporation or organization)                            Identification No.)

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

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



     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date: 35,917 shares of common stock,
no par value, at June 30, 2001.

     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, IOWA

                             CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                                 For the Periods
                          Ended June 30, 2001 and 2000
                      and the Year Ended December 31, 2000







<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS




                                                       June 30,     December 31,
                                                         2001          2000
                                                      (Unaudited)    (Audited)
                                                      -----------   ------------
                                  ASSETS

CURRENT ASSETS
  Cash and cash equivalents                           $ 1,319,689    $ 1,104,577
  Temporary investments                                   488,915        269,840
  Accounts receivable                                     502,207        703,468
  Interest receivable                                      50,617         50,800
  Prepaid income taxes                                    121,839        336,465
  Inventories                                             153,368         92,058
  Other                                                   109,460          5,383
                                                      -----------    -----------
                                                        2,746,095      2,562,591
                                                      -----------    -----------

OTHER NONCURRENT ASSETS
  Long-term investments                                 2,694,518      2,888,500
  Other investments                                     2,551,415      2,806,107
  Intangibles, net of accumulated amortization          1,062,970      1,107,625
  Note receivable                                         440,000             --
  Deferred income taxes                                   152,426        113,595
                                                      -----------    -----------
                                                        6,901,329      6,915,827
                                                      -----------    -----------

PROPERTY AND EQUIPMENT                                  5,857,735      6,176,434
                                                      -----------    -----------


  TOTAL ASSETS                                        $15,505,159    $15,654,852
                                                      ===========    ===========




   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
            For the Three and Six Months Ended June 30, 2001 and 2000





                                                        June 30,    December 31,
                                                          2001          2000
                                                       (Unaudited)    (Audited)
                                                       -----------  ------------

                   LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current portion of long-term debt                    $   118,300   $   118,300
  Accounts payable                                         238,530       364,232
  Accrued taxes                                            133,845       134,611
  Other                                                    164,601       170,670
                                                       -----------   -----------
                                                           655,276       787,813
                                                       -----------   -----------

LONG-TERM DEBT, less current portion                     1,980,816     2,038,990
                                                       -----------   -----------

STOCKHOLDERS' EQUITY
Common stock - no par value, 5,000,000 shares
  authorized, 35,917 and 37,241 shares issued
  and outstanding at $258 and $235 stated value,
  respectively                                           9,266,586     8,751,635
Retained earnings                                        3,602,481     4,076,414
                                                       -----------   -----------
                                                        12,869,067    12,828,049
                                                       -----------   -----------


  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $15,505,159   $15,654,852
                                                       ===========   ===========


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


                                       3
<PAGE>


<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
            For the Three and Six Months Ended June 30, 2001 and 2000

<TABLE>
<CAPTION>
                                      For the Three Months Ended     For the Six Months Ended
                                          2001          2000           2001           2000
                                      -----------    -----------    -----------    -----------
<S>                                   <C>            <C>            <C>            <C>
OPERATING REVENUES                    $ 1,517,006    $ 1,488,546    $ 3,086,443    $ 2,851,806
                                      -----------    -----------    -----------    -----------

OPERATING EXPENSES
  Cost of Services                        507,736        569,639      1,106,108      1,083,208
  Depreciation and amortization           275,977        269,933        554,635        529,684
  Selling, general and administration     488,238        536,215      1,025,655        993,044
                                      -----------    -----------    -----------    -----------
                                        1,271,951      1,375,787      2,686,398      2,605,936
                                      -----------    -----------    -----------    -----------


OPERATING INCOME                          245,055        112,759        400,045        245,870
                                      -----------    -----------    -----------    -----------

OTHER INCOME (EXPENSES)
  Interest and dividend income             63,011         86,613        114,257        158,338
  Loss on sale of investments                  --         (2,808)            --         (2,808)
  Gain on sale of cellular investment          --      4,900,959             --      4,900,959
  Interest expense                        (39,110)      (132,842)       (78,750)      (263,633)
  Income from cellular investments        100,002         83,335        294,689         83,335
  Income from Alpine investment                --             --         44,209         23,508
  Other, net                                6,535          9,112          9,979          4,122
                                      -----------    -----------    -----------    -----------
                                          130,438      4,944,369        384,384      4,903,821
                                      -----------    -----------    -----------    -----------

INCOME BEFORE INCOME TAXES                375,493      5,057,128        784,429      5,149,691
                                      -----------    -----------    -----------    -----------


INCOME TAXES                              150,068      1,993,780        295,792      2,004,809
                                      -----------    -----------    -----------    -----------


NET INCOME                            $   225,425    $ 3,063,348    $   488,637    $ 3,144,882
                                      ===========    ===========    ===========    ===========


NET INCOME PER COMMON SHARE           $      6.15    $     81.29    $     13.26    $     83.46
                                      ===========    ===========    ===========    ===========
</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, 1999          37,682    $ 5,614,618    $ 3,440,131    $ 9,054,749

  Comprehensive Income:
  Net income                                                     3,989,981      3,989,981

  Dividends paid                                                  (113,046)      (113,046)

  Common stock redeemed, net            (441)      (103,635)                     (103,635)

  Stated value stock adjustment                   3,240,652     (3,240,652)
                                  ----------    -----------    -----------    -----------

Balance at December 31, 2000          37,241      8,751,635      4,076,414     12,828,049

  Comprehensive Income:
    Net income                                                     488,637        488,637

  Dividends paid                                                  (111,087)      (111,087)

  Common stock redeemed, net          (1,324)      (336,532)                     (336,532)

  Stated value stock adjustment                     851,483       (851,483)
                                  ----------    -----------    -----------    -----------

Balance at June 30, 2001              35,917    $ 9,266,586    $ 3,602,481    $12,869,067
                                  ==========    ===========    ===========    ===========
</TABLE>


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


                                       5
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the Six Months Ended June 30, 2001 and 2000


<TABLE>
<CAPTION>
                                                               2001            2000
                                                            -----------    -----------
<S>                                                         <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                $   488,637    $ 3,144,882
  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                             554,635        529,684
      Amortization of investment tax credits                     (4,884)        (4,884)
      Deferred income taxes                                     (33,947)       (43,879)
      Gain on sale of cellular investment                          --       (4,900,959)
      Changes in operating assets and liabilities:
        (Increase) decrease in assets                           250,683        512,059
        Increase (decrease) in liabilities                     (132,537)       760,862
                                                            -----------    -----------
      Net cash provided by (used in) operating activities     1,122,587         (2,235)
                                                            -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                         (195,786)      (500,469)
  Cost of removing plant, net of salvage                          4,505           --
  Purchase of investments                                      (125,745)      (230,264)
  Proceeds from the sale of investments                         100,652        122,913
  Issuance in note receivable                                  (440,000)          --
  Purchase of other investments                                 (60,000)          --
  Sale in other investments                                     314,692         46,357
  Proceeds from sale of cellular investment                        --        5,108,279
                                                            -----------    -----------
    Net cash provided by (used in) investing activities        (401,682)     4,546,816
                                                            -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends paid                                               (111,087)      (113,046)
  Common stock redeemed                                        (336,532)          --
  Repayment of long-term debt                                   (58,174)    (1,463,132)
                                                            -----------    -----------
    Net cash used in financing activities                      (505,793)    (1,576,178)
                                                            -----------    -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                       215,112      2,968,403
                                                            -----------    -----------

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD              1,104,577        411,341
                                                            -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                  $ 1,319,689    $ 3,379,744
                                                            ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
  Cash paid during the period for:
    Interest                                                $    78,750    $   263,633
    Income taxes                                            $   120,000    $   975,000
</TABLE>


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


                                       6
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     In  the  opinion  of  management,   the  accompanying  unaudited  condensed
     consolidated  financial  statements contain all adjustments  (consisting of
     only normal  recurring  items)  necessary to present  fairly the  financial
     position  as of June 30,  2001 and  December  31,  2000 and the  results of
     operations  and  changes in cash flows for the three  months and six months
     ended June 30, 2001 and 2000.

