|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **                                                               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 September 30, 2007.                                              |
|   |                                                                                                           |
| o      | 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 o

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

        State the number of shares                    outstanding of each of the issuer’s classes of common equity, as of the                    latest practicable date: 31,016 shares of common stock, no par value, at                    October 1, 2007.

                Transitional Small Business                    Disclosure Format (Check                    one):      Yes                     o                      No x |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  |
|--|

| **PART I - FINANCIAL                    INFORMATION**

**Item                    1.        Financial                    Statements.** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                           |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                           |
| **Breda                Telephone Corp.****And Subsidiaries****Breda, IA**                                                                                      |
|                                                                                                                                                           |
|                                                                                                                                                           |
| **Condensed                Consolidated Financial Statements****For the Periods****Ended September 30, 2007 and 2006****And the Year Ended December 31, 2006** |

| 1 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                   |
|--------------------------------------------------------------------------------------------------------|
|                                                                                                   |
| **CONSOLIDATED BALANCE                SHEETS                September 30, 2007 and December 31, 2006** |
|                                                                                                   |

|                                                                                                                                                                                                                                                                                                                                           |   | **September 30,                2007                (Unaudited)** |       | **December 31,                2006                (Audited)** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|---------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
| ASSETS                                                                                                                                                                                                                                                                                                                                         |   |                                                             |            |                                                          |   |  |   |
|                                                                                                                                                                                                                                                                                                                                           |   |
| CURRENT                ASSETS                                                                                                                                                                                                                                                                                                                  |   |                                                             |       |                                                          |   |   |   |
|     Cash                and cash equivalents                                                                                                                                                                                                                                                                               |   | $                                                                | 1,547,489  |                                                          | $      | 777,708 |   |
|     Marketable                securities                                                                                                                                                                                                                                                                                   |   |                                                             | 725,142    |                                                          |   | 643,119 |   |
|     Accounts                receivable, net of allowances of $356,695 and $46,750                        in 2007 and 2006,                respectively                                                                                                                             |   |                                                             | 1,669,552  |                                                          |   | 995,861 |   |
|     Interest                receivable                                                                                                                                                                                                                                                                                     |   |                                                             | 96,315     |                                                          |   | 82,241 |   |
|     Current                portion of note receivable, less allowance                        of $219,691 in 2006                                                                                                                                                                   |   |                                                             | 254,383    |                                                          |   | 220,283 |   |
|     Inventory,                at average cost                                                                                                                                                                                                                                                                              |   |                                                             | 197,082    |                                                          |   | 151,659 |   |
|     Other                                                                                                                                                                                                                                                                                                                  |   |                                                             | 28,797     |                                                          |   | 47,440 |   |
|     Deferred                income taxes                                                                                                                                                                                                                                                                                   |   |                                                             | 12,319     |                                                          |   | 12,291 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                             | 4,531,079  |                                                          |   | 2,930,602 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| OTHER                NONCURRENT ASSETS                                                                                                                                                                                                                                                                                                         |   |                                                             |       |                                                          |   |   |   |
|     Marketable                securities                                                                                                                                                                                                                                                                                   |   |                                                             | 7,020,650  |                                                          |   | 6,775,348 |   |
|     Investments                in unconsolidated affiliates at equity                                                                                                                                                                                                                                                      |   |                                                             | 8,122,836  |                                                          |   | 7,562,375 |   |
|     Other                investments at cost                                                                                                                                                                                                                                                                               |   |                                                             | 608,746    |                                                          |   | 622,554 |   |
|     Goodwill                                                                                                                                                                                                                                                                                                               |   |                                                             | 896,812    |                                                          |   | 896,812 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                             | 16,649,044 |                                                          |   | 15,857,089 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| PROPERTY,                PLANT AND EQUIPMENT                                                                                                                                                                                                                                                                                                   |   |                                                             | 4,468,799  |                                                          |   | 4,509,149 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| TOTAL                ASSETS                                                                                                                                                                                                                                                                                                                    |   | $                                                                | 25,648,922 |                                                          | $      | 23,296,840 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| LIABILITIES AND                STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                      |   |                                                             |       |                                                          |   |   |   |
|                                                                                                                                                                                                                                                                                                                                      |
| CURRENT                LIABILITIES                                                                                                                                                                                                                                                                                                             |   |                                                             |       |                                                          |   |   |   |
|     Current                portion of long-term debt                                                                                                                                                                                                                                                                       |   | $                                                                | 184,640    |                                                          | $      | 175,729 |   |
|     Accounts                payable                                                                                                                                                                                                                                                                                        |   |                                                             | 756,731    |                                                          |   | 178,331 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|     Accrued                taxes                                                                                                                                                                                                                                                                                           |   |                                                             | 69,192     |                                                          |   | 123,301 |   |
|     Other                                                                                                                                                                                                                                                                                                                  |   |                                                             | 131,260    |                                                          |   | 63,417 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                             | 1,141,823  |                                                          |   | 540,778 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| LONG-TERM                DEBT, less current portion                                                                                                                                                                                                                                                                                            |   |                                                             | 999,590    |                                                          |   | 1,139,205 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| OTHER                NONCURRENT LIABILITIES                                                                                                                                                                                                                                                                                                    |   |                                                             | 1,489,077  |                                                          |   | 1,359,628 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| STOCKHOLDERS’                EQUITY                                                                                                                                                                                                                                                                                                      |   |                                                             |       |                                                          |   |   |   |
|     Common                stock - no par value, 5,000,000 shares authorized, 31,016                        shares issued and outstanding at                $457 and $394                        stated values,                respectively |   |                                                             | 14,174,312 |                                                          |   | 12,220,304 |   |
|     Retained                earnings                                                                                                                                                                                                                                                                                       |   |                                                             | 7,844,120  |                                                          |   | 8,036,925 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                             | 22,018,432 |                                                          |   | 20,257,229 |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                      |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                |   | $                                                                | 25,648,922 |                                                          | $      | 23,296,840 |   |
|                                                                                                                                                                                                                                                                                                                                           |   |                                                                  |       |                                                               |   |
|                                                                                                                                                                                                                                                                                                                                                |        |                                                                  |

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

| 2 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                            |
| **CONSOLIDATED STATEMENTS                OF INCOME (UNAUDITED)                For the Three and Nine Months Ended September 30, 2007 and 2006** |
|                                                                                                                                            |

|                                                                               | **For the Three Months                Ended** |      | **For the Nine Months                Ended** |           |
|------------------------------------------------------------------------------------|-----------------------------------------------|-----------|----------------------------------------------|----------------|
|                                                                          | **2007**                                      |      | **2006**                                     |           | **2007** |   | **2006** |   |
|                                                                          |                                          |      |                                         | **(Restated)** |   |   |   |   | **(Restated)** |   |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
| OPERATING                REVENUES                                                  | $                                             | 2,843,491 |                                         | $              | 2,314,272 |   | $ | 7,715,475 |   | $ | 6,351,101 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
| OPERATING                EXPENSES                                                  |                                          |      |                                         |           |   |   |   |   |   |   |   |   |
|     Cost of                services                            |                                          | 1,365,729 |                                         |           | 1,026,859 |   |   | 3,975,332 |   |   | 2,867,521 |   |
|     Depreciation                and amortization               |                                          | 262,748   |                                         |           | 238,555 |   |   | 749,157 |   |   | 727,232 |   |
|     Selling,                general, and administrative        |                                          | 496,864   |                                         |           | 546,393 |   |   | 1,646,243 |   |   | 1,647,916 |   |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                               |                                          | 2,125,341 |                                         |           | 1,811,807 |   |   | 6,370,732 |   |   | 5,242,669 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
| OPERATING                INCOME                                                    |                                          | 718,150   |                                         |           | 502,465 |   |   | 1,344,743 |   |   | 1,108,432 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
| OTHER INCOME                (EXPENSES)                                             |                                          |      |                                         |           |   |   |   |   |   |   |   |   |
|      Interest                and dividend income          |                                          | 93,137    |                                         |           | 103,427 |   |   | 376,834 |   |   | 272,993 |   |
|      Gain                or (Loss) on sale of investments |                                          | 89,166    |                                         |           | (197 | ) |   | 67,558 |   |   | 1,163,201 |   |
|                                                                                    |                                               |           |                                              |                |
|      Gain                or (Loss) on disposal of assets  |                                          | 7,515     |                                         |           | — |   |   | 17,478 |   |   | (21,714 | ) |
|      Interest                expense                      |                                          | (22,574   | )                                            |           | (25,698 | ) |   | (70,110 | ) |   | (79,331 | ) |
|      Income                from equity investments        |                                          | 584,598   |                                         |           | 680,327 |   |   | 1,398,410 |   |   | 1,382,092 |   |
|      Other,                net                            |                                          | (23,749   | )                                            |           | 8,716 |   |   | (38,782 | ) |   | 12,027 |   |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                               |                                          | 728,093   |                                         |           | 766,575 |   |   | 1,751,388 |   |   | 2,729,268 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
|      INCOME                BEFORE INCOME TAXES            |                                          | 1,446,243 |                                         |           | 1,269,040 |   |   | 3,096,131 |   |   | 3,837,700 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
|      INCOME                TAXES                          |                                          | 538,798   |                                         |           | 635,647 |   |   | 1,117,816 |   |   | 1,522,852 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
|      NET                INCOME                            | $                                             | 907,445   |                                         | $              | 633,393 |   | $ | 1,978,315 |   | $ | 2,314,848 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
|      NET                INCOME PER COMMON SHARE           | $                                             | 29.26     |                                         | $              | 20.42 |   | $ | 63.78 |   | $ | 74.62 |   |
|                                                                                    |                                               |           |                                              |                |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                          |
|      DIVIDENDS                PER COMMON SHARE            | $                                             | —   |                                         | $              | — |   | $ | 7.00 |   | $ | 7.00 |   |
|                                                                               |                                               |      |                                              |           |  |   |  |   |
|                                                                                    |                                               |           |                                              |                |

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

| 3 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA** |
|--------------------------------------------------------------------------------------|
|                                                                                 |
| **CONSOLIDATED STATEMENTS                OF STOCKHOLDERS’ EQUITY**             |
|                                                                                 |

|                                                                                  |   | **Common                Stock** |   | **Retained                Earnings** |       | **Total** |   |
|---------------------------------------------------------------------------------------|--------|---------------------------------|--------|--------------------------------------|------------|-----------|--------|
|                                                                                       |
| **Shares**                                                                            |   | **Amount**                      |
|                                                                                  |   |                                 |   |                                      |       |           |   |  |   |
|                                                                             |
| Balance at December 31, 2005                (Audited)                                 |   | 31,023                          |   | $                                    | 11,075,211 |      | $      | 6,583,060 |   | $ | 17,658,271 |   |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Comprehensive                income:                    |   |                            |   |                                 |       |      |   |   |   |   |   |   |
|           Net                Income |   |                            |   |                                 |       |      |   | 2,818,877 |   |   | 2,818,877 |   |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Dividends                paid                           |   |                            |   |                                 |       |      |   | (217,161 | ) |   | (217,161 | ) |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Common                stock redeemed, net               |   | (7                              | )      |                                 | (2,758     | )         |   |   |   |   | (2,758 | ) |
|                                                                                       |        |                                 |        |                                      |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Stated                value stock adjustment            |   |                            |   |                                 | 1,147,851  |      |   | (1,147,851 | ) |   |   |   |
|                                                                                  |   |                                 |   |                                      |       |           |   |  |   |
|                                                                             |
| Balance at                December 31, 2006 (Audited)                                 |   | 31,016                          |   |                                 | 12,220,304 |      |   | 8,036,925 |   |   | 20,257,229 |   |
|                                                                             |
|                                                                                       |        |                                 |        |                                      |
|      Comprehensive                income:                    |
|           Net                Income |   |                            |   |                                 |       |      |   | 1,978,315 |   |   | 1,978,315 |   |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Dividends                paid                           |   |                            |   |                                 |       |      |   | (217,112 | ) |   | (217,112 | ) |
|                                                                                       |        |                                 |        |                                      |
|                                                                             |
|      Stated                value stock adjustment            |   |                            |   |                                 | 1,954,008  |      |   | (1,954,008 | ) |   |   |   |
|                                                                                       |        |                                 |        |                                      |
|                                                                                  |   |                                 |   |                                      |       |           |   |  |   |
|                                                                             |
| Balance at                September 30, 2007 (Unaudited)                              |   | 31,016                          |   | $                                    | 14,174,312 |      | $      | 7,844,120 |   | $ | 22,018,432 |   |
|                                                                                  |   |                                 |   |                                      |       |           |   |  |   |
|                                                                                       |        |                                 |        |                                      |
|                                                                                       |        |                                 |        |                                      |

