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 March 31, 2002.

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

      For the transition period from __________________ to __________________

                         Commission file number: 0-26525

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

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

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

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

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 34,781 shares of common stock,
no par value, at March 31, 2002.

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

<PAGE>

                         PART I - FINANCIAL INFORMATION

      Item 1. Financial Statements.

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                             CONDENSED CONSOLIDATED
                              FINANCIAL STATEMENTS
                              For the Three Months
                          Ended March 31, 2002 and 2001
                      and the Year Ended December 31, 2001
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                      March 31,     December 31,
                                                         2002          2001
                                                     (Unaudited)   (As restated)
                                                     -----------   -------------
                                  ASSETS

CURRENT ASSETS
  Cash and cash equivalents                          $ 1,620,897   $ 1,797,415
  Temporary investments                                  516,888       636,169
  Accounts receivable                                    458,696       536,378
  Interest receivable                                     90,978        75,058
  Prepaid income taxes                                        --        51,280
  Inventories                                             95,995        93,028
  Other                                                  118,492       100,265
                                                     -----------   -----------
                                                       2,901,946     3,289,593
                                                     -----------   -----------

OTHER NONCURRENT ASSETS
  Long-term investments                                3,039,718     2,494,073
  Other investments:
    Investments in unconsolidated
      affiliates at equity                             2,765,954     2,489,639
    Long-term investments at cost                        804,164       811,497
  Intangibles, net of accumulated amortization           898,368     1,018,313
  Note receivable                                        455,958       451,502
                                                     -----------   -----------
                                                       7,964,162     7,265,024
                                                     -----------   -----------

PROPERTY AND EQUIPMENT                                 5,545,356     5,609,292
                                                     -----------   -----------

      TOTAL ASSETS                                   $16,411,464   $16,163,909
                                                     ===========   ===========

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


                                      -2-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                                      March 31,     December 31,
                                                         2002          2001
                                                     (Unaudited)   (As restated)
                                                     -----------   -------------

           LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Current portion of long-term debt                 $   126,365    $   126,365
   Accounts payable                                      228,467        199,675
   Accrued taxes                                         216,869        141,439
   Other                                                 210,590        157,791
                                                     -----------    -----------
                                                         782,291        625,270
                                                     -----------    -----------

LONG-TERM DEBT, less current portion                   1,881,811      1,912,625
                                                     -----------    -----------

DEFERRED CREDITS                                          72,348        114,564
                                                     -----------    -----------

STOCKHOLDERS' EQUITY
   Common stock - no par value, 5,000,000 shares
     authorized, 34,781 and 35,025
     shares issued and outstanding
     at $258 stated value, respectively                8,973,498      9,036,450
   Retained earnings                                   4,701,516      4,475,000
                                                     -----------    -----------
                                                      13,675,014     13,511,450
                                                     -----------    -----------

     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $16,411,464    $16,163,909
                                                     ===========    ===========

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


                                      -3-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               For the Three Months Ended March 31, 2002 and 2001

                                                       2002             2001
                                                   (Unaudited)     (As restated)
                                                   -----------      -----------

OPERATING REVENUES                                 $ 1,439,031      $ 1,569,437
                                                   -----------      -----------

OPERATING EXPENSES
   Cost of services                                    541,581          598,372
   Depreciation and amortization                       251,726          278,658
   Selling, general and administration                 511,645          537,417
                                                   -----------      -----------
                                                     1,304,952        1,414,447
                                                   -----------      -----------

OPERATING INCOME                                       134,079          154,990
                                                   -----------      -----------

OTHER INCOME (EXPENSES)
   Interest and dividend income                         64,996           51,246
   Interest expense                                    (37,556)         (39,640)
   Income from equity investments                      298,683          189,781
   Other, net                                            1,533              245
                                                   -----------      -----------
                                                       327,656          201,632
                                                   -----------      -----------

INCOME BEFORE INCOME TAXES                             461,735          356,622
                                                   -----------      -----------

INCOME TAXES                                           164,451          124,276
                                                   -----------      -----------

INCOME BEFORE CUMULATIVE EFFECT
   OF ACCOUNTING CHANGE                                297,284          232,346
                                                   -----------      -----------

CUMULATIVE EFFECT OF ACCOUNTING
   CHANGE, NET OF TAX                                  (70,768)              --
                                                   -----------      -----------

NET INCOME                                         $   226,516      $   232,346
                                                   ===========      ===========