     Certain  information and footnote  disclosures  normally included in annual
     financial   statements  prepared  in  accordance  with  generally  accepted
     accounting  principles 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, 2000 audited financial  statements.  The results of
     operations  for the  period  ending  June  30,  2001  are  not  necessarily
     indicative of the operating results of the entire year.

     Certain  reclassifications  have been made to the 2000 financial statements
     to conform with the 2001 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  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 also has
     telemarketing  services  that do not meet the  quantitative  threshold  for
     reportable segments.

     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 operations have been  aggregated  because of
     their similar characteristics.

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


                                       7
<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. OPERATING SEGMENTS, (Continued)

<TABLE>
<CAPTION>
                                              Local                     Internet
                                            Exchange                    Service
                                            Carriers     Broadcast      Provider       Other        Total
                                           ------------ ------------- ------------- ------------ -------------
<S>                                       <C>             <C>           <C>            <C>         <C>
Six months ended June 30, 2001

Revenues and sales

                  External customers        $2,034,833    $  509,377    $  385,877    $ 156,356    $3,086,443
                  Intersegment
Segment profit (loss)                          555,671       (51,193)      (11,833)      (4,008)      488,637

     Six months ended June 30, 2000

Revenues and sales
                  External customers        $1,892,466    $  526,849    $  305,123    $ 127,368    $2,851,806
                  Intersegment                      --            --                         --            --
Segment profit (loss)                        3,259,294       (65,228)      (18,637)     (30,547)    3,144,882

<CAPTION>
                                              Local                     Internet
                                            Exchange                    Service
                                            Carriers     Broadcast      Provider       Other        Total
                                           ------------ ------------- ------------- ------------ -------------
<S>                                       <C>             <C>           <C>            <C>         <C>
    Three months ended June 30, 2001

Revenues and sales
                  External customers        $  988,053    $  256,696    $  196,698    $  75,559    $1,517,006
                  Intersegment
Segment profit (loss)                          250,303       (24,377)        1,257       (1,758)      225,425

    Three months ended June 30, 2000

Revenues and sales
                  External customers        $  992,965    $  261,500    $  160,514    $  73,567    $1,488,546
                  Intersegment                      --            --                                       --
Segment profit (loss)                        3,129,061       (49,312)      (3,722)      (12,679)    3,063,348
</TABLE>


                                       8
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

         NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. OPERATING SEGMENTS, (Continued)

<TABLE>
<CAPTION>
     Reconciliation of Segment Information              Three months ended              Six months ended
     -------------------------------------
                                                      June 30,      June 30,        June 30,      June 30,
                                                       2001           2000           2001           2000
                                                    -----------    -----------    -----------    -----------
<S>                                                 <C>            <C>            <C>            <C>
     REVENUES:
          Total revenues and sales for reportable
            segments                                $ 1,441,447    $ 1,414,979    $ 2,930,087    $ 2,724,438
          Other revenues                                 75,559         73,567        156,356        127,368
          Elimination of intersegment revenues             --             --             --             --
                                                    -----------    -----------    -----------    -----------
              Consolidated Revenues                 $ 1,517,006    $ 1,488,546    $ 3,086,443    $ 2,851,806
                                                    ===========    ===========    ===========    ===========

     PROFIT:
          Total profit for reportable segments      $   227,183    $ 3,076,027    $   492,645    $ 3,175,429
          Other profit (loss)                            (1,758)       (12,679)        (4,008)       (30,547)
          Non-operating segment                            --             --             --             --
          Minority interest                                --             --             --             --
                                                    -----------    -----------    -----------    -----------
              Net Income                            $   225,425    $ 3,063,348    $   488,637    $ 3,144,882
                                                    ===========    ===========    ===========    ===========
</TABLE>


NOTE 3. NET INCOME PER SHARE

     Net income per common share for the three and six month  periods ended June
     30, 2001 and 2000 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 months
     and six months  ended June 30, 2001 and 2000 were  36,653 and  36,841,  and
     37,684 and 37,681, respectively.

NOTE 4. STOCK VALUE ADJUSTMENT

     During May 2000,  the board of  directors  authorized a $31 increase in the
     stated  value of each share of common  stock from $149 to $180.  There were
     37,682  shares  outstanding  at the  time of the  value  adjustment,  which
     reduced retained earnings by $1,168,142.

     During June 2000,  the board of  directors  authorized  an  additional  $55
     increase  in the stated  value of each  share of common  stock from $180 to
     $235.  There  were  37,682  shares  outstanding  at the  time of the  value
     adjustment, which reduced retained earnings by $2,072,510.

     During May 2001,  the board of  directors  authorized a $23 increase in the
     stated  value of each share of common  stock from $235 to $258.  There were
     37,021  shares  outstanding  at the  time of the  value  adjustment,  which
     reduced retained earnings by $851,483.


                                       9
<PAGE>


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

     Six Months  Ended June 30, 2001  Compared to the Six Months  Ended June 30,
     2000.

     There was an increase in total operating  revenues for the six-month period
     ended June 30, 2001, when compared to the same period in 2000, of $234,637,
     or 8.2%. The segments making up total operating revenue are: local exchange
     carrier services,  broadcast services, Internet services and other services
     revenue.

     Local exchange carrier services revenue  increased  $142,367,  or 7.5%, for
     the  six-month  period ended June 30, 2001,  when compared to the six-month
     period  ended  June 30,  2000.  Local  exchange  carrier  services  revenue
     includes  local network  services,  network  access  services,  billing and
     collection services and miscellaneous  income. These revenue components are
     discussed below.

     Local network services revenue increased $7,934, or 2.8%, for the six-month
     period ended June 30, 2001,  when compared to the same six-month  period in
     2000.  This increase  resulted from a small  increase in the overall custom
     calling feature revenues.

     Network  access  revenue  increased  $97,122,  or 8.5%,  when comparing the
     six-month  period ended June 30, 2001, to the  six-month  period ended June
     30,  2000.  This  increase  was due to more lines  generating  ongoing  SS7
     connectivity  revenues and also ongoing NECA pool  revenues.  Telemarketing
     revenues also increased which in turn increased access revenue for Breda.

     Billing  and  collection  service  revenue is a  function  of the amount of
     billing and collection services provided by Breda to other carriers such as
     AT&T. The billing and collection  services revenues decreased  $10,107,  or
     23.4%,  for the six-month  period ended June 30, 2001, when compared to the
     six-month period ended June 30, 2000.

     A component of local exchange  carrier  services revenue was an increase of
     $47,418,  or 11.2%, in  miscellaneous  revenue when comparing the six-month
     period ended June 30, 2001, with the six-month  period ended June 30, 2000.
     The increase in miscellaneous revenue was primarily the result of increased
     cellular service commissions and cellular accessories revenue. Breda opened
     a  retail  outlet  in its  county  seat in  early  April  2000,  which  has
     significantly  expanded its market  penetration  in the  cellular  services
     arena. There was no comparable revenue stream from the retail store for the
     first three months of the six-month period ended June 30, 2000.

     Broadcast services revenue decreased  $17,472,  or 3.3%, when comparing the
     six-month  period ended June 30, 2001, to the  six-month  period ended June
     30, 2000.  This decrease was directly  attributable to a 5% decrease in the
     customer base when


                                       10
<PAGE>

     comparing the two six-month  periods,  and is  attributable  to competition
     from satellite dish providers and declining  population  bases in the small
     rural communities where some of Breda's broadcast systems are located.