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

| 4 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                                          |
|-------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                          |
| **CONSOLIDATED STATEMENTS                OF CASH FLOWS                For the Nine Months Ended September 30, 2007 and 2006** |
|                                                                                                                          |

|                                                                                                                                                                                                                                         |   | **2007** |       | **2006**       |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|----------------|--------|
|                                                                                                                                                                                                                                    |   |     |       | **(Restated)** |   |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
| CASH FLOWS FROM OPERATING                ACTIVITIES                                                                                                                                                                                          |   |     |            |           |   |  |   |
|    Net                income                                                                                                                                                                                                  |   | $        | 1,978,315  |           | $      | 2,314,848 |   |
|    Adjustments                to reconcile net income                    to cash provided by operating activities:                                                                                        |   |     |       |           |   |   |   |
|      Depreciation                and amortization                                                                                                                                                                   |   |     | 749,157    |           |   | 727,232 |   |
|      Deferred                income taxes                                                                                                                                                                           |   |     | 129,421    |           |   | 285,316 |   |
|      Amortization                of investment premium/discount - net                                                                                                                                               |   |     | 31,167     |           |   | 44,846 |   |
|      Equity                income in unconsolidated affiliates, net of distributions                     received of $1,007,361 and $952,189 in 2007 and 2006,                respectively |   |     | (391,049   | )              |   | (429,903 | ) |
|      Realized                (gain) or loss on sale of property                                                                                                                                                     |   |     | (17,478    | )              |   | 21,714 |   |
|      Note                receivable discount                                                                                                                                                                        |   |     | —    |           |   | (814 | ) |
|      (Gain)                or loss on sale of marketable securities                                                                                                                                                 |   |     | 29,542     |           |   | — |   |
|      Gain                on sale of equity investments                                                                                                                                                              |   |     | (97,100    | )              |   |   |   |
|      Gain                on sale of investments - at cost                                                                                                                                                           |   |     | —    |           |   | (1,170,211 | ) |
|    Changes in                assets and liabilities:                                                                                                                                                                          |   |     |       |           |   |   |   |
|      (Increase)                Decrease in assets                                                                                                                                                                   |   |     | (714,545   | )              |   | (82,002 | ) |
|      Increase                (Decrease) in liabilities                                                                                                                                                              |   |     | 591,134    |           |   | (544,144 | ) |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|      Net                cash provided by operating activities                                                                                                                                                       |   |     | 2,288,564  |           |   | 1,166,882 |   |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|                                                                                                                                                                                                                                    |
| CASH FLOWS                FROM INVESTING ACTIVITIES                                                                                                                                                                                          |   |     |       |           |   |   |   |
|    Capital                expenditures                                                                                                                                                                                        |   |     | (708,714   | )              |   | (235,855 | ) |
|    Proceeds from                the sale of assets                                                                                                                                                                            |   |     | 18,385     |           |   | 116,247 |   |
|    Purchase of                marketable securities                                                                                                                                                                           |   |     | (1,552,612 | )              |   | (2,527,911 | ) |
|    Purchase of                equity investments                                                                                                                                                                              |   |     | (169,412   | )              |   | — |   |
|    Purchase of                other investments - at cost                                                                                                                                                                     |   |     | (2,094     | )              |   | (1,854 | ) |
|    Proceeds from                the sale of marketable securities                                                                                                                                                             |   |     | 1,164,578  |           |   | 788,703 |   |
|    Proceeds from                the sale of equity investments, net of                   issuance of note receivable                                                                                           |   |     | 63,000     |           |
|    Proceeds from                the sale of other investments - at cost                                                                                                                                                       |   |     | 15,902     |           |   | 1,343,701 |   |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|      Net                cash used in investing activities                                                                                                                                                           |   |     | (1,170,967 | )              |   | (516,969 | ) |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|                                                                                                                                                                                                                                    |
| CASH FLOWS                FROM FINANCING ACTIVITIES                                                                                                                                                                                          |   |     |       |           |   |   |   |
|    Repayment of                long term debt                                                                                                                                                                                 |   |     | (130,704   | )              |   | (122,362 | ) |
|    Dividends                paid                                                                                                                                                                                              |   |     | (217,112   | )              |   | (217,161 | ) |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|      Net                cash used in financing activites                                                                                                                                                            |   | $        | (347,816   | )              | $      | (339,523 | ) |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|                                                                                                                                                                                                                                    |
| Net Increase                in Cash and Cash Equivalents                                                                                                                                                                                     |   | $        | 769,781    |           | $      | 310,390 |   |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                    |
| Cash and Cash                Equivalents at Beginning of Period                                                                                                                                                                              |   |     | 777,708    |           |   | 739,741 |   |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|                                                                                                                                                                                                                                    |
| Cash and Cash                Equivalents at End of Period                                                                                                                                                                                    |   | $        | 1,547,489  |           | $      | 1,050,131 |   |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                         |   |          |       |                |   |
|                                                                                                                                                                                                                                    |
| Supplemental                Disclosures of Cash Flow Information                                                                                                                                                                             |   |     |       |           |   |   |   |
|    Cash paid                during the period for:                                                                                                                                                                            |   |     |       |           |   |   |   |
|      Interest                                                                                                                                                                                                       |   | $        | 70,110     |           | $      | 79,331 |   |
|      Income                taxes                                                                                                                                                                                    |   | $        | 980,855    |           | $      | 1,326,635 |   |
|                                                                                                                                                                                                                                              |        |          |
|                                                                                                                                                                                                                                              |        |          |

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

| 5 |
|---|

| **BREDA                    TELEPHONE CORP. 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 financial position as of September 30, 2007                        and December 31, 2006 and the results of operation and changes in cash                        flows for the three and nine months ended September 30, 2007 and                        2006.                                                                                                                                                                                                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | 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,                        2006 financial statements. The results of operations for the three and nine                        month period ended September 30, 2007 are not necessarily indicative of the                        operating results of the entire year. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Certain                        reclassifications have been made to the 2006 financial statements to                        conform with the 2007 presentations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|                                                                                                                                                                     |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **NOTE 2.                                   NONCASH                    INVESTING ACTIVITIES** |
|                                                                                                                                                                     |

|   | Noncash investing                        activities included $1,000 and $0 during the nine months ended September                        30, 2007 and September 30, 2006, respectively, relating to plant and                        equipment additions under construction during the period, which are                        reflected in accounts payable at September 30, 2007 and September 30,                        2006. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                                      |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|
| **NOTE 3.                                                      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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

| 6 |
|---|

| **BREDA                    TELEPHONE CORP. AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**NOTE 3.                                   OPERATING                    SEGMENTS (Continued)** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                  |

|   | **Nine                Months Ended                September 30, 2007** |   | **Local                Exchange                Carrier** |   | **Broadcast** |     | **Internet                Service                Provider** |   | **Total** |   |
|--------|------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|---------------|----------|-------------------------------------------------------------|--------|-----------|--------|
|   |                                                                        |        |                                                     |        |          |          |                                                        |        |      |
|   | Revenues                                                               | $      | 6,690,830                                                |   | $             | 535,648  |                                                        | $      | 488,997   |   | $ | 7,715,475 |   |
|   | Segment profit                (loss)                                   |   | 2,595,986                                                |   |          | (158,010 | )                                                           |   | (459,661  | )      |   | 1,978,315 |   |
|        |                                                                        |        |                                                          |        |               |
|   |                                                                   |   |                                                     |   |          |     |                                                        |   |      |   |
|   | **Nine                Months Ended                September 30, 2006** |   | **Local                Exchange                Carrier** |   | **Broadcast** |     | **Internet                Service                Provider** |   | **Total** |   |
|   |                                                                        |        |                                                     |        |          |          |                                                        |        |      |
|   | Revenues                                                               | $      | 5,332,314                                                |   | $             | 549,763  |                                                        | $      | 469,024   |   | $ | 6,351,101 |   |
|   | Segment profit                (loss)                                   |   | 2,887,598                                                |   |          | (153,431 | )                                                           |   | (419,319  | )      |   | 2,314,848 |   |
|        |                                                                        |        |                                                          |        |               |
|   |                                                                   |   |                                                     |   |          |     |                                                        |   |      |   |
|   | **Three Months Ended                September 30, 2007**               |   | **Local                Exchange                Carrier** |   | **Broadcast** |     | **Internet                Service                Provider** |   | **Total** |   |
|   |                                                                        |        |                                                     |        |          |          |                                                        |        |      |
|   | Revenues                                                               | $      | 2,496,057                                                |   | $             | 178,662  |                                                        | $      | 168,772   |   | $ | 2,843,491 |   |
|   | Segment profit                (loss)                                   |   | 1,152,030                                                |   |          | (54,812  | )                                                           |   | (189,773  | )      |   | 907,445 |   |
|        |                                                                        |        |                                                          |        |               |
|   |                                                                   |   |                                                     |   |          |     |                                                        |   |      |   |
|   | **Three Months Ended                September 30, 2006**               |   | **Local                Exchange                Carrier** |   | **Broadcast** |     | **Internet                Service                Provider** |   | **Total** |   |
|   |                                                                        |        |                                                     |        |          |          |                                                        |        |      |
|   | Revenues                                                               | $      | 1,981,776                                                |   | $             | 181,113  |                                                        | $      | 151,383   |   | $ | 2,314,272 |   |
|   | Segment profit                (loss)                                   |   | 842,887                                                  |   |          | (43,711  | )                                                           |   | (165,783  | )      |   | 633,393 |   |
|        |                                                                        |        |                                                          |        |               |

|                                                                                                               |
|--------------------------------------------------------------------------------------------------------------------|
| **NOTE                    4.        NET INCOME PER COMMON                    SHARE** |
|                                                                                                               |

|   | Net income per common                        share for September 30, 2007 and 2006 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 nine months ended September 30, 2007 and 2006 were 31,016 and                        31,023 respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                       |
|--------------------------------------------------------------------------------------------|
| **NOTE                    5.        STOCK VALUE ADJUSTMENT** |
|                                                                                       |

|   | During April 2007, the                        board of directors authorized a $63 increase in the stated value of each                        share of common stock from $394 to $457. There were 31,016 shares                        outstanding at the time of the value adjustment, which reduced retained                        earnings by $1,954,008. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                          |
|   | During July 2006, the                        board of directors authorized a $37 increase in the stated value of each                        share of common stock from $357 to $394. There were 31,023 shares                        outstanding at the time of the value adjustment, which reduced retained                        earnings by $1,147,851.  |

|                                                                                                             |
|------------------------------------------------------------------------------------------------------------------|
| **NOTE                    6.        PRIOR PERIOD                    RESTATEMENTS** |
|                                                                                                             |

|   | The Company restated                        its income from equity investments for the three and nine months ended                        September 30, 2006. The Company determined to restate its income from                        equity investments |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7 |
|---|

|   | from the accepted                        method of a twelve-month period ending September 30th to a                        better method of a twelve-month period ending December 31st,                        when calendar year or quarterly financial statements became available for                        each of the periods ending 2005 and 2006 for these investments. The Company                        determined to make the change in accounting method to have uniformity in                        its reporting period for all of the financial information presented in its                        financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | The change in                        accounting method for the three and nine months ended September 30, 2006                        resulted in a $212,445 increase and a $238,141 increase in income from                        equity investments, respectively. After an adjustment to income taxes, net                        income for the three and nine months ended September 30, 2006, increased                        $125,342, or $4.04 per share, and increased $140,504, or $4.53 per share,                        respectively.                                                                                        |

| 8 |
|---|

| **Item 2.                  ** | **Management’s                Discussion and Analysis of Financial Condition and Results of                Operations.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|-----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                    | Various discussions and                        statements in this quarterly report contain forward-looking statements,                        which can be identified by the use of forward-looking terminology such as                        “expects,” “estimates,” “plans,”                        anticipates,” “forecasts,” “predicts,”                        “projects,” “believes,” “should,”                        “could,” or other similar expressions or variations of those                        words, or by discussions of strategy. No assurance can be given that the                        future results covered by the forward-looking statements will be achieved.                        Some of the matters set forth in the “Cautionary Statement on Forward                        Looking Statements” section of Breda’s Annual Report on Form                        10-KSB for the year ended December 31, 2006 constitute cautionary                        statements identifying factors with respect to such forward-looking                        statements, including certain risks and uncertainties, that could cause                        actual results to vary materially from the future results indicated in such                        forward-looking statements. Other factors could also cause actual results                        to vary materially from the future results indicated in such                        forward-looking statements. |

|                    |
|-------------------------|
| **Overview**

*General* |
|                    |

|                                | Breda is a small                        provider of telecommunication services to residential and business                        customers in the west central region and the southwest region of rural                        Iowa. Breda and its subsidiaries, Prairie Telephone Co., Inc., Westside                        Independent Telephone Company, Tele-Services, Ltd. and BTC, Inc., all                        conduct business under the names “W.I.N.” or “Western                        Iowa Networks”.                                                                                     |
|-------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                | Breda and its                        subsidiaries operate seven telephone exchanges as the incumbent or                        “historical” local exchange carrier (ILEC) and one telephone                        exchange as the competitive local exchange carrier (CLEC) in Carroll, Iowa,                        where Qwest is the incumbent local exchange carrier. Other                        telecommunications services provided include long distance services,                        dial-up and high-speed Internet services, cable TV services, and satellite                        Internet services. |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| *Operating                Segments* |
|                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                | 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.                                                                                  |
|                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                | **Local Exchange                        Carrier Services.**  This 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 all of its ILEC and CLEC exchanges and                        surrounding areas.                                                                                                                                                                                        |
|                                     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|  | **Broadcast                        Services.**  This segment provides cable television services to                        customers in a total of seventeen towns in Iowa and one town in                        Nebraska.                              |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |                                                                                                                                                                                                                                                         |
|  | **Internet                        Services.**  This 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:                                                                                                                                                                      |

| 9 |
|---|

|                                    **                                   Local Exchange Carrier**                                                                Breda                                                                                    Prairie Telephone Co., Inc.                                                                                    Westside Independent Telephone Company                                                                                    BTC, Inc. (competitive local exchange carrier) |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

| **                                                   Broadcast Services**                                                                Tele-Services, Ltd.

**                                                   Internet Service Provider**                                                                BTC, Inc.