EARNINGS PER COMMON SHARE:

 INCOME BEFORE CUMULATIVE EFFECT OF
   ACCOUNTING CHANGE                               $      8.53      $      6.27
                                                   ===========      ===========

 NET INCOME                                        $      6.50      $      6.27
                                                   ===========      ===========

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


                                      -4-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                          Common Stock                 Retained
                                                   Shares             Amount           Earnings              Total
                                                ------------       ------------       ------------       ------------
<S>                                                   <C>          <C>                <C>                <C>
Balance at December 31, 2000 (as restated)            37,241       $  8,751,635       $  4,289,997       $ 13,041,632

  Comprehensive Income:
    Net income, (as restated)                                                            1,147,573          1,147,573

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

  Common stock redeemed, net                          (2,216)          (566,668)                             (566,668)

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

Balance at December 31, 2001,
  (as restated)                                       35,025          9,036,450          4,475,000         13,511,450

  Comprehensive Income:
    Net income                                                                             226,516            226,516

  Common stock redeemed, net                            (244)           (62,952)                              (62,952)
                                                ------------       ------------       ------------       ------------

Balance at March 31, 2002                             34,781       $  8,973,498       $  4,701,516       $ 13,675,014
                                                ============       ============       ============       ============
</TABLE>

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


                                      -5-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Months Ended March 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                             2002              2001
                                                                          -----------       -----------
<S>                                                                       <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net income, as restated                                                $   226,516       $   232,346
   Adjustments to reconcile net income to net
     cash provided by operating activities:
   Depreciation and amortization                                              251,726           278,658
   Amortization of investment tax credits                                      (2,443)           (2,443)
   Deferred income taxes                                                      (39,773)          (34,858)
   Cumulative effect of accounting change                                     119,945                --
   Note receivable discount                                                    (4,456)               --
   Equity income in unconsolidated affiliates, net of distributions
     received of $17,367 and $238,896 in 2002 and 2001, respectively         (281,315)           52,314
   Changes in operating assets and liabilities:
      (Increase) decrease in assets                                            91,848           214,277
      Increase (decrease) in liabilities                                      162,021            38,188
                                                                          -----------       -----------
   Net cash provided by operating activities                                  524,069           778,482
                                                                          -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures                                                      (187,790)          (48,833)
   Purchase of investments                                                   (630,237)          (83,040)
   Proceeds from the sale of investments                                      203,873            12,868
   Sale of other investments                                                    7,333           314,692
                                                                          -----------       -----------
     Net cash provided by (used in) investing activities                     (606,821)          195,687
                                                                          -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Common stock redeemed                                                      (62,952)          (49,820)
   Repayment of long-term debt                                                (30,814)          (28,847)
                                                                          -----------       -----------
     Net cash used in financing activities                                    (93,766)          (78,667)
                                                                          -----------       -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         (176,518)          895,502
                                                                          -----------       -----------

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                            1,797,415         1,104,577
                                                                          -----------       -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                $ 1,620,897       $ 2,000,079
                                                                          ===========       ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash paid during the period for:
     Interest                                                             $    37,556       $    39,640
     Income taxes                                                         $        --       $        --
</TABLE>

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


                                      -6-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      In the opinion of management, the accompanying unaudited condensed
      consolidated financial statements contain all adjustments (consisting of
      only normal recurring items) necessary to present fairly the financial
      position as of March 31, 2002 and December 31, 2001 and the results of
      operations and changes in cash flows for the three months ended March 31,
      2002 and 2001. As explained in note 6, during the first quarter of 2002,
      the company has adopted the equity method of accounting for certain
      investments, accordingly the 2001 financial statements have been restated
      in accordance with generally accepted accounting principles.

      Certain information and footnote disclosures normally included in annual
      financial statements prepared in accordance with generally accepted
      accounting principles in the United States of America have been condensed
      or omitted. It is suggested that these financial statements be read in
      conjunction with the financial statements and notes thereto included in
      the Company's December 31, 2001 audited financial statements. The results
      of operations for the period ending March 31, 2002 are not necessarily
      indicative of the operating results of the entire year.

      Certain reclassifications have been made to the 2001 financial statements
      to conform with the 2002 presentations.