     There was an increase in Internet  services for the six-month  period ended
     June 30, 2001,  when  compared to the same period in 2000,  of $80,754,  or
     26.5%.  This  increase was due to a 16% increase in the customer  base when
     comparing the two six-month periods. There was also a 26.9% increase in the
     associated  expenditures  to  provide  those  services  to  the  additional
     Internet  customers,  however,  resulting in a less than positive impact on
     net operating revenue. Breda has been experiencing  price-point competition
     for Internet  services  from Iowa Telecom in three  communities  since late
     fourth quarter 2000. Breda had been the sole provider of Internet  services
     in those  communities until that time. Iowa Telecom purchased the telephone
     exchanges for those communities in 1999 and began operating them on June 1,
     2000.  In late 2000,  Iowa Telecom  expanded the services  offered in those
     communities  to  include  Internet  services  and at a lower  price than is
     offered  by Breda.  Breda  has  committed  to  exploring  and  implementing
     re-engineering  options and other help-desk and underlying Internet service
     provider options that would reduce Breda's costs in order to allow Breda to
     compete at a lower price point for Internet services.  While Breda has lost
     Internet  customers  because  of  competition,   Breda's  overall  Internet
     operations have continued to grow. As discussed later, Breda invested in an
     Internet  Service  Provider  in May 2001  through its  subsidiary,  Prairie
     Telephone Company, Inc.

     Telemarketing  services  revenue  is  reported  as  other  revenue  and  it
     increased $28,988, or 22.8%, when comparing the six month period ended June
     30, 2001, to the same period in 2000. The increase is  attributable  to the
     rise in the  volume of  telemarketing  calls  made by  Breda's  subsidiary,
     Pacific Junction  Telemarketing  Center,  Inc. Because of the volatility of
     number  availability,  Pacific  Junction  continues  to  seek  supplemental
     programs  to  augment   the   telemarketing   leads   provided  by  Results
     Telemarketing, Inc.

     There was an increase in total operating expenses of $80,462,  or 3.1%, for
     the  six-month  period ended June 30, 2001,  when compared to the six-month
     period ended June 30, 2000.  The  components  making up operating  expenses
     relate to cost of services,  depreciation  and  amortization,  and selling,
     general and administrative expenditures.

     Cost of services  expenses  increased  $22,900,  or 2.1%, for the six-month
     period ended June 30, 2001,  when  compared to the  six-month  period ended
     June 30, 2000.  The cost of services  components,  which are plant specific
     operations, plant non-specific operations, programming, and Internet costs,
     are explained below.

     There was a decrease  of $44,661,  or 5.9%,  in plant  specific  operations
     expense when  comparing  the  six-month  period ended June 30, 2001, to the
     six-month period ended


                                       11
<PAGE>

     June 30,  2000.  This  decrease  was  attributable  to  decreased  cellular
     operating  expense for such items as inventory,  personnel costs, and other
     expense which had been  generated in the same  six-month  period ended June
     30, 2000 for the start-up of Breda's retail outlet.

     Plant  non-specific  operating expense increased  $13,004,  or 25%, for the
     six-month period ended June 30, 2001, when compared to the six-month period
     ended June 30, 2000. This expense  category change is mainly  accounted for
     by rate increases in utilities and postage.

     There was an increase  of $19,710,  or 13.4%,  in  programming  expense for
     cable TV services when comparing the six-month  period ended June 30, 2001,
     with the six-month period ended June 30, 2000. The programming increase was
     the result of programming fee increases.

     Because of its growth,  Internet  revenue and expense are now reported as a
     separate segment.  The cost of Internet increased by $34,847, or 26.9%, for
     the  six-month  period ended June 30, 2001,  when compared to the six-month
     time period ended June 30, 2000. This increase is directly  attributable to
     the  additional  costs of  providing  Internet  services  to the  increased
     customer base. These costs include  additional  rental of fiber lines, help
     desk and  customer  services  fees  from the  underlying  Internet  service
     provider,  and  internal  costs to provide  customer  service  and  billing
     service to the additional customers.

     Depreciation and amortization  expense  increased  $24,951 or 4.7%, for the
     six-month  period ended June 30, 2001,  when compared to the same period in
     2000. This increase reflects  increased  depreciation  rates on depreciable
     equipment  associated with new technology  services,  and the proportionate
     net overall depreciation of capital improvements made during the year 2000.
     Boring  equipment  was also  purchased and put into  operation  during this
     six-month time period, which increased the depreciation expense.

     Selling,  general and administrative  expenses increased $32,611,  or 3.3%,
     for the  six-month  period ended June 30, 2001,  when  compared to the same
     period in 2000. The customer  operations  component  increased $14,231,  or
     3.6%, when comparing these two six-month time periods,  and mainly resulted
     from increased labor and benefit costs.  Breda received a 13.0% increase in
     its health plan premiums for the year 2001.  Corporate  operations  expense
     increased  $10,746,  or 2%, during the six-month period ended June 30, 2001
     when compared to the six-month period ended June 30, 2000. The increase was
     not  attributable to any one item but included wage and benefit  increases,
     and increased  expenditures for national meetings and educational  seminars
     attended  by board  members  and  management.  General  taxes paid by Breda
     increased  $7,634,  or 11.2%, for the six-month period ended June 30, 2001,
     when  compared to the  six-month  period ended June 30, 2000,  and resulted
     from  increased tax rates levied by the taxing  authorities  in the various
     counties.


                                       12
<PAGE>

     The net result of the operating services revenue and operating expenses was
     an increase of $154,175,  or 62.7%,  in operating  income for the six-month
     period ended June 30, 2001,  when compared to the same  six-month  period a
     year ago.

     Other income (expense) decreased $4,519,437, or 92.2%, during the six-month
     period ended June 30, 2001,  when compared to the same six-month  period in
     2000.  There was no gain on the sale of a  cellular  investment  during the
     six-month  period ended June 30, 2001, to correspond to the $4,900,959 gain
     on the sale of a cellular  investment  which occurred  during the six-month
     period ended June 30, 2000. Interest and dividend income decreased $44,081,
     or 27.8%, for the period ended June 30, 2001 when compared to the six-month
     period ended June 30, 2000. Interest expense also decreased by $184,883, or
     70.1%,  when  comparing the same six-month  periods.  While the decrease in
     interest and dividend income also decreased  other income,  the decrease in
     interest  expense  actually  increased  other income.  Both the decrease in
     interest and dividend income and the decrease in interest  expense were the
     result of Breda,  Prairie Telephone Company,  Inc. and Tele-Services,  Ltd.
     paying back  $4,999,052  in long term debt to the Rural  Telephone  Finance
     Cooperative  during  the twelve  month  period  ended  December  31,  2000.
     Investments  were  redeemed  to  pay   approximately   $2,100,000  of  this
     $4,999,052 debt, which resulted in less investment  revenue being generated
     for the  six-month  period  ended  June  30,  2001,  when  compared  to the
     six-month period ended June 30, 2000. The $4,999,052  reduction in variable
     rate long-term debt  consequently  reduced  Breda's  interest  expense by a
     significant amount.

     Income from cellular investments  increased $211,354, or 253.6%, during the
     six-month  period ended June 30, 2001,  when compared to the same six-month
     period in 2000. There was one cellular investment  distribution received in
     the amount of $83,335  during the six-month  period ended June 30, 2000, as
     compared to distributions from two cellular  investments  totaling $294,689
     during the  six-month  period ended June 30,  2001.  Income from the Alpine
     investment  increased $20,701,  or 88.1%, during the six-month period ended
     June 30, 2001,  when compared to the same six-month  period in 2000.  Other
     miscellaneous  income increased $5,857 when comparing the six-month periods
     ended June 30, 2001, and June 30, 2000.