*Factors Affecting                    Breda’s Operating Performance* |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|   | Breda believes that a                        number of industry and company-specific factors are affecting and will                        continue to affect Breda’s results of operations. These factors                        include the following: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                           |

|  | • | The effect on                        Breda’s revenues of declining numbers of access lines caused                        by customer migration to cell phone usage only; technology advances                        allowing the provisioning of Internet (data) services on the same access                        line as voice service; technology advances provisioning residential and                        business voice services over data circuits (VOIP); and the declining                        population base in the rural areas served by Breda. |
|--|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|   | Breda’s strategic                        response to this trend includes efforts to introduce and provide enhanced                        local services and additional services like voice mail, dial-up and DSL                        Internet access, long distance services, and to provide cellular services                        through its agency agreement with U.S. Cellular. During third quarter 2006,                        Breda successfully deployed new long-reach, high-speed Internet technology                        in each of its ILEC towns that did not have high-speed Internet services                        from Breda. Breda also seeks to maximize its telecom industry offerings by                        partnering with surrounding telephone companies in wireless service                        ventures and through investment in cellular partnerships within the state                        of Iowa and surrounding states. Breda also competes with Qwest for voice,                        long distance, and Internet service customers in the county seat of                        Carroll, Iowa. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|  | • | The effect on                Breda’s revenues from current and potential future changes in access rate                regulation at the state and federal levels.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|  | • | The effect on                        Breda’s revenues from rate and pricing structure caused by the                        competition of multiple providers in the Carroll, Iowa market. The                        incumbent local exchange carrier (Qwest), the local cable TV provider                        (Mediacom) and additional outside competitors have all partnered with                        telecommunication providers that can bring additional service components to                        complete a bundled service offering to the customer in what is known in the                        industry as the “triple play”. Customers receive local phone                        service, blocks of long distance service minutes, Internet services, and                        video services (cable TV or satellite TV) for a competitive price. Breda                        now competes with the “triple play” bundled services offerings                        from both Qwest and Mediacom. |

| 10 |
|----|

|   | Breda implemented new                        switching capabilities for the Carroll, Iowa market in July, 2006 that                        allow Breda to offer another flavor of high-speed Internet services, in                        addition to its voice, long distance and present Internet services. The                        switching capabilities also allow Breda to look at bringing fiber to the                        home, which would be an overbuild of the Carroll market, and would allow                        Breda to be self-reliant in providing communication services to that                        community by no longer needing to lease access lines from Qwest to provide                        services. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Breda continues to                        evaluate and adjust its package offerings and pricing structures in order                        to attempt to remain competitive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|  | • | The effect on                        Breda’s revenues from decreased customer counts for dial-up Internet                        and cable TV services. Competition and bundled services, declining                        population bases in some of Breda’s rural service areas, and the cost                        of technology upgrades play a role in the competition for and retention of                        customers. Breda continues to look to consolidating cable TV programming                        transmission equipment in its communities where it is geographically                        feasible, in order to reduce system and service costs which are incurred to                        provide the cable TV services. Breda is also looking at the option of                        possibly selling some of its cable TV properties.                                                                                                                                                                                                                                                                                                      |
|--|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|  | • | The effect on                        Breda’s revenues from decreased access revenue caused by a decrease                        in the number of long distance calls originating from, or terminating to,                        an access line in one of Breda’s telephone exchanges. The                        proliferation of cell/wireless phone usage, and the designation of new                        technology by the FCC as data services, instead of voice services, has both                        decreased the “minutes of use” on Breda’s networks, which                        results in less access revenue, and caused the industry access payment                        structure to be renegotiated by the new technology providers and wireless                        providers. Breda continues to investigate new opportunities in the industry                        that the installation of the soft switch in Carroll, Iowa allows because of                        its capacity to handle significant amounts of traffic that were not                        possible with Breda’s older technology switches. |

|         |
|--------------|
| **Revenues** |
|         |

|   | 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 for the three-month periods ended, respectively,                        September 30, 2006, and September 30, 2007: |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|   |                                           | **Three Months Ended                September 30,** |      | **% of Total Revenues                for the Three Months Ended                Ended September 30,** |   |
|--------|------------------------------------------------|-----------------------------------------------------|-----------|------------------------------------------------------------------------------------------------------|--------|
|   |                                           |                                                     |      |                                                                                                      |   |
|   |                                           | **2007**                                            |      | **2006**                                                                                             |   | **2007** |   | **2006** |   |
|   |                                           |                                                     |      |                                                                                                      |   |  |   |  |   |
|   | OPERATING                REVENUES              |                                                |           |                                                                                                 |   |  |   |  |   |  |   |
|   | Local exchange                carrier services | $                                                   | 2,496,057 |                                                                                                 | $      | 1,981,776 |   | 87.8 | % | 85.6 | % |
|   | Broadcast                services              |                                                | 178,663   |                                                                                                 |   | 181,113 |   | 6.3 | % | 7.8 | % |
|   | Internet                services               |                                                | 168,771   |                                                                                                 |   | 151,383 |   | 5.9 | % | 6.6 | % |
|   |                                           |                                                     |      |                                                                                                      |   |  |   |  |   |
|   |                                           | $                                                   | 2,843,491 |                                                                                                 | $      | 2,314,272 |   | 100.0 | % | 100.0 | % |
|   |                                           |                                                     |      |                                                                                                      |   |  |   |  |   |

| 11 |
|----|

|   | *Local Exchange                        Carrier Services.* Breda’s revenue in this segment comes from the                        following sources: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                     |

|  | 1. | Local Network                        Services.  These revenues include monthly subscription charges for                        basic service and enhanced calling features, such as voice mail and caller                        ID, which are billed to individual residential and business                        customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  | 2. | Network Access                        Services.  These revenues are generated from charges established                        to compensate Breda for the origination, transport and termination of calls                        generated by the customers of long distance carriers and for calls                        transported and terminated to the customers of wireless carriers. These                        revenues are received from carriers such as AT&T, Verizon, MCI, and                        Sprint. Breda also receives federally administered universal service                        support as a result of the interstate switched access support provisions                        put into place by the Federal Communications Commission. The Universal                        Service Fund was started as a mechanism to promote phone service                        accessibility for everyone at affordable rates and comparable service. The                        access charges for long distance services within Iowa are based on rates                        approved by the Iowa Utilities Board. Switched and special access charges                        for interstate and international services are based on rates approved by                        the Federal Communications Commission. The transport and termination                        charges paid by wireless carriers are specified in interconnection                        agreements negotiated with each individual wireless carrier. |
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  | 3. | Long Distance                        Services.  Breda generates revenues for providing long distance                        services to its customers. This revenue category also includes fees related                        to the provision of directory assistance and operator assistance                        services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  | 4. | Cellular                        Services.  Breda is an agent for the U.S. Cellular service area in                        Iowa. As an agent for U.S. Cellular, Breda generates commission revenue                        from the sale of the wireless calling plans offered by U.S. Cellular to                        Breda’s customers. Breda also generates revenue from the sale of                        phones and accessories needed to receive wireless phone service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  | 5. | Billing and                        Collection Services.  Breda receives revenue for performing                        billing and collection services for long distance carriers. Breda receives                        a minimal percentage of the long distance call dollars that Breda receives                        and processes through its customer billing system. The customer receives                        one bill, which includes both local and long distance charges, instead of                        receiving a separate bill from their long distance carrier.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  | 6. | Miscellaneous.                        Phone-related services generated by Breda include revenues from directory                        publishing, directory advertising, inside line care, the sale and                        maintenance of customer premise equipment, the sale and maintenance of                        phone systems, and the sale of pager services. A significant revenue source                        is the rental of Breda’s fiber optic toll trunks to other                        telecommunication providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|  |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

|   | *Broadcast Services.                         * The revenues in this segment are generated from the monthly fees                        charged to customers for basic and premium cable TV services. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 12 |
|----|

|   | *Internet Services.                         * The bulk of the revenues in this segment arise from monthly                        dial-up and high-speed Internet access services fees billed to residential                        and business customers. Revenues are also generated from the sale of                        Internet equipment modems and routers, and from customer trouble-shooting                        and maintenance support fees. This revenue category also includes revenue                        generated through the offering of a satellite-based Internet                        service.        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Operating                Expenses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Operating Expense                        Categories.* Breda’s operating expenses are categorized as cost of                        services; depreciation and amortization; and selling, general and                        administrative.                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Cost of Services.                         * This category includes expenses for salaries and wages relating                        to plant operation and maintenance; network access costs; long distance                        provisioning costs; conference bridge provisioning costs; salary, wage,                        equipment, training, and advertising costs for cellular and retail                        services; postage; utilities; and Internet service provisioning                        costs.                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Depreciation and                        amortization.* This category of costs includes depreciation of the                        telecommunication equipment and network; Internet services equipment; cable                        TV programming equipment and transmission equipment; buildings; and                        amortization of intangible assets.                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Selling, General and                        Administrative.* This category includes expenses for legal and                        accounting services; wages and benefits; contract service payments; travel,                        meals and lodging; investment fees; board of director fees and expense                        reimbursements; insurance premiums; supplies; advertising and promotion                        costs; dues and subscriptions; property taxes; and all customer service                        operations, marketing and sales operations, and administrative operations                        costs. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Results of                Operations**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The following table                        sets forth certain items reflected in Breda’s consolidated statements                        of operations for the periods indicated, expressed as a percentage of total                        revenues:                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|               |                                               |   | **Three Months Ended                September 30,** |   | **Nine Months Ended                September 30,** |   |
|--------------------|----------------------------------------------------|--------|-----------------------------------------------------|--------|----------------------------------------------------|--------|
|               |                                               |   |                                                     |   |                                                    |   |
|               |                                               |   | **2007**                                            |   | **2006                (Restated)**                 |   | **2007** |   | **2006                (Restated)** |   |
|               |                                               |   |                                                     |   |                                                    |   |  |   |  |   |
|     |
|               | Operating                revenues                  |   | 100                                                 | %      | 100                                                | %      | 100 | % | 100 | % |
|               | Cost of                services                    |   | 48                                                  | %      | 44                                                 | %      | 52 | % | 45 | % |
|               | Depreciation                and amortization       |   | 9                                                   | %      | 10                                                 | %      | 10 | % | 11 | % |
|               | Selling,                general and administrative |   | 18                                                  | %      | 24                                                 | %      | 21 | % | 27 | % |
|                    |                                                    |        |                                                     |        |
|               |                                               |   |                                                     |   |                                                    |   |  |   |  |   |
|     |
|               | Operating                income                    |   | 25                                                  | %      | 22                                                 | %      | 17 | % | 17 | % |
|               | Other income                (expenses)             |   | 26                                                  | %      | 33                                                 | %      | 23 | % | 43 | % |
|               | Income                taxes                        |   | 19                                                  | %      | 27                                                 | %      | 14 | % | 24 | % |
|                    |                                                    |        |                                                     |        |
|               |                                               |   |                                                     |   |                                                    |   |  |   |  |   |
|     |
|               | Net                income                          |   | 32                                                  | %      | 28                                                 | %      | 26 | % | 36 | % |
|               |                                               |   |                                                     |   |                                                    |   |  |   |  |   |
|                    |                                                    |        |                                                     |        |

| 13 |
|----|

|   | **Three                Months Ended September 30, 2007 and 2006**                                                                                                                                     |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                  |
|   | The table below sets                        forth the components of Breda’s revenues for the three months ended                        September 30, 2007, compared to the same period in 2006. |
|        |                                                                                                                                                                                                  |

|         |                                                             |   | **Three Months Ended                September 30,** |      | **Change** |   |
|--------------|------------------------------------------------------------------|--------|-----------------------------------------------------|-----------|------------|--------|
|         |                                                             |   |                                                     |      |            |   |
|         |                                                             |   | **2007**                                            |      | **2006**   |   | **Amount** |   | **Percent** |   |
|         |                                                             |   |                                                     |      |            |   |  |   |  |   |
|         | OPERATING                REVENUES                                |   |                                                |           |       |   |  |   |   |  |   |  |   |
|         | Local Exchange                Carrier                            |   |                                                |      |       |   |   |   |   |   |   |   |   |
|         |    Local network                services          |   | $                                                   | 228,011   |       | $      | 230,490 |   | $ | (2,479 | ) | -1.1 | % |
|         |    Network                access services         |   |                                                | 1,710,403 |       |   | 1,210,045 |   |   | 500,358 |   | 41.4 | % |
|         |    Long distance                services          |   |                                                | 137,063   |       |   | 62,934 |   |   | 74,129 |   | 117.8 | % |
|         |    Cellular                services               |   |                                                | 370,999   |       |   | 415,463 |   |   | (44,464 | ) | -10.7 | % |
|         |    Billing and                collection services |   |                                                | 2,480     |       |   | 3,391 |   |   | (911 | ) | -26.9 | % |
|         |    Miscellaneous                                  |   |                                                | 47,101    |       |   | 59,453 |   |   | (12,352 | ) | -20.8 | % |
|         |                                                             |   |                                                     |      |            |   |  |   |  |   |
|         |                                                             |   | $                                                   | 2,496,057 |       | $      | 1,981,776 |   | $ | 514,281 |   | 26.0 | % |
|         |                                                             |   |                                                     |      |            |   |  |   |  |   |
|    |
|         | Broadcast                Services                                |   | $                                                   | 178,663   |       | $      | 181,113 |   | $ | (2,450 | ) | -1.4 | % |
|    |
|         | Internet                services                                 |   | $                                                   | 168,771   |       | $      | 151,383 |   | $ | 17,388 |   | 11.5 | % |
|    |
|         |                                                             |   |                                                     |      |            |   |  |   |  |   |
|         |                                                             |   | $                                                   | 2,843,491 |       | $      | 2,314,272 |   | $ | 529,219 |   | 22.9 | % |
|         |                                                             |   |                                                     |      |            |   |  |   |  |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There was an increase                        in total operating revenues for the three-month period ended September 30,                        2007, when compared to the three-month period ended September 30, 2006, of                        $529,219, or 22.9%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | *Local                Exchange Carrier Services - $514,281*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Local exchange carrier                        services revenues accounted for 87.8% of all operating revenues in the                        three-month period ended September 30, 2007. There was a $514,281, or                        26.0%, increase in local exchange carrier services revenues for the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Local network services                        revenues decreased $2,479, or 1.1%, for the three months ended September                        30, 2007, as compared to the same period in 2006, primarily because of a                        decrease in residential lines. As the number of customers taking high speed                        Internet instead of dial-up Internet increases, the number of residential                        lines decrease since high speed Internet does not require a second phone                        line. Breda’s long distance services revenue increased $74,129, or                        117.8%, for the three months ended September 30, 2007, as compared to the                        three-month period ended September 30, 2006. While Breda has experienced a                        12.6% increase in its long distance customer base when comparing the two                        periods, the increase is offset somewhat by a decrease in the average                        minutes used by each customer on a monthly basis, as well as a decrease in                        the price that Breda is charging its customers for Breda’s long                        distance service offerings. The rate decreases for bundled service                        offerings began on July 1, 2006. Breda has received a good response to its                        package offerings that include local and long distance service from both                        residential and business customers and is the main reason for the increase                        in long distance services revenue. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Part of Breda’s                        117.8% increase in long distance revenue for the three months ended                        September 30, 2007 when compared to the same period in 2006 was because                        Breda’s underlying long distance carrier experienced some billing                        problems in the recording and transmitting of call                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