NOTE 2. OPERATING SEGMENTS

      The Company organizes its business into three reportable segments: local
      exchange carrier (LEC) services, broadcast services and internet service
      provider (ISP) services. The LEC services segment provides telephone, data
      services and other services to customers in local exchanges. The broadcast
      services segment provides cable television services to customers in Iowa
      and Nebraska. The ISP services segment provides internet access to
      customers within the local exchanges and the surrounding areas. The
      Company also had telemarketing services that do not meet the quantitative
      threshold for a reportable segment. These services were discontinued
      during fourth quarter 2001.

      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.

<TABLE>
<CAPTION>
                                                   Local                          Internet
                                                 Exchange                         Service
                                                  Carrier        Broadcast        Provider           Other            Total
                                                 ----------      ----------       ----------       ----------       ----------
          Three months ended
            March 31, 2002
<S>                                              <C>             <C>              <C>              <C>              <C>

      Revenues
            External customers                   $1,012,635      $  244,382       $  182,014       $       --       $1,439,031
            Intersegment                                 --              --               --               --               --
              Segment profit (loss)                 355,162        (108,929)         (17,166)          (2,551)         226,516
</TABLE>


                                      -7-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. OPERATING SEGMENTS, (Continued)

<TABLE>
<CAPTION>
                                                   Local                          Internet
                                                 Exchange                         Service
                                                  Carrier        Broadcast        Provider           Other            Total
                                                 ----------      ----------       ----------       ----------       ----------
<S>                                              <C>             <C>              <C>              <C>              <C>
       Three months ended
         March 31, 2001
         (As restated)

      Revenues
             External customers                  $1,046,780      $  252,681       $  189,179       $   80,797       $1,569,437
             Intersegment                                --              --               --               --               --
               Segment profit (loss)                274,502         (26,816)         (13,090)          (2,250)         232,346
</TABLE>

           Reconciliation of Segment Information

                                                        Three months ended
                                                      March 31,      March 31,
                                                        2002           2001
                                                    (Unaudited)   (As restated)
                                                    -----------    -----------
      REVENUES:
           Total revenues for reportable segments   $ 1,439,031    $ 1,488,640
           Other revenues                                    --         80,797
           Elimination of intersegment revenues              --             --
                                                    -----------    -----------
               Consolidated Revenues                $ 1,439,031    $ 1,569,437
                                                    ===========    ===========

      PROFIT:
           Total profit for reportable segments     $   229,067    $   234,596
           Other profit (loss)                           (2,551)        (2,250)
           Non-operating segment                             --             --
           Minority interest                                 --             --
                                                    -----------    -----------
               Net Income                           $   226,516    $   232,346
                                                    ===========    ===========

NOTE 3. NET INCOME PER COMMON STOCK

      Net income per common share for March 31, 2002 and 2001 was computed by
      dividing the weighted average number of shares of common stock outstanding
      into the net income. The weighted average number of shares of common stock
      outstanding for the three months ended March 31, 2002 and 2001 are 34,843
      and 37,029, respectively.

NOTE 4. STOCK VALUE ADJUSTMENT

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


                                      -8-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5. CUMMULATIVE EFFECT OF ACCOUNTING CHANGE

      In 2001, the Financial Accounting Standards Board Issued Statements of
      Financial Accounting Standards No. 141 "Business Combinations" and No. 142
      "Goodwill and Other Intangible Assets" effective for fiscal years
      beginning after December 31, 2001. Under the new rules goodwill and
      intangible assets deemed to have indefinite lives will no longer be
      amortized but will be subject to periodic impairment tests in accordance
      with the Statements. Other intangible assets will continue to be amortized
      over their useful lives. The Statement also requires business combinations
      initiated after June 30, 2001 to be accounted for using the purchase
      method of accounting, and broadens the criteria for recording intangible
      assets separate from goodwill.

      The nonamortization provisions of the Statement will not impact
      amortization expense related to acquisitions initiated prior to June 30,
      2001, but any goodwill or indefinite lived intangibles acquired subsequent
      to June 30, 2001, will not be amortized. Effective January 1, 2002, all
      amortization expense on goodwill and intangible assets with indefinite
      lives has ended. During first quarter 2002, the Company performed the
      first of the required impairment tests of goodwill and indefinite lived
      intangible assets as of January 1, 2002. Fair value was determined using
      discounted cash flow forecasts. The Company has determined the goodwill
      related to the purchase price of Westside Communications, Inc., which is a
      component of the broadcast segment, was impaired and $70,768, net of tax
      has been written off during the quarter ending March 31, 2002. Intangible
      amortization for the three months ended March 31, 2001 was $22,328, ($.60
      per share).