     Income taxes decreased  $1,709,017 for the six-month  period ended June 30,
     2001,  when  compared to the same  period in 2000.  The  decrease  resulted
     primarily  from Breda not having a  $4,999,052  taxable  gain on a cellular
     investment  in the six-month  period ended June 30, 2001,  when compared to
     the same six-month period in 2000.

     Net income decreased  $2,656,245,  or 84.5%, for the six-month period ended
     June 30, 2001,  when compared to the same period in 2000.  The decrease was
     again primarily attributable to Breda not having a net after tax reportable
     gain on the sale of cellular


                                       13
<PAGE>

     investments in the six-month  period ended June 30, 2001,  when compared to
     the six-month period ended June 30, 2000.

     Liquidity and Capital Resources at Year Ended December 2000.

     Breda's net working capital was a positive $1,774,778 at December 31, 2000.
     The  positive  working  capital  at  year-end  2000 was due mainly to three
     factors. Two of those factors were that cash and cash equivalents increased
     $693,236,   and  temporary   investments   increased  $175,030  during  the
     twelve-month  period ended December 31, 2000. The third factor was that the
     current portion of long-term debt decreased by $490,112.  These net working
     capital changes  resulted  primarily from the receipt of $5,226,034 in cash
     from the sale of the CIC stock in May 2000,  and the  subsequent  payoff of
     the  variable  rate (8.05% - 8.4% at December  31,  2000) long term debt of
     $4,695,968 to the Rural  Telephone  Finance  Cooperative  on June 30, 2000,
     September 30, 2000, and October 16, 2000.  Other expenses  associated  with
     the payoff of the Rural Telephone  Finance  Cooperative  variable rate debt
     were interest costs of $54,289, and prepayment  penalties of $17,262.  Long
     term  investments  totaling  $2,100,000  were  liquidated  and used for the
     payment of a portion of this  long-term  debt.  The CIC stock sale proceeds
     were also used to make federal  estimated tax payments of $2,435,069 during
     the year ended December 31, 2000.

     Long  term  investments  decreased  by  $1,529,121.  As  noted  previously,
     $2,100,000 in long term  investments  was redeemed to pay off variable rate
     debt  owed to the  Rural  Telephone  Finance  Cooperative.  The  difference
     between the $2,100,000 and the $1,529,121 decrease in long-term  investment
     resulted from additional long-term investments made by Breda.

     The long- term debt  decrease  of  $4,508,940  is the  result of  scheduled
     quarterly  principal  payments  being paid in 2000 as well as the payoff of
     long term debt as noted previously.

     Liquidity and Capital Resources at Six Months Ended June 30, 2001.

     Breda had an increase of $183,504 in current  assets  during the  six-month
     period ended June 30, 2001,  when  compared to the year ended  December 31,
     2000. This resulted from an $215,112  increase in cash and cash equivalents
     which is being held for the anticipated  redemption of additional shares of
     stock in Breda  during  the  normal  course of  business.  While  temporary
     investments  increased $219,075,  inventories  increased $61,310, and other
     current assets  increased  $104,077,  those items were offset by a $201,261
     decrease in accounts receivable and a $214,626 decrease in prepaid taxes.

     Noncurrent  assets,  which  mainly  consist  of  longer-term   investments,
     decreased  $14,498 during the six-months ended June 30, 2001, when compared
     to  year-end  December  31,  2000.  On May 2, 2001,  Breda  entered  into a
     contractual agreement


                                       14
<PAGE>

     through  its  subsidiary,  Prairie  Telephone  Company,  Inc.,  to  advance
     $500,000  to Desktop  Media,  L.L.C.  This  transaction  is shown as a Note
     Receivable  for $440,000 for the six-month  period ended June 30, 2001, and
     for which there is no  corresponding  entry for the  six-month  time period
     ended June 30,  2001.  The  remaining  $60,000 is  reported as a 10% equity
     interest in Desktop Media,  L.L.C. and is included in other investments.  A
     corresponding  $193,982  decrease in long-term  investments  and a $314,692
     decrease  in  other   investments   offset  this  Desktop   Media,   L.L.C.
     transaction. The remainder of the overall decrease in noncurrent assets was
     caused by the  amortization  of  intangibles  and an  increase  in deferred
     income taxes.

     Breda's net working capital was $2,090,819 at June 30, 2001, as compared to
     $1,774,778 at December 31, 2000. The $316,041  increase in working  capital
     between the two time periods resulted mainly from the $125,702  decrease in
     accounts  payable and the net increase in current  assets as explained in a
     prior paragraph. The accounts payable decrease between the six months ended
     June 30,  2001 and the year ended  December  31,  2000  resulted  primarily
     because of a $116,794  plant under  construction  payable on  December  31,
     2000, which was paid before June 30, 2001.

     Common stock had a net  increase of $514,951  during the  six-month  period
     ended June 30,  2001,  when  compared to the year ended  December 31, 2000.
     This  increase  is the  result of two  items:  the  $23/share  increase  in
     outstanding  shares value on May 16, 2001,  and a decrease in the number of
     outstanding shares through redemption of stock by Breda, from 37,241 shares
     to 35,917  shares  during the  six-month  period ended June 30,  2001.  The
     decrease in the  Retained  Earnings  during the time period  ended June 30,
     2001, when compared to year-end December 31, 2000, is the net effect of the
     restated share value transaction and the year-to-date net income as of June
     30, 2001.

     Three  Months  Ended June 30, 2001  Compared to the Three Months Ended June
     30, 2000.

     There was an  increase  in total  operating  revenues  for the  three-month
     period ended June 30, 2001,  when  compared to the same period in 2000,  of
     $28,460, or 1.9%. The segments making up total operating revenue are: local
     exchange carrier services,  broadcast services, Internet services and other
     services revenue.

     Local exchange carrier services revenue  decreased  $4,912, or .5%, for the
     three-month  period ended June 30, 2001,  when compared to the  three-month
     period  ended  June 30,  2000.  Local  exchange  carrier  services  revenue
     includes  local network  services,  network  access  services,  billing and
     collection services and miscellaneous  income. These revenue components are
     discussed below.

     Local  network  services   revenue   basically  stayed  the  same  for  the
     three-month  period  ended  June  30,  2001,  when  compared  to  the  same
     three-month period in 2000.



                                       15
<PAGE>

     Network  access  revenue  increased  $29,202,  or 5%,  when  comparing  the
     three-month  period ended June 30, 2001,  to the  three-month  period ended
     June 30, 2000. This increase was due to more lines  generating  ongoing SS7
     connectivity  revenues and also ongoing NECA pool  revenues.  Telemarketing
     revenues showed only a slight increase when comparing these two three-month
     time periods,  so there was almost no affect on network  access revenue for
     Breda.

     Billing  and  collection  service  revenue is a  function  of the amount of
     billing and collection services provided by Breda to other carriers such as
     AT&T and was virtually the same for the  three-month  period ended June 30,
     2001, when compared to the three-month period ended June 30, 2000.

     A component of local exchange  carrier  services revenue showing a decrease
     of  $33,547,  or 13.5%,  was  miscellaneous  revenue,  when  comparing  the
     three-month  period ended June 30, 2001, with the three-month  period ended
     June 30, 2000.  The decrease in  miscellaneous  revenue was  primarily  the
     result of decreased  cellular  service  commissions.  Breda opened a retail
     outlet in its county  seat in early  April  2000,  which has  significantly
     expanded its market  penetration in the cellular  services arena.  However,
     during the three-month period ended June 30, 2001, there was a 28% decrease
     in customer cellular service  transactions when compared to the three-month
     period ended June 30, 2000. While this  three-month  period is normally the
     slowest  sales  period  of  the  year  for  cellular  service,  Breda  also
     attributes  some of the sales decline to the overall  economic  slowdown in
     its service areas.