| 14 |
|----|

|   | detail records which                        prohibited Breda’s billing of its end users for some of their long                        distance calls. Breda and its underlying long distance provider were able                        to recover information on unbilled calls from the carrier for the last                        quarter 2006 and the first quarter 2007, and all available unbilled records                        were billed to the end users when billing was processed for August 1, 2007.                        Breda also experienced billing software problems with its calling plans,                        which caused minutes to not be billed to customers in some of its package                        LD plans during the prior three-month period ended June 30, 2007.                        Breda’s billing software vendor also was able to recapture this data                        and Breda billed these minutes during the three-month period ended                        September 30, 2007. These adjustments totaled approximately $4,477.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Network access services                        increased $500,358, or 41.4%, for the three-month period ended September                        30, 2007, when compared to the three-month period ended September 30, 2006.                        This increase mainly resulted from increased terminating access revenues                        generated from traffic delivered to Breda’s conference bridges in                        Carroll, Iowa. Breda has contracted with conference bridge vendors for the                        transport of long distance calls over Breda’s networks. Breda began                        billing for these services in September 2006, and began billing for                        additional conference bridge services in March 2007. Breda’s access                        revenue has also increased because, as noted previously, BTC, Inc.                        implemented new switching capabilities in July 2006 in its Carroll, Iowa                        location, and is now able to receive some tandem switching rate element                        payments for consolidating and switching its traffic from three of                        Breda’s own seven telephone exchanges. There was also some increase                        in Breda’s access revenue because of an increased customer base                        taking Breda’s long distance services. These customers generate                        access revenue when they use Breda’s networks to make long distance                        calls.                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Cellular services                        decreased $44,464, or 10.7%, for the three-month period ended September 30,                        2007, when compared to the three-month period ended September 30, 2006.                        Breda experienced a 8.5% decrease in its cellular customer count during the                        three-month period ended September 30, 2007, when compared to the three                        month period ended September 30, 2006. Breda experienced a decrease in                        cellular customers during the month of August 2007, when U.S. Cellular ran                        special Iowa State Fair promotions that included free equipment and special                        calling packages that Breda and other U.S. Cellular agents were not allowed                        to offer to the customers in their service areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Combined miscellaneous                        and billing/collection revenues decreased $13,263, or 21.1%, for the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006. The main components of                        miscellaneous revenue were the receipt of rent from other telephone                        companies or industry carriers for the lease of capacity over fiber optic                        rings owned by Breda, or owned jointly with neighboring telephone                        companies, and the receipt of switching services revenue. Billing and                        collection revenue continues to decrease since most carriers now bill for                        their own long distance services instead of paying a carrier, such as                        Breda, to bill these services for them. Industry guidelines no longer allow                        payment for the provisioning of tandem services to neighboring telephone                        companies so these companies rerouted traffic that was previously tandemed                        by Breda. Effective August 15, 2007, Breda no longer is providing and                        receiving payment for these services which resulted in a decrease in                        revenue. The miscellaneous revenue for the three-month period ended                        September 30, 2007, when compared to the three-month period ended September                        30, 2006, also decreased because Breda sold fewer key systems during the                        current three-month period. |

| 15 |
|----|

|   | *Broadcast                Services – ($2,450)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Broadcast services                        decreased $2,450, or 1.4%, for the three-month period ended September 30,                        2007, when compared to the three-month period ended September 30, 2006.                        Tele-Services continues to lose customers and to face stiff competition                        from satellite providers who are able to provide extensive channel line-up                        packages, and who are also able to include local channels in their package                        offerings. Tele-Services completed a fiber construction project during the                        quarter ended September 30, 2005, and another project during quarter ended                        September 30, 2006, which allowed it to combine cable TV head ends. Breda                        continues to explore other consolidation opportunities in                        Tele-Services’ cable TV communities in order to reduce operating                        costs through consolidation of equipment and maintenance costs. Breda is                        also exploring the option of selling some of its cable TV properties. Rate                        increases were implemented in November 2005, and August 2006, respectively,                        for the two communities that received additional channels from the                        consolidation of head ends. Tele-Services added the HBO premium channel in                        Farragut, Riverton and Sidney on February 1, 2007. Rate increases were                        implemented for the basic service package in ten of its cable communities                        on March 1, 2007. Premium channel increases were also implemented in eight                        of its cable communities on March 1, 2007. Another factor faced by                        Tele-Services is the declining population base in the small rural                        communities served by Tele-Services.                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | *Internet                Services – $17,388*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Internet services                        revenue increased $17,388, or 11.5%, for the three-month period ended                        September 30, 2007, when compared to the three-month period ended September                        30, 2006. Breda has seen an increase in its high-speed Internet customer                        base when comparing the two periods, which has offset the decrease in                        Breda’s dialup Internet customer base. The decrease in dialup                        Internet customers is the result of the intense competition by multiple                        suppliers in the Carroll, Iowa market area, and the migration of customers                        to high-speed Internet because of an overall decrease in the price for                        high-speed Internet. 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. In May 2007, Breda consolidated its high-speed                        Internet offering into two price and bandwidth options which has met with                        great customer acceptance and increased Breda’s customer base for the                        three-month period ended September 30, 2007. Also, with the advent of newer                        technologies that expand the range for high-speed Internet services from                        Breda’s central office, Breda began offering new longer-reach,                        high-speed Internet services in its remaining five outlying ILEC                        communities that previously were not able to receive those services from                        Breda. These service offerings were implemented during the fourth quarter                        2006, and Breda has had a very favorable response to these new technology                        Internet offerings. This increase in customer base is, however, offset by a                        decrease in the price that customers are charged for Breda’s                        high-speed Internet offerings. |

| 16 |
|----|

|   | OPERATING                EXPENSES                                                                                                                                                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                         |
|   | The table below sets                        forth the components of Breda’s operating costs for the three months                        ended September 30, 2007, compared to the same period in 2006. |
|        |                                                                                                                                                                                                         |

|                     |                                                                                   | **Three Months Ended                September 30,** |        | **Change** |   |
|--------------------------|----------------------------------------------------------------------------------------|-----------------------------------------------------|-------------|------------|--------|
||
| **2007**                 | **2006**                                                                               | **Amount**                                          | **Percent** |
||
|                     | OPERATING                EXPENSES                                                      |                                                |             |       |   |  |   |   |  |   |   |  |   |
|                     | Cost of services                                                                       |                                                |        |       |   |   |   |   |   |   |   |   |   |
|                     |    Plant                specific operations                             | $                                                   | 613,614     |       | $      | 314,402 |   | $ | 299,212 |   |   | 95.2 | % |
|                     |    Plant                nonspecific operations                          |                                                | 111,889     |       |   | 64,591 |   |   | 47,298 |   |   | 73.2 | % |
|                     |    Cost of                long distance                                 |                                                | 74,237      |       |   | 43,557 |   |   | 30,680 |   |   | 70.4 | % |
|                     |    Cost of                cellular                                      |                                                | 293,540     |       |   | 302,260 |   |   | (8,720 | ) |   | -2.9 | % |
|                     |    Cost of                internet                                      |                                                | 164,120     |       |   | 210,792 |   |   | (46,672 | ) |   | -22.1 | % |
|                     |    Cost of                programming                                   |                                                | 108,329     |       |   | 91,257 |   |   | 17,072 |   |   | 18.7 | % |
||
|                     |      Total cost of                services                    | $                                                   | 1,365,729   |       | $      | 1,026,859 |   | $ | 338,870 |   |   | 33.0 | % |
||
|      |
|                     | Depreciation and                amortization                                           | $                                                   | 262,748     |       | $      | 238,555 |   | $ | 24,193 |   |   | 10.1 | % |
|      |
|                     | Selling, general and                administrative                                     |                                                |        |       |   |   |   |   |   |   |   |   |   |
|                     |    Customer                operations                                   | $                                                   | 208,370     |       | $      | 198,983 |   | $ | 9,387 |   |   | 4.7 | % |
|                     |    Corporate                operations                                  |                                                | 223,909     |       |   | 308,350 |   |   | (84,441 | ) |   | -27.4 | % |
|                     |    General                taxes                                         |                                                | 64,585      |       |   | 39,060 |   |   | 25,525 |   |   | 65.3 | % |
||
|                     |      Total selling,                general and administrative | $                                                   | 496,864     |       | $      | 546,393 |   | $ | (49,529 | ) |   | -9.1 | % |
||
|      |
|                     |                                                                                   | $                                                   | 2,125,341   |       | $      | 1,811,807 |   | $ | 313,534 |   |   | 17.3 | % |
||

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Cost of                Services - $338,870*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Cost of services                        increased $338,870, or 33.0%, for the three-month period ended September                        30, 2007, when compared to the three-month period ended September 30, 2006.                        Most all of the $338,870 increased costs were incurred for the provisioning                        of the conference bridge services, which began in July 2006. Some                        additional increased costs arose from labor rate increases implemented in                        2007 when comparing the two three-month periods. There was a $30,680, or                        70.4%, increase in long distance provision costs which is a direct                        reflection of the increased long distance revenue incurred during the                        three-month period ended September 30, 2007; a $8,720, or 2.9%, decrease in                        cellular service provisioning costs and a $46,672, or 22.1%, decrease in                        Internet provisioning costs when comparing the three-month period ended                        September 30, 2007 to the three-month period ended September 30, 2006.                        Breda also incurred additional costs for repair and maintenance                        expenditures for its central offices, equipment and buildings and grounds                        during the three-month period ended September 30, 2007, when compared to                        the three-month period ended September 30, 2006. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Although a greater                        number of customers continued to use Breda’s long distance services,                        their average minutes of use per month are decreasing. The decreased                        minutes of use, along with Breda’s switch to a new underlying carrier                        on August 20, 2006, have contributed to a decrease in Breda’s overall                        cost to provide long distance service. Breda had a 12.6% increase in                        customers subscribing to Breda’s long distance services for the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006, which caused the increase in                        the long distance provisioning costs. Breda’s decrease in cellular                        service provisioning costs was directly tied to the decrease in cellular                        customers during the three month period ended September 30, 2007.                        Breda’s decrease in Internet provisioning costs resulted mainly from                        the migration of many of its dial-up customers in its southern Iowa                                                                                                                                                                                                                                                                         |

| 17 |
|----|

|   | exchanges to high speed                        Internet services where provisioning could be consolidated for both new and                        present high speed Internet customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | While                        Tele-Services’ overall customer growth for cable TV services                        continued to decline, its programming costs increased $17,072, or 18.7%,                        for the three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006. Even though Tele-Services is a                        member of an industry programming purchasing group, it continues to see                        significant increases in the programming rates paid by Tele-Services in                        order to offer its cable TV offerings.                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Depreciation and                Amortization – $24,193*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Depreciation and                        amortization expense increased $24,193, or 10.1%, for the three-month                        period ended September 30, 2007, when compared to the three-month period                        ended September 30, 2006. Breda made significant upgrades to its equipment                        and networks during 2007. These investments are in service and are now                        being depreciated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Selling,                General and Administrative –($49,529)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Selling, general and                        administrative expenses decreased $49,529, or 9.1 %, for the three-month                        period ended September 30, 2007, when compared to the three-month period                        ended September 30, 2006. There was an overall decrease in consulting,                        accounting and legal fees for the three-month period ended September 30,                        2007. While there were outside consulting services utilized to analyze and                        pursue new business opportunities in the industry during the three-month                        period ended September 30, 2007, when compared to the three-month period                        ended September 30, 2006, there were no corresponding professional fees for                        annual meeting and SEC filing services during the three-month period ended                        September 30, 2007. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | OTHER INCOME                (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | The table below sets                        forth the components of other income (expense) for the three-month period                        ended September 30, 2007, compared to the same period in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|     |                                                 | **Three Months Ended                September 30,** |        | **Change** |   |
|----------|------------------------------------------------------|-----------------------------------------------------|-------------|------------|--------|
||
| **2007** | **2006                (Restated)**                   | **Amount**                                          | **Percent** |
||
|     | OTHER INCOME                (EXPENSE)                |                                                |        |       |   |   |   |   |   |   |   |   |   |
|     | Interest and dividend                income          | $                                                   | 93,137      |       | $      | 103,427 |   | $ | (10,290 | ) |   | -9.9 | % |
|     | Gain or (Loss) on sale of                investments |                                                | 89,166      |       |   | (197 | ) |   | 89,363 |   |   | 45,361.9 | % |
|     | Gain or (Loss) on disposal                of assets  |                                                | 7,515       |       |   | — |   |   | 7,515 |   |   | 100.0 | % |
|     | Interest expense                                     |                                                | (22,574     | )          |   | (25,698 | ) |   | 3,124 |   |   | -12.2 | % |
|     | Income from equity                investments        |                                                | 584,598     |       |   | 680,327 |   |   | (95,729 | ) |   | -14.1 | % |
|     | Other, net                                           |                                                | (23,749     | )          |   | 8,716 |   |   | (32,465 | ) |   | -372.5 | % |
||
|     |                                                 | $                                                   | 728,093     |       | $      | 766,575 |   | $ | (38,482 | ) |   | -5.0 | % |
||