     Broadcast  services revenue  decreased  $4,804, or 1.8%, when comparing the
     three-month  period ended June 30, 2001,  to the  three-month  period ended
     June 30, 2000. This decrease was directly  attributable to a 5% decrease in
     the  customer  base when  comparing  the two  three-month  periods,  and is
     attributable  to competition  from satellite dish providers and a declining
     population base in some of the rural areas served by Tele-Services, Ltd.

     There was an increase in Internet services for the three-month period ended
     June 30, 2001,  when  compared to the same period in 2000,  of $36,184,  or
     22.5%.  This  increase was due to a 16% increase in the customer  base when
     comparing the two  three-month  periods.  There was also an increase in the
     associated  expenditures  to  provide  those  services  to  the  additional
     Internet  customers,  however,  resulting in a less than positive impact on
     net operating revenue. Breda has been experiencing  price-point competition
     for Internet  services  from Iowa Telecom in three  communities  since late
     fourth quarter 2000. Breda had been the sole provider of Internet  services
     in those  communities until that time. Iowa Telecom purchased the telephone
     exchanges for those communities in 1999 and began operating them on June 1,
     2000.  In late 2000,  Iowa Telecom  expanded the services  offered in those
     communities  to  include  Internet  services  and at a lower  price than is
     offered by


                                       16
<PAGE>

     Breda.  Breda is presently working on implementing  re-engineering  options
     and other help-desk and underlying  Internet  service provider options that
     would  reduce  Breda's  costs in order to allow Breda to compete at a lower
     price point for Internet services.

     Telemarketing  services  revenue  is  reported  as  other  revenue  and  it
     increased  $1,992,  or 2.7%, when comparing the period ended June 30, 2001,
     to the same period in 2000. The increase is attributable to the slight rise
     in the volume of telemarketing  calls made by Breda's  subsidiary,  Pacific
     Junction  Telemarketing  Center,  Inc.  Because of the volatility of number
     availability,  Pacific Junction continues to seek supplemental  programs to
     augment the telemarketing leads provided by Results Telemarketing, Inc.

     There was a decrease in total operating expenses of $103,836,  or 7.5%, for
     the  three-month   period  ended  June  30,  2001,  when  compared  to  the
     three-month  period ended June 30, 2000. The three components  encompassing
     operating  expenses are: cost of services,  depreciation and  amortization,
     and selling, general and administrative expenditures.

     Cost of services expenses decreased $61,903,  or 10.9%, for the three-month
     period ended June 30, 2001, when compared to the  three-month  period ended
     June 30, 2000.  The cost of services  components,  which are plant specific
     operations, plant non-specific operations, programming, and Internet costs,
     are explained below.

     There was a decrease of $80,800,  or 20.4%,  in plant  specific  operations
     expense when comparing the  three-month  period ended June 30, 2001, to the
     three-month  period  ended  June  30,  2000.  This  decrease  was  directly
     attributable  to  decreased  cellular  operating  expense for such items as
     inventory,  personnel  costs,  and other  expense to support  the  cellular
     operation.  Breda experienced a 28% decrease in cellular sales transactions
     during the  three-month  period ended June 30, 2001,  when  compared to the
     three-month  period  ended  June 30,  2000.  There  were less  expenditures
     because  of this  sales  contact  decline  and also  because  there were no
     expenditures  associated  with the opening of Breda's  retail  store in the
     three  month-period ended June 30, 2001, like there were in the three-month
     period ended June 30, 2000.

     Plant  nonspecific  operating  expense  decreased  $1,702, or 5.5%, for the
     three-month  period ended June 30, 2001,  when compared to the  three-month
     period ended June 30, 2000.

     There was an increase  of $10,234,  or 13.6%,  in  programming  expense for
     cable TV services  when  comparing  the  three-month  period ended June 30,
     2001,  with the  three-month  period ended June 30, 2000.  The  programming
     increase was the result of programming fee increases.


                                       17
<PAGE>

     Because of its growth,  Internet  revenue and expense are now reported as a
     separate segment.  The cost of Internet services  increased by $10,395,  or
     15.4%, for the three-month period ended June 30, 2001, when compared to the
     three-month  time period  ended June 30,  2000.  This  increase is directly
     attributable to the additional costs of providing  Internet services to the
     increased  customer base.  These costs include  additional  rental of fiber
     lines,  help desk and customer  services fees from the underlying  Internet
     service  provider,  and  internal  costs to provide  customer  service  and
     billing service to the additional customers.

     Depreciation and amortization  expense  increased  $6,044, or 2.2%, for the
     three-month period ended June 30, 2001, when compared to the same period in
     2000. This increase reflects  increased  depreciation  rates on depreciable
     equipment  associated with new technology  services,  and the proportionate
     net overall  depreciation of capital improvements made during the year 2000
     as well as the first six months of 2001.

     Selling,  general and administrative  expenses decreased $47,977,  or 8.9%,
     for the  three-month  period ended June 30, 2001, when compared to the same
     period in 2000. The customer  operations  component  decreased  $8,483,  or
     4.1%,  when  comparing  these two  three-month  time  periods,  and  mainly
     resulted from decreased phone service expenditures for telemarketing. Breda
     received a 13.0%  increase in its health plan  premiums  for the year 2001.
     Corporate  operations  decreased  $41,047,  or 14%,  during the three-month
     period ended June 30, 2001 when  compared to the  three-month  period ended
     June  30,  2000.  The  decrease  was not  attributable  to any one item but
     resulted  mainly from a decrease in the costs of outside legal,  accounting
     and consulting  services.  General taxes paid by Breda increased $1,553, or
     4.5%, for the three-month  period ended June 30, 2001, when compared to the
     three-month  period ended June 30, 2000,  and resulted  from  increased tax
     rates levied by the taxing authorities in the various counties.

     The net result of the operating services revenue and operating expenses was
     an increase of $132,296, or 117.3%, in operating income for the three-month
     period ended June 30, 2001, when compared to the same three-month  period a
     year ago.

     Other  income  (expense)  decreased   $4,813,931,   or  97.4%,  during  the
     three-month  period  ended  June  30,  2001,  when  compared  to  the  same
     three-month  period in 2000.  There  was no gain on the sale of a  cellular
     investment during the three-month period ended June 30, 2001, to correspond
     with the $4,900,959  gain on the sale of a cellular  investment  during the
     three-month  period  ended June 30,  2000.  Interest  and  dividend  income
     decreased $23,602, or 27.2%, for the three-month period ended June 30, 2001
     when  compared to the  three-month  period  ended June 30,  2000.  Interest
     expense  also  decreased  $93,732,   or  70.6%,  when  comparing  the  same
     three-month  periods.  While the decrease in interest  and dividend  income
     also  decreased  other income,  the decrease in interest  expense  actually
     increased  other income.  Both the decrease in interest and dividend income
     and the decrease in interest expense were the result of


                                       18
<PAGE>

     Breda, Prairie Telephone Company, Inc. and Tele-Services,  Ltd. paying back
     $4,999,052  in long term debt to the Rural  Telephone  Finance  Cooperative
     during the twelve month period ended  December 31, 2000.  Investments  were
     redeemed to pay  approximately  $2,100,000  of this  $4,999,052  debt which
     resulted  in  less  investment  revenue  being  generated  as  well as less
     interest  expense being incurred for the three-month  period ended June 30,
     2001, when compared to the three-month period ended June 30, 2000.

     Income from cellular  investments  increased  $16,667,  or 20%,  during the
     three-month  period  ended  June  30,  2001,  when  compared  to  the  same
     three-month  period in 2000.  Other  miscellaneous  income decreased $2,577
     when  comparing the  three-month  periods ended June 30, 2001, and June 30,
     2000.

     Income taxes decreased $1,843,712 for the three-month period ended June 30,
     2001,  when  compared to the same  period in 2000.  The  decrease  resulted
     primarily  from Breda not having a  $4,999,052  taxable  gain on a cellular
     investment in the three-month  period ended June 30, 2001, when compared to
     the same three-month period in 2000.

     Net income decreased $2,837,923, or 92.6%, for the three-month period ended
     June 30, 2001,  when compared to the same period in 2000.  The decrease was
     again primarily attributable to Breda not having a net after tax reportable
     gain on the sale of cellular  investments in the  three-month  period ended
     June 30, 2001, when compared to the three-month period ended June 30, 2000.

     Other Activities.

     Breda's primary ongoing capital investment activity will currently continue
     to be additions  to  property,  plant and  equipment.  For  example,  Breda
     continues to make  investments in  state-of-the-art  technology in order to
     try to offer subscribers better service. Capital expenditures for 2000 were
     approximately  $726,922,  and are  currently  expected to be  approximately
     $777,151 in 2001.

     Breda does anticipate that  substantial  expenditures  will need to be made
     for  software  upgrades  that will  become  necessary  in order for  Breda,
     Prairie  Telephone and Westside  Independent  to become  compliant with the
     requirements  of the  Communications  Assistance  for Law  Enforcement  Act
     ("CALEA").  CALEA  was  passed in 1994 in  response  to rapid  advances  in
     telecommunications  technology,  such  as  the  implementation  of  digital
     technology and wireless  services,  that have threatened the ability of law
     enforcement officials to conduct authorized electronic surveillance.  CALEA
     requires telecommunications carriers to modify their equipment, facilities,
     and  services  to  ensure  that  they are able to  comply  with  authorized
     electronic  surveillance.  These modifications were originally scheduled to
     be completed by October 25, 1998,  but in accord with an extension  granted
     by the FCC,  were  generally to be  completed  by June 30,  2001.  Industry
     associations  have  requested  that  the  FCC  extend  the  June  30,  2001
     preliminary extension deadline


                                       19
<PAGE>

     for wireline  carrier  compliance  with CALEA until September 30, 2001. For
     the wireline,  cellular,  and broadband  personal  communications  services
     carriers,  implementation of a packet-mode capability and six Department of
     Justice/Federal  Bureau of  Investigation  "punch  list"  capabilities  was
     scheduled to be completed by September 30, 2001. Industry associations,  on
     behalf of their members, have requested a blanket extension from the FCC of
     the CALEA  (punchlist)  compliance  deadline of September 30, 2001,  but to
     date no extension has been granted.  The industry  associations are arguing
     that  because the FBI has not yet  completed  buy-out  agreements  with all
     manufacturers to pay for CALEA capability  software and because the FCC has
     not begun  any  proceedings  relating  to the  four-punchlist  capabilities
     recently  vacated and remanded by the D.C. Court of Appeals,  most carriers
     will be unable to comply with the September 30, 2001  deadline.  If the FCC
     granted the extension,  it is estimated  that the extension  would be for a
     one-year  period.  Breda is  currently  seeking  estimates  for the cost to
     upgrade Breda's, Prairie Telephone's and Westside Independent's software as
     necessary  to become  compliant  with the Act,  but,  as  indicated,  Breda
     anticipates  substantial  expenditures  will be  necessary,  and that those
     expenditures may be as much as approximately $200,000.

     As of June 30, 2001, Breda had approximately  $2,099,116 outstanding on its
     one loan with the Rural Telephone Finance Cooperative. The interest rate on
     the loan was fixed on July 17, 1998, at 7.35%.  The loan has a fifteen-year
     term that matures in September, 2013. Breda and Prairie Telephone also have
     lines of credit available from the Rural Telephone  Finance  Cooperative in
     the amounts  of,  respectively,  $1,500,000  and  $500,000.  Those lines of
     credit will expire on December 1, 2005 and November  30,  2005.  No amounts
     were outstanding under either of those lines of credit on June 30, 2001.

     Breda  is  continuing  to  evaluate  the  access  charge  rate  reform  and
     deregulation  plan for non-price cap,  incumbent  local  exchange  carriers
     which was  submitted to the FCC by the  Multi-Association  Group ("MAG") in
     October of 2000.  Non-price cap,  incumbent local exchange carriers include
     most of the small and mid-sized  local  exchange  carriers that serve rural
     and  insular  areas in the  U.S.,  such as  Breda,  Prairie  Telephone  and
     Westside Independent.  While the plan originally was to take effect on July
     1,  2001,  the FCC has not  approved  or ruled on the MAG  plan.  Typically
     access rate charge reforms are implemented in the January or July months of
     the calendar  year. The  post-presidential  election FCC has stated it will
     rule expeditiously on these charge reforms, but there is no past experience
     with this FCC to estimate a ruling date. Breda believes that the plan could
     have a negative impact on revenues. The plan is discussed in Breda's annual
     report on Form 10-KSB for the year ended December 31, 2000.

     In order for Breda,  Prairie Telephone and Westside  Independent to receive
     universal  service  funds  in the  year  2002,  the FCC  needs  to  receive
     certification  by October 1, 2001, from the Iowa Utilities Board (IUB) that
     Breda, Prairie Telephone and Westside Independent are eligible

                                       20
<PAGE>


     telecommunication  carriers,  and  that  they  are  using  their  funds  in
     accordance with the  Telecommunications  Act of 1996, Section 254(e). While
     compliance with these deadlines should pose no problems,  if for any reason
     there were denial of universal  service  funding  because of the failure to
     meet these deadlines, it would have a significant negative impact on Breda.
     Breda  estimates  the  monetary  impact  for  noncompliance  would  be  the
     reduction in universal service revenue of approximately $400,000.

     New NECA rates  relating to  interstate  access went into effect on July 1,
     2001. There were not, however, any material rate changes for Breda, Prairie
     Telephone or Westside Independent arising from those new NECA rates.

     Breda has an agency  agreement  with U.S.  Cellular,  which allows Breda to
     sell cellular phones and related packages to the public, and Breda receives
     commissions  on those sales.  U.S.  Cellular  had  notified  Breda that the
     agreement  would be terminated  effective May 31, 2001.  U.S.  Cellular had
     proposed  a new  agreement,  but  Breda had  serious  concerns  about  that
     agreement,  including  the fact  that the new  agreement  would  pay  lower
     commissions to Breda.  Breda has  subsequently  received a letter from U.S.
     Cellular stating that Breda's current contract with U.S.  Cellular would be
     extended to September 1, 2001,  to allow the parties to attempt to reach an
     agreement on the open issues. While Breda is attempting to negotiate a more
     favorable agreement,  there is no assurance Breda will be successful in its
     negotiations.  If Breda is  unsuccessful,  the new  agreement  will  have a
     negative impact on Breda's cellular commissions revenue.

     Breda also plans to  continue to consider  expanding  its core  business of
     providing  telephone  services  by looking at any  opportunities  which may
     arise to  acquire  additional  telephone  lines.  There are no  assurances,
     however,  that  any such  opportunities  will  ever  arise or that any such
     opportunities  will fit into Breda's  strategic  plan or will  otherwise be
     able to be realized by Breda.

     Breda, Prairie Telephone Company,  Inc. and Westside Independent  Telephone
     Company currently have no definite plans to provide any material additional
     or improved services to their  subscribers.  This  determination may change
     quickly,   however,   given  the  rapidly   changing   technology   in  the
     telecommunications  and cable  industries.  For  example,  as  discussed in
     Breda's  annual report on Form 10-KSB for the year ended December 31, 2000,
     it is possible that Breda or Prairie  Telephone  Company,  Inc. may, either
     directly or through one of the companies in which they have invested, begin
     to offer  personal  communication  services in the next one to three years.
     The area of personal communication services is, however, an uncertain area,
     and there is no assurance that Breda or Prairie Telephone Company,  Inc. or
     any of the  entities  in which  they  have  invested  will  ever  offer any
     personal  communication  services or that any offering of any such services
     will be successful or otherwise profitable.