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest and                        Dividend Income.* Interest and dividend income decreased $10,290, or                        9.9%, for the three-month period ended September 30, 2007, when compared to                        the three-month period ended September 30, 2006. Breda’s overall                        investments increased, and the rates earned increased on investments in                        both temporary investments and marketable securities on which Breda                        generates interest income for the three-month period ended September 30,                        2007, when compared to the three-month period ended September 30, 2006.                        Breda’s interest income |

| 18 |
|----|

|   | decreased with the sale                        of Desktop Media, LLC because after June 1, 2007, Breda no longer received                        interest payments of approximately $3,400 per month on the Desktop Media,                        LLC note receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Gain on sale of                        investments.*  The $89,166 gain on sale of investments for the                        three-month period ended September 30, 2007, is a combination of the                        $97,100 gain on the sale of Breda’s investment in Desktop Media, LLP                        and the net gain/loss on the redemption of temporary investments, for which                        there is no corresponding entry in the same three-month period in                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Gain on disposal of                        assets.*  The $7,515 gain on disposal of assets for the three-month                        period ended September 30, 2007, represents the gain from the sale or                        trade-in of service vehicles and for which there is no corresponding entry                        in the same three-month period in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Interest Expense.                         * The $3,124, or 12.2%, decrease in interest expense for the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006, is the result of the reduction                        of the Rural Telephone Finance Cooperative loan balance on which interest                        is calculated because of the payment of the scheduled principal payments on                        the loan. There has been no change in interest rate and no additional loan                        amounts have been borrowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Income from Equity                        Investments.* Income from equity investments decreased $95,729, or                        14.1%, for the three-month period ended September 30, 2007, when compared                        to the three-month period ended September 30, 2006. The equity investments                        income 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 income reported on Breda’s income                        statement for the three-month period ended September 30, 2007 is a                        reflection of the net increases and decreases in the net income of                        Breda’s equity investments. Most of Breda’s equity investments                        are in cellular partnerships. Some of these cellular investments now                        receive universal service funding which has increased their overall                        operating revenue. An additional source of income from equity investments                        arises from Breda’s ownership interest in Alpine Communications,                        L.C., an operating telephone company in northeastern Iowa and in Bug                        Tussel, LLC, a wireless cell site provider, and in Spiralight Network, LLC,                        a fiber optic network provider in Wisconsin and Illinois. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Other, Net.                         * The $32,465, or 372.5%, decrease in other net income for the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006, is mainly attributable to                        increased partnership-related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Income Tax Expense.                         * Income taxes increased $177,203, or 14.0%, for the three-month                        period ended September 30, 2007, when compared to the same period in 2006.                        The increase is a direct reflection of the increased income generated from                        operations for the three month period ended September 30, 2007 when                        compared to the three-month period ended September 30, 2006. The effective                        tax rate for the three-month period ended September 30, 2007 is 37.26%,                        compared to a 50.09% tax rate for the same three-month period in 2006. The                        effective tax rate differs from the U.S. statutory rate due to state income                        taxes and the proportion of income from investments which are exempt from                        income tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Net Income.                         * Net income increased $274,052, or 43.3%, for the three-month                        period ended September 30, 2007, when compared to the same period in 2006.                        Operating income accounted for $215,685 of this increase during the                        three-month period ended September 30, 2007, when compared to the                        three-month period ended September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

| 19 |
|----|

|   | **Nine months                Ended September 30, 2007 and 2006**                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                 |
|   | The table                below sets forth the components of Breda’s revenues for the nine months ended                September 30, 2007, compared to the same period in 2006. |
|        |                                                                                                                                                                                 |

|                     |                                                             | **Nine Months Ended                September 30,** |        | **Change** |   |
|--------------------------|------------------------------------------------------------------|----------------------------------------------------|-------------|------------|--------|
||
| **2007**                 | **2006**                                                         | **Amount**                                         | **Percent** |
||
|                     | OPERATING                REVENUES                                |                                               |        |       |   |   |   |   |   |   |   |   |   |
|                     | Local Exchange                Carrier                            |                                               |        |       |   |   |   |   |   |   |   |   |   |
|                     |    Local                network services          | $                                                  | 685,361     |       | $      | 672,251 |   | $ | 13,110 |   |   | 2.0 | % |
|                     |    Network                access services         |                                               | 4,457,772   |       |   | 3,203,922 |   |   | 1,253,850 |   |   | 39.1 | % |
|                     |    Long                distance services          |                                               | 266,796     |       |   | 244,574 |   |   | 22,222 |   |   | 9.1 | % |
|                     |    Cellular                services               |                                               | 1,125,497   |       |   | 1,090,089 |   |   | 35,408 |   |   | 3.2 | % |
|                     |    Billing                and collection services |                                               | 8,924       |       |   | 11,149 |   |   | (2,225 | ) |   | -20.0 | % |
|                     |    Miscellaneous                                  |                                               | 146,480     |       |   | 110,329 |   |   | 36,151 |   |   | 32.8 | % |
||
|                     |                                                             | $                                                  | 6,690,830   |       | $      | 5,332,314 |   | $ | 1,358,516 |   |   | 25.5 | % |
||
|      |
|                     | Broadcast                Services                                | $                                                  | 535,648     |       | $      | 549,763 |   | $ | (14,115 | ) |   | -2.6 | % |
|      |
|                     | Internet                services                                 | $                                                  | 488,997     |       | $      | 469,024 |   | $ | 19,973 |   |   | 4.3 | % |
|      |
||
|                     |                                                             | $                                                  | 7,715,475   |       | $      | 6,351,101 |   | $ | 1,364,374 |   |   | 21.5 | % |
||

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There was an increase                        in total operating revenues for the nine-month period ended September 30,                        2007, when compared to the nine-month period ended September 30, 2006, of                        $1,364,374, or 21.5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Local                Exchange Carrier Services - $1,358,516*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Local exchange carrier                        services revenues accounted for 86.7% of all operating revenues in the                        nine-month period ended September 30, 2007. There was a $1,358,516, or                        25.5%, increase in local exchange carrier services revenues for the                        nine-month period ended September 30, 2007, when compared to the nine-month                        period ended September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Local network services                        revenues increased $13,110, or 2.0%, for the nine months ended September                        30, 2007, as compared to the same period in 2006, primarily because of the                        increased number of customers taking phone service from BTC, Inc. in                        Carroll, Iowa. Breda’s long distance services revenue increased                        $22,222, or 9.1%, for the nine months ended September 30, 2007, as compared                        to the nine-month period ended September 30, 2006. Although Breda has seen                        an increase in its long distance customer base when comparing the two                        periods, the increase is offset by a decrease in the average minutes used                        by each customer on a monthly basis, as well as a decrease in the price                        that Breda is charging its customers for Breda’s long distance                        service offerings. The rate decreases for bundled service offerings began                        on July 1, 2006. Breda has received a good response to its package                        offerings that include local and long distance service from both                        residential and business customers. This customer response is reflected in                        the 12.3% increase in Breda’s customer base and the corresponding                        increase in its long distance services revenue for the nine month period                        ended September 30, 2007. |

| 20 |
|----|

|   | Breda’s                        underlying long distance carrier experienced some billing problems in the                        recording and transmitting of call detail records which prohibited                        Breda’s billing of its end users for some of their long distance                        calls during the three-month period ended June 30, 2007. Breda worked with                        its carrier to resolve the problem and all available unbilled records were                        billed to the end users when billing was processed for August 1, 2007.                        Breda also experienced billing software problems with its calling plans,                        which caused minutes to not be billed to customers in some of its package                        LD plans. Breda also worked with its billing software vendor to recapture                        and bill these minutes. These adjustments accounted for $4,477 of the                        increased long distance service revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Network access services                        increased $1,253,850, or 39.1%, for the nine-month period ended September                        30, 2007, when compared to the nine-month period ended September 30, 2006.                        This increase mainly resulted from increased terminating access revenues                        received from traffic delivered to Breda’s conference bridges in                        Carroll, Iowa. Breda has contracted with conference bridge vendors for the                        transport of long distance calls over Breda’s networks. Breda began                        billing for these services in September 2006, and began billing for                        additional conference bridge services in March 2007. Breda’s access                        revenue has also increased because, as noted previously, BTC, Inc.                        implemented new switching capabilities in July 2006 in its Carroll, Iowa                        location, and is now able to receive some tandem switching payments for                        consolidating and switching its traffic from three of Breda’s own                        seven telephone exchanges. There was also some increase in Breda’s                        access revenue because of an increased customer base taking Breda’s                        long distance services. These customers generate access revenue when they                        use Breda’s networks to make long distance calls. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Cellular services                        increased $35,408, or 3.2%, for the nine-month period ended September 30,                        2007, when compared to the nine-month period ended September 30, 2006.                        Breda’s cellular customer count decreased .4% during the nine-month                        period ended September 30, 2007, when compared to the nine-month period                        ended September 30, 2006. Even with the almost identical customer                        count, Breda experienced some increase in equipment sales and cellular                        commissions revenue during the nine-month period ended September 30, 2007.                        Breda attributes this increase to the sale of more premium package options,                        and the sale of more advanced technology equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Combined miscellaneous                        and billing/collection revenues increased $33,926, or 27.9%, for the                        nine-month period ended September 30, 2007, when compared to the nine-month                        period ended September 30, 2006. The main components of miscellaneous                        revenue were the receipt of rent from other telephone companies or industry                        carriers for the lease of capacity over fiber optic rings owned by Breda,                        or owned jointly with neighboring telephone companies, and the receipt of                        switching services revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | *Broadcast                Services – ($14,115)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | Broadcast services                        decreased $14,115, or 2.6%, for the nine-month period ended September 30,                        2007, when compared to the nine-month period ended September 30, 2006.                        Tele-Services continues to lose customers and to face stiff competition                        from satellite providers, who are able to provide extensive channel line-up                        packages, and who are also able to include local channels in their package                        offerings. Tele-Services completed a fiber construction project during the                        quarter ended September 30, 2005, and another project during quarter ended                        September 30, 2006, which allowed it to combine cable TV head ends. Breda                        continues to explore other consolidation opportunities in                        Tele-Services’ cable TV communities in order to reduce operating                        costs through consolidation of equipment and maintenance costs. Breda is                        also                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

| 21 |
|----|

|   | exploring the option of                        selling some of its cable TV properties. Rate increases were implemented in                        November 2005, and August 2006, respectively, for the two communities that                        received additional channels from the consolidation of head ends.                        Tele-Services added the HBO premium channel in Farragut, Riverton and                        Sidney on February 1, 2007. Rate increases were implemented for the basic                        service package in ten of its cable communities on March 1, 2007. Premium                        channel increases were also implemented in eight of its cable communities                        on March 1, 2007. Another factor faced by Tele-Services is the declining                        population base in the small rural communities served by                        Tele-Services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | *Internet                Services – $19,973*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Internet services                        revenue increased $19,973, or 4.3%, for the nine-month period ended                        September 30, 2007, when compared to the nine-month period ended September                        30, 2006. Breda has seen an increase in its high-speed Internet customer                        base when comparing the two periods, which has offset the decrease in                        Breda’s dialup Internet customer base. The decrease in dialup                        Internet customers is the result of the intense competition by multiple                        suppliers in the Carroll, Iowa market area, and the migration of customers                        to high-speed Internet because of an overall decrease in the price for                        high-speed Internet. 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. Effective May 1, 2007, Breda consolidated its                        high-speed Internet offering into two price and bandwidth options which has                        met with great customer acceptance and increased Breda’s customer                        base for the nine-month period ended September 30, 2007. Also, with the                        advent of newer technologies that expand the range for high-speed Internet                        services from Breda’s central office, Breda began offering new                        longer-reach, high-speed Internet services in its remaining five outlying                        ILEC communities that previously were not able to receive those services                        from Breda. These service offerings were begun during the fourth quarter                        2006, and Breda has had a very favorable response to these new technology                        Internet offerings. This increase in customer base is, however, offset by a                        decrease in the price that customers are charged for Breda’s                        high-speed Internet offerings. |

| 22 |
|----|

|   | OPERATING                EXPENSES                                                                                                                                                                           |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                        |
|   | The table below sets                        forth the components of Breda’s operating costs for the nine months                        ended September 30, 2007, compared to the same period in 2006. |
|        |                                                                                                                                                                                                        |

|                     |                                                                                   | **Nine Months Ended                September 30,** |        | **Change** |   |
|--------------------------|----------------------------------------------------------------------------------------|----------------------------------------------------|-------------|------------|--------|
||
| **2007**                 | **2006**                                                                               | **Amount**                                         | **Percent** |
||
|                     | OPERATING                EXPENSES                                                      |                                               |        |       |   |   |   |   |   |   |   |   |   |
|                     | Cost of services                                                                       |                                               |        |       |   |   |   |   |   |   |   |   |   |
|                     |    Plant                specific operations                             | $                                                  | 1,826,795   |       | $      | 788,175 |   | $ | 1,038,620 |   |   | 131.8 | % |
|                     |    Plant                nonspecific operations                          |                                               | 288,966     |       |   | 209,788 |   |   | 79,178 |   |   | 37.7 | % |
|                     |    Cost of                long distance                                 |                                               | 172,043     |       |   | 146,001 |   |   | 26,042 |   |   | 17.8 | % |
|                     |    Cost of                cellular                                      |                                               | 882,096     |       |   | 873,487 |   |   | 8,609 |   |   | 1.0 | % |
|                     |    Cost of                internet                                      |                                               | 481,402     |       |   | 576,634 |   |   | (95,232 | ) |   | -16.5 | % |
|                     |    Cost of                programming                                   |                                               | 324,031     |       |   | 273,437 |   |   | 50,594 |   |   | 18.5 | % |
||
|                     |      Total cost of                services                    | $                                                  | 3,975,333   |       | $      | 2,867,522 |   | $ | 1,107,811 |   |   | 38.6 | % |
||
|      |
|                     | Depreciation and                amortization                                           | $                                                  | 749,157     |       | $      | 727,232 |   | $ | 21,925 |   |   | 3.0 | % |
|      |
|                     | Selling, general and                administrative                                     |                                               |        |       |   |   |   |   |   |   |   |   |   |
|                     |    Customer                operations                                   | $                                                  | 622,460     |       | $      | 564,552 |   | $ | 57,908 |   |   | 10.3 | % |
|                     |    Corporate                operations                                  |                                               | 866,849     |       |   | 946,223 |   |   | (79,374 | ) |   | -8.4 | % |
|                     |    General                taxes                                         |                                               | 156,933     |       |   | 137,140 |   |   | 19,793 |   |   | 14.4 | % |
||
|                     |      Total selling,                general and administrative | $                                                  | 1,646,242   |       | $      | 1,647,915 |   | $ | (1,673 | ) |   | -0.1 | % |
||
|      |
|                     |                                                                                   | $                                                  | 6,370,732   |       | $      | 5,242,669 |   | $ | 1,128,063 |   |   | 21.5 | % |
||

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Cost of                Services - $1,107,811*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Cost of services                        increased $1,107,811, or 38.6%, for the nine-month period ended September                        30, 2007, when compared to the nine-month period ended September 30, 2006.                        Most of the increased costs were incurred for the provisioning of the                        conference bridge services which began in July 2006. Some additional                        increased costs arose from labor rate increases implemented in 2007 when                        comparing the two nine-month periods. There was a $26,042, or 17.8%,                        increase in long distance provision costs, a $8,609, or 1.0%, increase in                        cellular service provisioning costs and a $95,232, or 16.5%, decrease in                        Internet provisioning costs when comparing the nine-month period ended                        September 30, 2007 to the nine-month period ended September 30, 2006. Breda                        also incurred additional costs for repair and maintenance expenditures for                        its central offices, equipment and buildings and grounds during the                        nine-month period ended September 30, 2007, when compared to the nine-month                        period ended September 30, 2006. Breda’s cellular provisioning cost                        increase reflected the increase in the cost of the cellular equipment,                        which in turn generated the higher cellular services revenue in the                        nine-month period ended September 30, 2007. Breda’s decrease in                        Internet provisioning costs resulted mainly from the migration of many of                        its dial-up customers in its southern Iowa exchanges to high speed Internet                        services where provisioning could be consolidated for both new and present                        high speed Internet customers. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Although a greater                        number of customers continued to use Breda’s long distance services,                        their average minutes of use per month are decreasing. The decreased                        minutes of use, along with Breda’s switch to a new underlying carrier                        on August 20, 2006, have contributed to a decrease in Breda’s overall                        cost to provide long distance service. Breda had a 12.3% increase in                        customers subscribing to Breda’s long distance services for the                        nine-month period ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

| 23 |
|----|

|   | September 30, 2007,                        when compared to the nine-month period ended September 30, 2006, which                        increased both the cost of provisioning long distance services, and the                        generation of long distance services revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | While                        Tele-Services’ overall customer growth for cable TV services                        continued to decline, its programming costs increased $50,594, or 18.5%,                        for the nine-month period ended September 30, 2007, when compared to the                        nine-month period ended September 30, 2006. Even though Tele-Services is a                        member of an industry programming purchasing group, it continues to see                        significant increases in the programming rates paid by Tele-Services in                        order to offer its cable TV offerings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Depreciation and                Amortization – $21,925*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Depreciation and                        amortization expense increased $21,925, or 3.0%, for the nine-month period                        ended September 30, 2007, when compared to the nine-month period ended                        September 30, 2006. Breda made significant upgrades to its equipment and                        networks during 2007. These investments are in service and are now being                        depreciated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Selling,                General and Administrative – ($1,673)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Selling, general and                        administrative expenses decreased $1,673, or .1 %, for the nine-month                        period ended September 30, 2007, when compared to the nine-month period                        ended September 30, 2006. The expenditures during the two three-month                        periods were nearly identical. There was some decrease in professional and                        legal fees for the nine-month period ended September 30, 2007 when compared                        to the nine-month period ended September 30, 2007, because there were no                        legal, accounting and consulting fees to correspond to the preliminary work                        done during the nine month period ended September 30, 2006 in preparation                        for a special shareholder meeting to amend the company’s articles of                        incorporation. Breda continued to utilize outside consulting services to                        analyze and pursue new business opportunities in the industry during the                        nine-month period ended September 30, 2007. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | OTHER INCOME                (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The table below sets                        forth the components of other income (expense) for the nine-month period                        ended September 30, 2007, compared to the same period in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

|     |                                                 | **Nine Months Ended                September 30,** |        | **Change** |   |
|----------|------------------------------------------------------|----------------------------------------------------|-------------|------------|--------|
||
| **2007** | **2006                (Restated)**                   | **Amount**                                         | **Percent** |
||
|     | OTHER INCOME                (EXPENSE)                |                                               |        |       |   |   |   |   |   |   |   |   |   |
|     | Interest and dividend                income          | $                                                  | 376,834     |       | $      | 272,993 |   | $ | 103,841 |   |   | 38.0 | % |
|     | Gain or (Loss) on sale of                investments |                                               | 67,558      |       |   | 1,163,201 |   |   | (1,095,643 | ) |   | -94.2 | % |
|     | Gain or (Loss) on disposal                of assets  |                                               | 17,478      |       |   | (21,714 | ) |   | 39,192 |   |   | 180.5 | % |
|     | Interest expense                                     |                                               | (70,110     | )          |   | (79,331 | ) |   | 9,221 |   |   | -11.6 | % |
|     | Income from equity                investments        |                                               | 1,398,410   |       |   | 1,382,092 |   |   | 16,318 |   |   | 1.2 | % |
|     | Other, net                                           |                                               | (38,782     | )          |   | 12,027 |   |   | (50,809 | ) |   | -422.5 | % |
||
|     |                                                 | $                                                  | 1,751,388   |       | $      | 2,729,268 |   | $ | (977,880 | ) |   | -35.8 | % |
||

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest and                        Dividend Income.* Interest and dividend income increased $103,841, or                        38.0%, for the nine-month period ended September 30, 2007, when compared to                        the nine-month period ended September 30, 2006. This increase is                        attributable to increased investments and rates earned on investments in                        both temporary investments and marketable securities on which Breda |

| 24 |
|----|

|   | generates interest                        income for the nine-month period ended September 30, 2007, when compared to                        the nine-month period ended September 30, 2006. As noted previously, Breda                        no longer receives approximately $3,400 per month in interest payments as                        was the case prior to the sale of Desktop Media, LLC in June 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Gain on sale of                        investments.*  The $67,558 gain on the sale of investments for the                        nine-month period ended September 30, 2007, is a combination of a $97,100                        gain on the sale of Breda’s investment in Desktop Media, LLP and the                        net gains and losses on the redemption of temporary investments. The                        $1,163,201 gain on sale of investments for the nine-month period ended                        September 30, 2006, is a combination of a $1,170,211 gain from the                        redemption of the Rural Telephone Bank stock in April 2006, and the net                        gains and losses on the redemption of temporary investments. There is no                        corresponding entry to the Rural Telephone Bank stock redemption for the                        nine-month period ended September 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Gain on disposal of                        assets.*  The $17,478 gain on disposal of assets for the nine-month                        period ended September 30, 2007, represents the gain from the sale or                        trade-in of service vehicles, and the gain on the sale of a small parcel of                        land, and a small central office building, in Farragut, IA, for which there                        is no corresponding entry in the same nine-month period in 2006. The                        $21,714 loss on disposal of assets for the nine-month period ended                        September 30, 2006 represents the loss from the sale of a building at 526                        N. Carroll Street, in Carroll, Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Interest Expense.                         * The $9,221, or 11.6%, decrease in interest expense for the                        nine-month period ended September 30, 2007, when compared to the nine-month                        period ended September 30, 2006, is the result of the reduction of the                        Rural Telephone Finance Cooperative loan balance on which interest is                        calculated because of the payment of the scheduled principal payments on                        the loan. There has been no change in interest rate and no additional loan                        amounts have been borrowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Income from Equity                        Investments.* Income from equity investments increased $16,318, or 1.2%,                        for the nine-month period ended September 30, 2007, when compared to the                        nine-month period ended September 30, 2006. The equity investments income                        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                        increase in equity investments income reported on Breda’s income                        statement for the nine-month period ended September 30, 2007 is a                        reflection of the net increases and decreases in the net income of                        Breda’s equity investments. Most of Breda’s equity investments                        are in cellular partnerships. Some of these cellular investments now                        receive universal service funding which has increased their overall                        operating revenue. An additional source of income from equity investments                        arises from Breda’s ownership interest in Alpine Communications,                        L.C., an operating telephone company in northeastern Iowa, and in Bug                        Tussel, LLC, a wireless cell site provider, and in Spiralight Network, LLC,                        a fiber optic network provider in rural areas of Wisconsin and                        Illinois. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Other, Net.                         * The $50,809, or 422.5%, decrease in other net income for the                        nine-month period ended September 30, 2007, when compared to the nine-month                        period ended September 30, 2006, is mainly attributable to increased                        partnership-related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Income Tax Expense.                         * Income taxes decreased $741,569, or 19.3%, for the nine-month                        period ended September 30, 2007, when compared to the same period in 2006.                        The decrease in income tax expense is a direct correlation to the                        $1,095,643 decrease in the sale of investments because there was no                        corresponding sale of investments during the nine month period ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

| 25 |
|----|

|   | September 30, 2007 to                        compare with the redemption of the Rural Telephone Bank stock that occurred                        during the nine-month period ended September 30, 2006. The effective tax                        rate for the nine-month period ended September 30, 2007 is 36.1%, compared                        to a 39.7% tax rate for the same nine-month period in 2006. The effective                        tax rate differs from the U.S. statutory rate due to state income taxes and                        the proportion of income from investments which are exempt from income                        tax.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *Net Income.                         * Net income increased $336,533, or 14.5%, for the nine-month                        period ended September 30, 2007, when compared to the same period in 2006,                        and is mainly attributable to revenue generated from conference bridge                        services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Liquidity                and Capital Resources**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda’s                        short-term and long-term liquidity requirements arise primarily from the                        following: operations and working capital requirements; capital                        expenditures; interest payments on the long term financing from the Rural                        Telephone Finance Cooperative; dividend payments on Breda’s common                        stock; redemption of Breda’s common stock; and potential                        industry-related acquisitions or investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda intends to fund                        the operations, working capital requirements, capital expenditures,                        interest payments, dividend payments, and stock redemptions from cash from                        operations. Breda also intends to fund smaller industry-related                        acquisitions or investments from cash from operations. For the nine months                        ended September 30, 2007 and September 30, 2006, cash provided by operating                        activities was $2,288,564 and $1,166,882, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | To fund any significant                        future acquisitions or investments, Breda would consider the redemption of                        its short-term and long-term marketable securities investments; the use of                        its revolving lines of credit with the Rural Telephone Finance Cooperative;                        or the addition of long-term debt from industry lenders. Breda presently                        has an unused line of credit with the Rural Telephone Finance Cooperative                        of $1,500,000, and Prairie Telephone has an unused line of credit with the                        Rural Telephone Finance Cooperative of $500,000. Breda’s present                        revenues would be able to sustain the costs of additional debt if the need                        arose. All potential acquisitions or investments will, however, be                        evaluated on their own merits for, among other things, potential cash and                        revenue production, and if the potential return on investment will be                        sufficient to incur the additional debt. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda has historically                        funded its operations and capital expenditure requirements primarily from                        cash from operations. The following table summarizes Breda’s                        short-term liquidity as of September 30, 2007, and December 31,                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|               |                                                        | As of  |      |   |
|--------------------|-------------------------------------------------------------|--------|-----------|--------|
||
||
|               |
|               | **Short-Term                Liquidity**                     |   |           |   |   |  |   |   |
|               |   Current                Assets                   | $      | 4,531,079 |   | $ | 2,930,602 |   |   |
|               |   Current                Liabilities              |   | 1,141,823 |   |   | 540,778 |   |   |
||
|               |     Net                Working Capital  | $      | 3,389,256 |   | $ | 2,389,824 |   |   |
||
|     |
|               |   Cash and Cash                Equivalents        | $      | 1,547,489 |   | $ | 777,708 |   |   |
|               |   Short Term                Marketable Securities | $      | 725,142   |   | $ | 643,119 |   |   |
|               |   Available on                Line of Credit      | $      | 2,000,000 |   | $ | 2,000,000 |   |   |

| 26 |
|----|

|   | Current assets                        increased $1,600,477, or 54.6%, for the nine-month period ended September                        30, 2007, when compared to the year ended December 31, 2006, and was due                        mainly to two items. The first was the $851,804 increase in cash, cash                        equivalents, and marketable securities for the payment of budgeted capital                        expenditures before year-end 2007. The second was the $673,691 increase in                        accounts receivable, which was due to unpaid conference bridge access                        services. As discussed later, Verizon and Sprint are refusing to pay for                        these services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Current liabilities                        increased $601,045, or 111.1%, for the nine-month period ended September                        30, 2007, when compared to the year ended December 31, 2006. Accounts                        payable increased $578,400, or 324.3%, when comparing the two periods,                        which is mainly attributable to an increase in the amount incurred as of                        September 30, 2007 for the provisioning of conference bridge services as                        compared to the amounts incurred for those purchases as of December 31,                        2006. Accrued taxes decreased $54,109, or 43.9%, for the nine-month period                        ended September 30, 2007, when compared to the year ended December 31,                        2006. The decrease is attributable to a decrease in the provision for                        income taxes for the third quarter of 2007. There was also an increase in                        other accrued liabilities of $67,843. The increase in other accrued                        liabilities is mainly attributable to an increase in accrued payroll and                        accrued leave benefits for the nine-month period ended September 30, 2007,                        when compared with the year ended December 31, 2006. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | The following                table summarizes Breda’s sources and uses of cash for the nine months ended                September 30, 2007 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|     |                                                  | **For the Nine Months                Ended                September 30,** |       |   |
|----------|-------------------------------------------------------|---------------------------------------------------------------------------|------------|--------|
||
| **2007** | **2006                (Restated)**                    |
||
|     | **Net Cash Provided                (Used)**           |                                                                      |            |   |   |  |   |   |
|     |    Operating                Activities | $                                                                         | 2,288,564  |   | $ | 1,166,882 |   |   |
|     |    Investing                Activities |                                                                      | (1,170,967 | )      |   | (516,969 | ) |   |
|     |    Financing                Activities |                                                                      | (347,816   | )      |   | (339,523 | ) |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For the nine months                        ended September 30, 2007 and September 30, 2006, cash provided by operating                        activities was $2,288,564 and $1,166,882, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Cash used in investing                        activities for the nine-month period ended September 30, 2007 was                        $1,170,967, and cash used in investing activities was $516,969 for the                        nine-month period ended September 30, 2006. During the nine-month period                        ended September 30, 2007, $708,714 was used to purchase assets such as                        battery backups, service vehicles, bucket truck, central office equipment,                        cable and wire facilities and Internet equipment. Capital expenditures                        increased $472,859 for the nine-month period ended September 30, 2007 when                        compared to the nine-month period ended September 30, 2006. Marketable                        securities were sold for $1,164,578 during the nine-month period ended                        September 30, 2007, but $1,552,612 of marketable securities were purchased                        for a net purchase of $388,034. During the nine-month period ended                        September 30, 2006, the net purchase of marketable securities was                        $1,739,208. During the nine-month period ended September 30, 2007, Breda                        also contributed additional capital in the amount of $169,412 to its                        Spiralight Networks, LLC investment, which retained Breda’s 35.2941%                        interest. With the sale of its investment in Desktop Media, LLC, the                        outstanding Desktop Media, LLC note receivable of $220,283 was replaced by                        a short-term promissory note from Jaguar Communications, Inc. in the amount                        of $254,383. Jaguar communications, Inc. is the purchaser of Desktop Media,                        LLC. |