                                       21
<PAGE>

     There are no current  plans to expand the cable  services  areas of, or the
     cable services provided by,  Tele-Services,  Ltd.  Tele-Services,  Ltd. is,
     however,  continuing to work on consolidating  its head-end  equipment with
     the goal  being that the  equipment  will then be able to serve two or more
     communities,  instead of just one community as is currently the case. It is
     hoped that this consolidation will reduce Tele-Services, Ltd.'s maintenance
     costs for that equipment. Tele-Services, Ltd. also anticipates that it will
     continue to need to upgrade its plant, equipment and cables in order to add
     more channel  line-ups so that it can stay  competitive  and continue to be
     able to obtain programming  licenses.  The costs of those upgrades in 2001,
     and of any head-end consolidations, are estimated to be less than $100,000.

     During  the  month of July  2001,  Breda  and its  subsidiaries  which  are
     offering  Internet services  converted  feasible service areas to a Virtual
     Internet  Service  Product.  This  conversion  allows  Breda to  brand  its
     Internet  services as its own even though the underlying  service  provider
     has not  changed.  The  conversion  may also allow  Breda to address  other
     options that could result in future cost savings to Breda, which could help
     Breda compete more  effectively in the Internet  service  market.  Breda is
     also  currently  reviewing  engineering  options  as well as  options  with
     affiliated  companies  to  attempt to take  advantage  of  additional  cost
     savings in providing the Internet service.

     Breda  and its  subsidiaries  have  and  will  continue  to  incur  capital
     expenditures in connection with upgrading their telephone,  cable and other
     equipment and systems.  For example,  Breda will be upgrading its financial
     system  software in the third quarter of 2001,  and will be converting  the
     billing and financial software utilized by Westside  Independent  Telephone
     Company  in either the first or second  quarter of 2002.  The cost of those
     upgrades and conversions will not, however, be material to Breda.

     On May 2, 2001, a new company called Desktop Media,  L.L.C. was formed by a
     corporation named Desktop Media,  Prairie Telephone  Company,  Inc. and two
     other telephone  companies.  Desktop Media,  L.L.C. is a Minnesota  limited
     liability  company.   Under  agreements  signed  in  conjunction  with  the
     formation of Desktop Media,  L.L.C.,  Prairie Telephone  Company,  Inc. has
     become a 10% equity owner of Desktop Media, L.L.C.

     Desktop Media, L.L.C.  provides both dial-up and high-speed Internet access
     in south central Minnesota.  Desktop Media, L.L.C. is a full-scale Internet
     Service Provider,  which also sells computer hardware and related services.
     Desktop  Media,  L.L.C.  has  filed  applications  to  provide  traditional
     telephone  services as a competitive  local exchange  carrier.  The overall
     business  plan is based upon  Desktop  Media  L.L.C.  providing  data local
     exchange carrier services.  Desktop Media,  L.L.C. will contract to provide
     Internet Service Provider  support services to Prairie  Telephone  Company,
     Inc. and the other two telephone  companies  which have invested in Desktop
     Media, L.L.C.

                                       22
<PAGE>


     Under the agreements,  Prairie Telephone Company, Inc. has advanced Desktop
     Media,  L.L.C.  $500,000  under a  promissory  note dated May 2,  2001.  No
     interest or principal  payments  are required  during the first year of the
     promissory note. In the second year of the promissory note,  Desktop Media,
     L.L.C.  will be  required  to pay  interest  only,  which will  include all
     interest  deferred  during the first year and interest  accruing during the
     second year.  On the first day of the 25th month  following  May 2, 2001, a
     principal  payment of $12,000 plus interest  will be due by Desktop  Media,
     L.L.C.  with a  similar  installment  payment  due on the first day of each
     month thereafter until the entire principal and interest accruing under the
     promissory note has been paid in full. Desktop Media, L.L.C. has the option
     of prepaying all or any part of the principal balance, or accrued interest,
     at any time without penalty.

     The  promissory  note has been  guaranteed by the manager of Desktop Media,
     L.L.C.  The manager of Desktop Media,  L.L.C. has also guaranteed the loans
     made by the other two  telephone  companies  who have  invested  in Desktop
     Media, L.L.C. There is also a management  agreement between the manager and
     Desktop Media, L.L.C.

     There is no assurance that Desktop Media,  L.L.C. will perform according to
     its  business  plan,  and there is  therefore  no  assurance  that  Prairie
     Telephone Company, Inc. will ever receive any debt repayments or returns or
     other value from its investment in Desktop Media, L.L.C. As discussed above
     in this quarterly report, one of the intended purposes of Prairie Telephone
     Company,  Inc.'s relationship with Desktop Media, L.L.C. is to try to lower
     Breda's and its subsidiaries' costs of providing Internet services in order
     to allow Breda to compete at a lower price point for Internet services.

     Breda is  continuing  to negotiate new  employment  agreements  with Robert
     Boeckman and Jane Morlok. No break in service is anticipated for either Mr.
     Boeckman or Ms. Morlok.

     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.

     Breda has filed an  application  to register the mark "W.I.N.  Western Iowa
     Networks"  with the United States Patent and  Trademark  Office.  Breda was
     notified  in late  February  2001,  that the  Patent  Office  had  found no
     conflicting  marks in its records regarding the mark. Based on legal review
     of this  information,  Breda determined that this  information  indicated a
     higher level of assurance and that there would be minimal risk in using the
     mark even though Breda has not received final  notification of registration
     from the United States Patent and Trademark  Office.  During second quarter
     2001,  Breda  utilized  the  mark  and some  related  logos in the  general
     advertising  and promotion of its  business,  including on trucks and other
     equipment. Breda also implemented an


                                       23
<PAGE>

     advertising  campaign  to create  awareness  of the mark and to promote its
     general  business  and  services.  Breda hopes to use the mark and logos to
     create an integrated,  unified  marketing  approach for all of the products
     and  services of Breda and its  subsidiaries  and to increase  awareness of
     those products and services. Breda has not effected any change in the scope
     or nature of its or any of its  subsidiaries'  business in connection  with
     the adoption and use of the mark and logos.

     Cautionary Statement on Forward Looking Statements.

     This item and other items in this quarterly  report 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  anticipated  future trends in revenues and net
     income,  projections  concerning  operations  and  cash  flow,  growth  and
     acquisition  opportunities,  management's  plans  and  intentions  for  the
     future,  and other similar  forecasts and statements of expectation.  Words
     such as "expects,"  "estimates,"  "plans,"  "anticipates,"  "contemplates,"
     "predicts,"    "intends,"    "believes,"   "seeks,"   "should,"   "thinks,"
     "objectives"  and other  similar  expressions  or  variations  thereof  are
     intended to identify forward looking statements. Forward looking statements
     made by Breda  and its  management  are  based on  estimates,  projections,
     views,  beliefs  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 risks, uncertainties and assumptions, nearly all of which are beyond
     the  control  of Breda and its  management.  The risks,  uncertainties  and
     assumptions  affecting  forward  looking  statements  include,  but are not
     limited to:

          o    the possible adverse effects to Breda and its subsidiaries  which
               may arise under the regulations which are still to be promulgated
               under the  Telecommunications  Act of 1996,  including  increased
               competition;

          o    adverse changes by the Federal Communications Commission or other
               regulatory  authorities  to the access  charge  rates that can be
               charged by Breda and its subsidiaries to long distance carriers;

          o    technological   advances  in  the  telecommunications  and  cable
               industries  which may replace or otherwise  adversely affect in a
               material way the existing  technologies utilized by Breda and its
               subsidiaries;


                                       24
<PAGE>

          o    employee relations;

          o    management's business strategies;

          o    general  industry  conditions,  including  consolidations  in the
               telecommunications and cable industries;

          o    general economic  conditions at the national,  regional and local
               levels;

          o    acts or omissions of competitors and other third parties;

          o    changes in or more governmental regulations and policies;

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

          o    continued availability of financing, and on favorable terms.

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

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

     Breda currently is not aware of any pending legal proceeding to which Breda
     is a party or to which any of  Breda's  property  is  subject,  other  than
     routine  litigation that is incidental to its business.  Breda currently is
     not aware that any governmental  authority is contemplating  any proceeding
     against Breda or any of its property.

Item 2. Changes in Securities.

     No  material  modifications,  limitations  or  qualifications  of the  type
     required  to be  reported  under this Item were made to or placed  upon the
     terms of Breda's  shares of common stock during the period of April 1, 2001
     through June 30, 2001.

     Breda did not issue any  shares of its  common  stock  during the period of
     April 1, 2001 through June 30, 2001.


                                       25
<PAGE>


Item 3. Defaults Upon Senior Securities.

     There has been no material default or any material arrearage or delinquency
     by Breda of the type required to be reported under this Item.

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

     The annual meeting of the  shareholders  of Breda was held on May 16, 2001.
     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 2001.

     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,  and 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 terms of two of Breda's directors expired at the 2001 annual meeting of
     the  shareholders of Breda. The directors whose terms expired at the annual
     meeting were Scott Bailey and Larry Daniel.

     There were three  nominees for the two  director  positions to be filled at
     the  2001  annual  meeting  of the  shareholders.  The  nominees  were  the
     following individuals:

          Rick Anthofer
          Larry Daniel
          Charles Thatcher

     Scott Bailey determined not to pursue re-election as a director.

     Larry  Daniel and Charles  Thatcher  were  elected to serve as directors of
     Breda until the annual meeting of the  shareholders  of Breda to be held in
     the year 2004.

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

                                     Against                          Broker
      Name                 For     or Withheld         Abstentions    Non-Votes
      ----                 ---     -----------         -----------    ---------
      Rick Anthofer        177          ---                ---           ---
      Larry Daniel         202          ---                ---           ---
      Charles Thatcher     183          ---                ---           ---


                                       26
<PAGE>

     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
                Roger Nieland                               Dave Grabner
                Clifford Neumayer

     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 2001. The number of votes cast for,  against or withheld,  and the
     number of abstentions  and broker  non-votes,  regarding this matter was as
     follows:

      For        Against or Withheld        Abstentions         Broker Non-Votes
      ---        -------------------        -----------         ----------------
      185                 26                      88                     ---

Item 5. Other Information.

     During the quarter ended March 31, 2001,  Breda  redeemed 212 shares of its
     common stock from one  shareholder  at $235 per share for a total amount of
     $49,820.

     During the  quarter  ended June 30,  2001,  Breda  redeemed 8 shares of its
     common stock from one  shareholder  at $235 per share for a total amount of
     $1,880.  Also during the quarter ended June 30, 2001,  Breda redeemed 1,104
     shares  from five  shareholders  at $258 per  share  for a total  amount of
     $284,832.

     Breda's board of directors  determines  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 redemption price at
     approximately  75% of the book value of Breda.  The board of directors  has
     historically made this  determination in March or April 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 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
     redemption  price of $258 per share at the May 16, 2001  annual  meeting of
     the shareholders.  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.


                                       27
<PAGE>


Item 6. Exhibits and Reports on Form 8-K.

          (a)  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.

          (b)  Breda did not file any  reports  on Form 8-K during the period of
               April 1, 2001 through June 30, 2001.


                                       28
<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 13, 2001.                    By: /s/ Dean Schettler
                                                 -------------------------------
                                                 Dean Schettler, President



Date:   August 13, 2001.                     By:/s/   David Grabner
                                                --------------------------------
                                                David Grabner, Treasurer




                                       29
<PAGE>


                                  EXHIBIT INDEX
                             Exhibits to Form 10-QSB
                        Three Months Ended June 30, 2001
                              BREDA TELEPHONE CORP.

Description of Exhibit                                                    Page
----------------------                                                    Number
                                                                          ------
2.   Plan of Acquisition, Disposition,
     Reorganization, Arrangement,
     Liquidation or Succession

     (a)  Stock Purchase  Agreement dated May 22, 1998, by and between
          Arthur   Zerwas  and  Mary  Zerwas,   Westside   Independent
          Telephone Company,  and Breda Telephone  Corporation,  along
          with the Amendment to the Stock Purchase Agreement dated May
          22,  1998.  (Filed as Exhibit  2.1 to  Breda's  Registration
          Statement  on Form 10-SB,  and  incorporated  herein by this
          reference.)

     (b)  Stock Purchase  Agreement dated May 22, 1998, by and between
          Arthur  Zerwas  and Mary  Zerwas,  and Breda  Tele-Services,
          Ltd.,  along  with  the  Amendment  to  the  Stock  Purchase
          Agreement  dated  May 22,  1998.  (Filed as  Exhibit  2.2 to
          Breda's   Registration   Statement   on  Form   10-SB,   and
          incorporated herein by this reference.)

     (c)  Asset  Purchase  Agreement  dated  October 6,  1998,  by and
          between NewPath Communications, L.C. and Tele-Services, Ltd.
          (Filed as Exhibit 2.3 to Breda's  Registration  Statement on
          Form 10-SB, and incorporated herein by this reference.)

     (d)  Asset Purchase  Agreement by and between Golden Sky Systems,
          Inc. and Breda  Telephone  Corporation  dated as of November
          30,  1998,  along  with  the  Amendment  of  Asset  Purchase
          Agreement  dated as of January 11,  1999.  (Filed as Exhibit
          2.4 to Breda's  Registration  Statement  on Form 10-SB,  and
          incorporated herein by this reference.)

     (e)  Stock Purchase  Agreement dated March 29, 2000, by and among
          AirTouch Iowa,  LLC,  Central Iowa Cellular,  Inc.,  Prairie
          Telephone Company, Inc., Panora Tele- communications,  Inc.,
          Walnut Creek Communications, Inc.,


<PAGE>


          Minburn Telephone Company, and Interstate Enterprises,  Ltd.
          (Filed  as  Exhibit  2.1 to  Breda's  Form 8-K  dated  March
          29,2000 and filed April 12, 2000, and incorporated herein by
          this reference.)

     (f)  Des Moines Tower  Proceeds  Agreement  dated as of March 29,
          2000, by and  among  AirTouch  Communications,  Inc., Panora
          Telecommunications, Inc., Walnut Creek Communications, Inc.,
          Minburn Telephone Company, Interstate Enterprises,  Ltd. and
          Prairie Telephone Company, Inc., along with Exhibits A and B
          thereto.  (Filed as Exhibit  2.2 to  Breda's  Form 8-K dated
          March 29, 2000 and filed April 12,  2000,  and  incorporated
          herein by this reference.)

3.   Articles of Incorporation and Bylaws

     (a)  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.)

     (b)  Amended and Restated Bylaws of Breda Telephone Corp.  (Filed
          as Exhibit 3.2 to  Amendment  No. 1 to Breda's  Registration
          Statement  on Form 10-SB,  and  incorporated  herein by this
          reference.)

10.  Material Contracts

     (a)  Employment  Agreement  effective April 1, 2000 between Breda
          and Robert Boeckman.  (Filed as Exhibit 10.1 to Breda's Form
          10-QSB for the  quarterly  period ended March 31, 2000,  and
          incorporated herein by this reference.)

     (b)  Employment  Agreement  effective April 1, 2000 between Breda
          and Jane  Morlok.  (Filed as Exhibit  10.2 to  Breda's  Form
          10-QSB for the  quarterly  period ended March 31, 2000,  and
          incorporated herein by this reference.)