| 27 |
|----|

|   | Cash used in financing                        activities was $347,816 for the nine-month period ended September 30, 2007,                        and $339,523 for the nine-month period ended September 30, 2006. These                        amounts represent the cash used to repay Rural Telephone Finance                        Cooperative long-term debt and the cash used to pay dividends to                        shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Long Term                Debt**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | As of September 30,                        2007, Breda had $1,184,230 of long-term debt with the Rural Telephone                        Finance Cooperative. This debt carries a fixed rate of interest of 7.35%.                        Substantially all of the assets of Breda are pledged as security for the                        long-term debt. The Rural Telephone Finance Cooperative notes are to be                        paid in equal quarterly installments covering principal and interest until                        paid in full by the year 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | The security and loan                        agreements underlying the Rural Telephone Finance Cooperative notes contain                        certain restrictions on distributions to stockholders, investment in or                        loans to others, and payment of management fees or an increase in                        management fees. Breda is restricted from making any distributions, except                        as might be specifically authorized in writing in advance by the Rural                        Telephone Finance Cooperative note holders, unless Breda’s net worth                        meets the minimum requirements set forth in the loan agreement, and                        distributions are limited to certain levels of prior year cash margins.                        Breda is also required to achieve a debt service coverage ratio of not less                        than 1.25 to 1 and a times interest earned ratio of not less than 1.5 to                        1. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Obligations                and Commitments**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda’s ongoing                        capital commitments include capital expenditures and debt service                        requirements. For the nine months ended September 30, 2007, capital                        expenditures were $708,714.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda’s                contractual obligations as of September 30, 2007 are:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|        |                |        |         |        |        |
|--------|----------------|--------|---------|--------|--------|
|   | 2007           | $      | 184,640 |   |   |
|   | 2008           |   | 197,228 |   |   |
|   | 2009           |   | 210,675 |   |   |
|   | 2010           |   | 225,038 |   |   |
|   | 2011           |   | 240,380 |   |   |
|   | 2012 and After |   | 126,269 |   |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Breda believes that                        cash provided by operations and current cash balances will be adequate to                        meet Breda’s foreseeable operational, capital expenditure, and debt                        service requirements. Breda’s actual cash needs and the availability                        of required funding may, however, differ from Breda’s expectations                        and estimates, and those differences could be material. Future capital                        requirements will depend on many factors, including, among others, the                        demand for Breda’s services in Breda’s existing markets and                        regulatory, technological and competitive developments. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | **Off-Balance                Sheet Risk and Concentration of Credit Risk**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Breda has no                off-balance sheet exposure or risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

| 28 |
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|   | Breda has certain                        financial instruments which could potentially subject Breda to                        concentrations of credit risk. These financial instruments consist                        primarily of trade receivables and cash and temporary cash                        investments. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                    |
|   | Breda adheres to its                        investment policy with respect to marketable securities, which allows                        investments in:                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                    |

|  | a. | Securities                issued or guaranteed by the U.S. Government or its agencies.                                                           |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------|
|  |    |                                                                                                                                             |
|  | b. | Corporate or                municipal bonds rated A or better by a major rating service.                                                         |
|  |    |                                                                                                                                             |
|  | c. | Money market funds                        investing in U.S. Government, U.S. Agency or highly rated municipal                        securities. |
|  |    |                                                                                                                                             |

|   | **Recent                Accounting Pronouncement**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | In July 2006, the                        Financial Accounting Standards Board (FASB) issued FASB Interpretation No.                        48, “Accounting for Uncertainty in Income Taxes—an                        interpretation of FASB Statement No. 109”. FIN 48 clarifies the                        accounting for uncertainty in income taxes recognized in accordance with                        Statement of Financial Accounting Standards No. 109, “Accounting for                        Income Taxes”. Guidance is provided on derecognition, classification,                        interest and penalties accounting in interim periods, disclosure and                        transition. FIN 48 requires that Breda recognize in its financial                        statements the impact of a tax position, if that position is more likely                        than not of being sustained on audit, based on the technical merits of the                        position. The provisions of FIN 48 were effective as of the beginning of                        Breda’s 2007 fiscal year, with the cumulative effect of the change in                        accounting principle recorded as an adjustment to opening retained                        earnings. Adoption of FIN 48 on January 1, 2007, had no effect on                        Breda’s financial position, results of operations or cash                        flows. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | **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 (FCC) and the Iowa Utilities Board (IUB) creates a material risk                        to Breda and its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The FCC currently has                        an open docket on inter-carrier compensation, which was initiated to                        identify a unified approach to intercarrier compensation. The current                        intercarrier compensation system distinguishes between different types of                        carriers and services, such as local and long-distance or wireless and                        wireline, and the FCC has 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Breda continues to work                        with two Iowa industry associations in reviewing and submitting comments on                        the Missoula Plan, which is now before the FCC. The Missoula Plan is a set                        of proposals put together by a coalition of telecom companies, including                        the Rural Alliance. The Rural Alliance is a combination of the Expanded                        Portland Group and the Alliance for Rational Intercarrier Compensation. The                        Missoula Plan grew out of a set of proposals to counter the big carriers                        and the original FCC plan to use “bill and keep” for                        intercarrier compensation. Bill and keep would have meant that a company                        such as Breda would bill its own customers and get no payments from any                        other carrier, such as AT&T or MCI, for the use of its networks to                        carry toll traffic.                                                                                                                                                                                                                                                                                                                                                                                                                                                |

| 29 |
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|   | The FCC had sought                        initial comments on the Missoula Plan by October 25, 2006. In January 2007,                        the supporters of the Missoula Plan filed an amendment intended to target                        new federal support to states that have already reduced intrastate access                        rates and the highest end-user rates. The “Federal Benchmark”                        mechanism would provide supplemental funding to ensure end-user rates                        remain within a national benchmark range when the Missoula Plan is                        implemented. The FCC had put the Missoula Plan for ICC reform and the                        Federal Benchmark mechanism amendment out for public comment, but no                        further response from the FCC has occurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Breda believes that                        changes in access charges will likely occur, and that if any of the plans                        known today are adopted, as currently proposed, there will be substantial                        reductions in 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | 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.                        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 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | In August 2005, the FCC                        opened an extremely broad comment proceeding on Universal Service Funding                        (USF), in which it sought input on a variety of specific USF proposals                        offered by members of the Federal-State Joint Board on Universal Service.                        State industry associations have been meeting with FCC staff members and                        with various Washington legislative staff members to discuss proposed                        legislation preserving and improving USF, including how funds are expended                        and assessing levels of broadband deployment in Iowa. The issues at stake                        are both on how the revenue is assessed and generated for the universal                        service fund, and the criteria for the disbursement of funds from the                        universal service pool. Some of the suggested changes on the revenue side                        of the debate would be to have all current entities paying into the USF                        continue to pay into the fund; have any service provider that uses                        telephone numbers, IP (Internet Protocol) addresses or their functional                        equivalents to provide real-time voice communications pay into the fund;                        and any provider that offers a network connection for a fee to the public,                        including DSL, cable modem connections, WiMax and broadband over power                        lines, pay into the fund. This would increase the revenue base to more than                        just carriers providing telephone line services. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | On the disbursement                        side, some proposals would limit the number of eligible telecommunication                        carriers by specifying the criteria that must be met by recipients,                        including that the provider must provide service throughout their service                        area; remain functional in emergency situations; and satisfy both consumer                        protection and service quality standards. Unlike present USF payments, the                        proposals include that USF payments would allow recovery based on actual                        costs, rather than the incumbent carrier’s costs. State industry                        organizations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

| 30 |
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|   | have filed reply                        comments in the FCC docket relating to capping the funding received by                        competitive carriers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Breda believes that                        federal universal service fund changes will occur but is unable to                        determine an estimated time frame or estimated financial ramifications as                        of the date of this filing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The National Exchange                        Carrier Association (NECA) has been delegated some authority by the FCC                        regarding the regulation of interstate access charge rates. In a letter                        dated January 15, 2007, NECA notified Breda that beginning July 1, 2007                        most carriers could expect an overall average cost settlement decrease of                        7.27% as a result of the new settlement formulas filed by NECA with the FCC                        in December 2006. Overall, NECA projected that the majority of                        companies’ settlements will decrease between 5% and 15%. The decrease                        generally reflects new overall reduced cost levels and decreases due to                        Line Haul Distance Sensitive formula structure changes. NECA’s 2007                        Modification of Average Schedules filing included a proposed transition                        plan to help companies adjust to reduced settlements. The FCC has approved                        both the proposed formulas and the proposed transition plan. Breda                        estimates, based on the information provided by NECA, that Breda could                        receive $322,860 (17.8%) less per year in average schedule payments after                        the 24-month transition period is completed. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The Communications                        Assistance For Law Enforcement Act (CALEA) was passed in 1994 and sets                        forth the assistance capabilities that telecommunications carriers need to                        maintain so that they can support law enforcement in the conduct of                        lawfully authorized electronic surveillance. Breda, Prairie Telephone and                        Westside Independent had been granted various extensions from time to time                        for compliance with the various requirements of the Act, with the most                        recent extension ending on June 30, 2006. Breda installed a soft switch in                        its CLEC exchange in the last quarter of 2005, and the technology in this                        switch allows for CALEA compliance in both its CLEC exchange of Carroll,                        Iowa, and its ILEC exchange in Breda, Iowa. Breda currently is working                        through an upgrade plan involving the purchase of switches and set up of                        installation dates for its remaining, stand-alone switches in five small                        exchange locations throughout its service territory. Breda estimates that                        its final cost to upgrade the remaining switches could be close to                        $2,000,000.                                 |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | On May 12, 2006, the                        FCC adopted an order whereby all broadband Internet and interconnected                        voice over Internet protocol (VoIP) providers must comply with CALEA                        surveillance regulations by May 14, 2007. The FCC declined to exclude any                        facilities-based broadband Internet access providers from CALEA, noting                        that “Trusted Third Parties” and service bureaus can assist                        small entities in processing surveillance orders in accordance with the                        system security requirements, thereby ameliorating burdens for these                        providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The FCC’s May 12,                        2006 order also restricted the availability of compliance extensions to                        equipment, facilities and services deployed prior to October 25, 1998;                        required any provider with a pending compliance extension petition                        currently on file to file another letter by February 12, 2007 attesting                        that the petition exclusively concerns equipment, facilities or services                        installed or deployed prior to October 25, 1998; concluded that providers                        are responsible for the costs of complying with CALEA in most situations;                        permitted telecommunications carriers and broadband Internet access and                        interconnected VoIP providers the option of using Trusted Third Parties to                        assist in meeting the CALEA obligations to provide law enforcement agencies                        the electronic surveillance information they require in an acceptable                        format; required providers to file their security and integrity plans with                        the FCC by March 12, 2007; and required all providers to submit interim                        reports to the FCC on CALEA compliance by February 12, 2007.                                                                         |

| 31 |
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|   | For telephone companies                        with separate broadband and VoIP entities, these requirements are in                        addition to those for their carrier operations, and require separate                        reports to be filed for each operation. Breda has enlisted Iowa Network                        Services to be its Trusted Third Party resource in meeting the CALEA                        requirements. As of the date of this filing, Breda has filed all required                        CALEA reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 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. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | 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 2008 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 2008. 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, is now providing a                        phone service offering through Mediacom’s partnership with Sprint.                        The IUB also granted Mediacom a certificate of public convenience to offer                        service in numerous areas throughout Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Breda also anticipates                        that it will face new competition from other providers of newer VoIP (voice                        over Internet protocol) technologies, such as Vonage 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 likely occur 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 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. As of May 1, 2007, Breda began                        offering a 256 Mbps high speed Internet service option with a reduced price                        to its customers. This service has been extremely well received by                        Breda’s customers and many of its dial-up customers are converting to                        this high speed Internet offering. Breda is presently testing and preparing                        to launch a wireless Internet product in order to offer high speed Internet                        services to neighboring communities that Breda cannot reach through its                        other long-reach products. Breda anticipates that this wireless high-speed                        Internet service will be available for customers no later than mid-December                        2007.                                                                                                                                                                      |

| 32 |
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|   | During the third                        quarter of 2006, Breda completed the launch of high-speed Internet service                        offerings in all of its telephone exchanges that did not have the                        capability to offer that type of service. These offerings utilize the                        Internet product technologies currently used by Breda, as well as new                        technologies that allow customers outside the normal high-speed service                        area to still receive a high bandwidth connection. These customers in the                        past were not able to receive high-speed Internet services using standard                        provisioning equipment because of distance restrictions in most high-speed                        Internet technologies. Breda has had an excellent response to these                        longer-range, high-speed Internet service offerings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda entered into a                        marketing and distribution agreement with the National Rural                        Telecommunications Cooperative (NRTC) on May 13, 2004, for the distribution                        of high-speed Internet service via satellite. 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’s marketing campaign originated on September 1, 2005, and Breda                        received good response to this service. Breda and the other satellite                        Internet providers in WildBlue’s satellite Beam 26 were notified in                        January 2006 that because of the huge success of this product, the capacity                        in Beam 26 was filling up, and no additional customers could be added once                        capacity reached a designated limit in order to not degrade the service for                        the customers already using the service. Breda stopped taking applications                        for this service on March 13, 2006. NRTC and WildBlue were able to                        implement additional satellite capacity in the first quarter of 2007, but                        Breda does not plan to again offer this service to its customers because                        Breda is now able to provide high speed Internet services to almost all of                        its customers given Breda’s rollout of its longer range, high-speed                        Internet technologies in all of Breda’s ILEC exchanges. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda 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 and                        high-speed Internet rates and to provide higher speed Internet                        access.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Beginning in late 2006,                        AT&T began withholding payment of access charges from many of the Iowa                        independent telephone companies (ILECs) that provided conference-bridging                        services because AT&T thought the ILEC and CLEC (competitive local                        exchange carrier such as BTC, Inc.) access charges and traffic volumes were                        too high. Within a matter of weeks, Qwest, Verizon, Sprint and AT&T                        Wireless also began to withhold payment of access charges. In response, and                        consistent with the FCC’s explicit orders on this matter, seven of                        the Iowa ILECs filed a collection action in federal district court for                        collection of these charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda is not a party to                        any of these lawsuits or collection actions, and is presently being paid                        for conference bridging services by most carriers. However, beginning in                        May 2007, Verizon Business, who is now the payer of access charges for                        carriers previously identified as MCI and Wiltel, stopped payment of access                        charges for conference bridge traffic traversing MCI and Wiltel networks.                        On July 27, 2007, BTC, Inc. received an e-mailed Dispute Notification from                        Verizon Business disputing interstate and intrastate switched access                        charges billed by BTC, Inc. to Verizon Business between October 1, 2006,                        and July 2007. BTC, Inc. continues to work with legal counsel to determine                        what collection actions should be taken against Verizon                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

| 33 |
|----|

|   | Business for the                        $718,163 in unpaid access charges. On October 29, 2007, BTC, Inc. also                        received a dispute notification from Sprint indicating that their                        regulatory and legal teams were in the process of performing analysis of                        the BTC, Inc. traffic, and disputing some of the terminating usage. BTC,                        Inc. is owed $54,785.61 for unpaid Sprint access charges. In addition to                        determining what legal course of action should be taken against Verizon                        Business and Sprint, BTC, Inc. is also monitoring the outcome of the                        various court proceedings in Iowa, Minnesota, and New York as well as oral                        arguments and proceedings before the FCC and the Iowa Utilities Board.                        While BTC, Inc.’s situation is not identical to these proceedings,                        some of the rulings will be applicable to BTC, Inc.’s situation. The                        FCC has ruled in prior cases involving carrier non-payment of access                        charges that carriers could not take these kinds of “self-help”                        actions and could not block traffic traversing their networks.                                                                                                                                                                                                                                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | On October 2, 2007, the                        FCC issued an Order granting in part and denying in part the complaint                        filed by Qwest Communications against Farmers and Merchants Mutual                        Telephone Company of Wayland, Iowa. The FCC found that the telephone                        company had not acted unlawfully by imposing interstate access charges for                        conference bridge services. While the commission ruled that the telephone                        company did generate an excessive rate of return, their tariff was lawful                        under the Telecommunications Act, and therefore Qwest could not recover                        damages. BTC, Inc. anticipates continued rulings and decisions on many of                        these outstanding cases and proceedings within six weeks to two                        months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Also, on October 2,                        2007, the FCC published a rulemaking proceeding to investigate cost and                        tariffing issues raised by allegations that some rural local exchange                        carriers are experiencing significant increases in access demand, resulting                        in unreasonable access rates. The FCC is seeking comment on several                        possible approaches to address alleged access stimulation strategies. One                        proposal being considered would require carriers to file revised tariffs if                        demand increased beyond a threshold level. The FCC is requesting                        information on rate-of-return LECs such as Breda, Prairie Telephone Co. and                        Westside Independent Telephone, price-cap LECs, and CLECs such as BTC,                        Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Prairie Telephone                        became a 10% owner of Desktop Media, L.L.C. on May 2, 2001. 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. 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 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 and the other owners of Desktop Media, L.L.C. signed a purchase                        agreement on June 26, 2007 to sell their interests in Desktop Media, L.L.C.                        The proposed sale received the approval of the Minnesota Public Utilities                        Commission on August 24, 2007. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Jaguar Communications,                        Inc., a Minnesota telecommunications provider, purchased the membership                        interest units of Desktop Media, LLC on September 28, 2007. While the                        stated purchase price was $2,125,000, the actual purchase price was                        $1,133,510.89 after the netting of $741,489.11 in outstanding carrier,                        legal, accounting, and miscellaneous expenditures, and the netting of                        $250,000 which was set back for purchaser’s use in providing                        switching facilities. Prior to the finalization of the purchase, the                        Desktop Media, LLC owner with a 49% ownership                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

| 34 |
|----|

|   | interest traded 33% of                        his 49% interest equally to the three remaining telephone company members                        in exchange for the release of his personal guarantee on the outstanding                        debt in Desktop Media, LLC owed to the three telephone company members.                        Prairie Telephone held a 28% interest in Desktop Media, LLC at the time of                        the sale, and received $317,383.05 or 28% of the $1,133,510.89 purchase                        price. Prairie Telephone Co. received $63,000 in cash, and received a                        short-term promissory note for the remaining $254,383.05. The promissory                        note dated September 28, 2007 carries a 4.81% interest rate, and the note                        is due in full upon the earlier of a) the twelve-month anniversary of the                        date of the note, or b) upon the payment to Jaguar Communications, Inc. of                        the initial disbursement with respect to Jaguar’s currently pending                        loan request with the Rural Utilities Service (RUS). At the time of the                        sale, Desktop Media LLC’s outstanding loan to Prairie Telephone of                        $439,974 less allowances of $219,691 was $220,283. Breda subsequently                        reported a $97,100 gain on the sale of this investment on its financial                        statements for the period ended September 30, 2007. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | At its quarterly                        meeting on August 4, 2005, the Board of Directors of the Rural Telephone                        Bank approved the liquidation and dissolution of the Bank. On November 10,                        2005, the liquidation and dissolution process was initiated with the                        signing of the 2006 Agriculture Appropriations bill by President Bush,                        which paved the way for all Bank stock to be redeemed. Breda received                        liquidation funds on April 13, 2006, of $1,336,000, which was the par value                        of Breda’s investment in the Bank stock. Breda’s net of tax                        gain on the liquidation of this investment was approximately                        $698,946.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Prairie Telephone                        purchased a 35.29% interest in Spiralight Network, L.L.C. on December 28,                        2006 for $960,000. On May 24, 2007, Prairie Telephone contributed its                        prorata share of a capital call by Spiralight Network, L.L.C. in the amount                        of $169,411.72. Spiralight Network, L.L.C. provides fiber transport                        services in Wisconsin, Illinois and Minnesota. The investment is accounted                        for on the equity method of accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

|                                                                             |
|----------------------------------------------------------------------------------|
| **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 Breda’s 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 Breda’s property. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 35 |
|----|

| **Item                    2.      Unregistered Sales of Equity Securities and                    Use of Proceeds.** |
|----------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                         |

|   | Breda did not sell any                        shares of its common stock during the period of July 1, 2007 through                        September 30, 2007.                                                                                                                                                                                                                                                                                                             |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda did not purchase                        any shares of its common stock from shareholders during the period of July                        1, 2007 through September 30, 2007.                                                                                                                                                                                                                                                                                       |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | There were 16 transfers                        of shares of Breda’s common stock during the period of July 1, 2007                        through September 30, 2007 with respect to which Breda did not exercise                        Breda’s right of first refusal to purchase the shares. Ten of the                        transfers involved payment of consideration, and a summary of those                        transactions is as follows: |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|  | a) | 2 shares were                sold for $457 per share;                                                                                    |
|--|----|------------------------------------------------------------------------------------------------------------------------------------------|
|  |    |                                                                                                                                     |
|  | b) | 8 shares were                sold for $450 per share;                                                                                    |
|  |    |                                                                                                                                     |
|  | c) | 30 shares were                sold for $457 per share;                                                                                   |
|  |    |                                                                                                                                     |
|  | d) | 2 shares were                sold for $457 per share;                                                                                    |
|  |    |                                                                                                                                     |
|  | e) | 10 shares were                sold for $457 per share;                                                                                   |
|  |    |                                                                                                                                     |
|  | f) | 30 shares were                sold for $457 per share;                                                                                   |
|  |    |                                                                                                                                     |
|  | g) | 10 shares were                sold to a Breda board member for $457 per share;                                                           |
|  |    |                                                                                                                                     |
|  | h) | 120 shares from an                        estate were sold to five individuals in uneven lots for $457 per                        share; |
|  |    |                                                                                                                                     |
|  | i) | 53 shares were                sold for $457 per share; and                                                                               |
|  |    |                                                                                                                                     |
|  | j) | 110 shares                were sold to three individuals in uneven lots for $457 per share.                                              |
|  |    |                                                                                                                                     |

|   | There were six                        transfers that did not involve the payment of any consideration, and a                        summary of those transactions is as follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                             |

|  | a) | 53 shares were                transferred to a joint trust in the name of the shareholder and his                spouse; |
|--|----|--------------------------------------------------------------------------------------------------------------------------|
|  |    |                                                                                                                     |
|  | b) | 63 shares were                transferred equally from one shareholder to his three children;                            |
|  |    |                                                                                                                     |
|  | c) | 30 shares were                transferred from one shareholder to a revocable trust;                                     |
|  |    |                                                                                                                     |
|  | d) | 49 shares were                transferred to a joint trust in the name of the shareholder and her                spouse; |
|  |    |                                                                                                                     |
|  | e) | 212 shares                were transferred equally from an estate to four heirs; and                                     |
|  |    |                                                                                                                     |
|  | f) | 2 shares were                transferred from one shareholder to his spouse.                                             |
|  |    |                                                                                                                     |

|   | **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 July 1, 2007                        through September 30, 2007. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                                                                                 |
|--------------------------------------------------------------------------------------------------------------------------------------|
| **Item                    4.      Submission of Matters to a Vote of Security                    Holders.** |
|                                                                                                                                 |

|   | No matters were                        submitted to a vote of the shareholders of Breda, through the solicitation                        of proxies or otherwise, during the period of July 1, 2007 through                        September 30, 2007. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                       |
|----------------------------------------------------------------------------|
| **Item                    5.      Other Information.** |
|                                                                       |

|   | There was no                        information required to be disclosed in a report on Form 8-K during the                        period of July 1, 2007 through September 30, 2007 which was not reported on                        a Form 8-K. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 36 |
|----|

|   | There were no material                        changes during the period of July 1, 2007 through September 30, 2007 to the                        procedures by which the shareholders of Breda may recommend nominees to                        Breda’s board of directors. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                              |
|-------------------------------------------------------------------|
| **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]** |

| 37 |
|----|

| **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:  November                13, 2007. | By:                                  | /s/ Steve                Frickenstein |
|                                               |                                 |  |
|                                               |                                 | Steve Frickenstein, Chief                Executive Officer |
|                                               |                                 |   |
|                                               |                                 |   |
| Date:  November                13, 2007. | By:                                  | /s/ Jane Morlok |
|                                               |                                 |  |
|                                               |                                 | Jane Morlok, Chief                Financial Officer  |

| 38 |
|----|

| EXHIBIT                    INDEX                    Exhibits to Form 10-QSB                    Three Months Ended September 30, 2007                    BREDA TELEPHONE CORP. |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                          |

| **Description of                Exhibit** | **Page**                                                |
|-------------------------------------------|---------------------------------------------------------|
|                                           |                                                         |
|                                      |                                                    |  |
| 3.                                        | **Articles of Incorporation                and Bylaws** |  |
|                                      |                                                    |   |  |
|                                      |                   3.1                         | Articles of Restatement                        of Breda Telephone Corp. (Filed as Exhibit 3.1 to Breda’s Form 10-QSB                        for the quarterly period ended March 31, 2007 and filed May 14, 2007, and                        incorporated herein by this reference.) |   |
|                                      |                                                    |   |   |
|                                      |                   3.2                         | Second Amended and                        Restated Bylaws of Breda Telephone Corp. (Filed as Exhibit 3.2 to                        Breda’s Form 8-K filed April 4, 2007, and incorporated herein by this                        reference.) |   |

|   |                                  |                                                                                                                                                                                                                                                                                                                                                        |
|--------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.    | **Material                Contracts** |                                                                                                                                                                                                                                                                                                                                                        |
|   |                                  |                                                                                                                                                                                                                                                                                                                                                   |  |
|   |   10.1                      | Employment Agreement                        dated November 13, 2006 between Breda and Jane Morlok. (Filed as Exhibit                        10.1 to Breda’s Form 10-QSB for the quarterly period ended September                        30, 2006 and filed November 14, 2006, and incorporated herein by this                        reference.) |   |
|        |                                  |                                                                                                                                                                                                                                                                                                                                                   |   |
|   |   10.2                      | Employment Agreement                        dated June 14, 2006 between Breda and Steve Frickenstein. (Filed as Exhibit                        10.2 to Breda’s Form 10-QSB for the quarterly period ended June 30,                        2006 and filed August 11, 2006, and incorporated herein by this                        reference.)     |   |
|        |                                  |                                                                                                                                                                                                                                                                                                                                                   |   |
|   |   10.3                      | Employment Agreement                        dated June 14, 2006 between Breda and Charles Deisbeck. (Filed as Exhibit                        10.3 to Breda’s Form 10-QSB for the quarterly period ended June 30,                        2006 and filed August 11, 2006, and incorporated herein by this                        reference.)       |   |

|   |                                                       |                                                    |
|--------|------------------------------------------------------------|---------------------------------------------------------|
| 31.    | **Rule 13a-14(a)/15d-14(a)                Certifications** |                                                    |
|   |                                                       |                                                    |   |
|   |  *31.1                                                | Rule 13a-14(a) Certification of Chief Executive Officer | E-1 |
|        |                                                       |                                                    |   |
|   |  *31.2                                                | Rule 13a-14(a) Certification of Chief Financial Officer | E-2 |

| 39 |
|----|

| 32.                                        | **Section 1350                Certifications** |                                                  |
|--------------------------------------------|------------------------------------------------|-------------------------------------------------------|
|                                       |                                           |                                                  |
|                                       |  *32.1                                    | Section 1350 Certification of Chief Executive Officer | E-3 |
|                                       |                                           |                                                  |   |
|                                       |  *32.2                                    | Section 1350 Certification of Chief Financial Officer | E-4 |
|                                       |                                           |                                                  |   |
| *Included with this                filing. |                                           |

| 40 |
|----|