NOTE 6. OTHER INVESTMENTS

      INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY

      Investments in unconsolidated affiliates are recorded on the equity
      method. Earnings for these equity investments are included for periods
      ended within up to three months of the date of the Consolidated Statement
      of Income.

      These investments in partnerships, limited liability companies and joint
      ventures are as follows:

                                                  March 31,     December 31,
                                                    2002           2001
                                                 ----------     ----------

      Alpine Communications, L.C                 $  782,900     $  819,147
      RSA #1, Ltd.                                  616,754        505,728
      RSA #7, Ltd.                                  246,691        209,646
      RSA #8, Ltd.                                  380,156        319,068
      RSA #9, Ltd.                                  597,986        486,381
      Quad County Communications                    107,329        110,531
      Carroll County Wireless, L.L.C                 25,009         30,009
      Guthrie Group, L.L.C                            9,129          9,129
                                                 ----------     ----------
                                                 $2,765,954     $2,489,639
                                                 ==========     ==========

      The Company has a 15.8% interest in Alpine Communications, L.C. (Alpine).
      The Alpine group operates several telephone exchanges in eastern Iowa. The
      Company's percentage interests in RSA #1, Ltd., RSA #7, Ltd., RSA #8, Ltd.
      and RSA #9, Ltd. are 9.1%, 7.1%, 11.7% and 16.7%, respectively, at March
      31, 2002 and December 31, 2001.

      Additionally, Westside Independent Telephone Company, a wholly-owned
      subsidiary of Breda Telephone Corporation, has a 33.33% ownership interest
      in Quad County Communications. This entity owns and operates a fiber optic
      network.


                                      -9-
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6. OTHER INVESTMENTS, (Continued)

      The Company's percentage interests in Carroll County Wireless, L.L.C. and
      Guthrie Group, L.L.C. are 33.33% and 25%, respectively. Both of these
      companies provide personal communication services (PCS). The operations of
      these entities are immaterial to the consolidated financial statements.

      INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY

      Condensed consolidated financial data for Alpine, RSA #1, RSA #7, RSA #8,
      RSA #9 and Quad County is as follows:

                                                March 31,        March 31,
                                                  2002             2001
                                              -----------      -----------

      Net income                              $ 2,505,791      $ 1,495,416
                                              ===========      ===========

      Current assets                          $11,172,773      $10,430,254
      Non-current assets                       28,210,923       25,699,074
      Current liabilities                       7,237,619        5,964,559
      Non-current liabilities                  11,839,552       13,597,177

      During first quarter 2002, the Company changed its method of accounting
      for the investments in Alpine, RSA #1, RSA #7, RSA #8 and RSA #9, from the
      cost method to the equity method. Accordingly, retained earnings at
      December 31, 2000, net income for 2001, and the first quarter ended March
      31, 2001 have been restated by $213,583, $208,325 and $(30,866),
      respectively.

      LONG-TERM INVESTMENTS AT COST

      Long-term investments at cost included non-marketable equity securities
      and certificates as follows:

                                                   March 31,     December 31,
                                                     2002           2001
                                                   --------       --------

      NECA Services, Inc. - stock                  $300,000       $300,000
      Rural Telephone Finance
          Cooperative - certificates                188,670        196,003
      Rural Telephone Bank - stock                  165,789        165,789
      Iowa Network Services - stock                  78,705         78,705
      Desk Top Media, L.L.C                          60,000         60,000
      Other                                          11,000         11,000
                                                   --------       --------
                                                   $804,164       $811,497
                                                   ========       ========


                                      -10-
<PAGE>

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

      Three Months Ended March 31, 2002 Compared to Three Months Ended March 31,
      2001.

      There was a decrease in total operating revenues for the three-month
      period ended March 31, 2002, when compared to the same period in 2001, of
      $130,406, or 8.3%. The segments making up total operating revenue are:
      local exchange carrier services, broadcast services, Internet services and
      other services revenue.

      Local exchange carrier services revenue decreased $34,145, or 3.3%, for
      the three-month period ended March 31, 2002, when compared to the
      three-month period ended March 31, 2001. Local exchange carrier services
      revenue includes local network services, network access services, billing
      and collection services and miscellaneous income. Those four components
      are discussed in the following four paragraphs.

      Local network services revenue decreased $2,190, or 1.5%, for the
      three-month period ended March 31, 2002, when compared to the same
      three-month period in 2001. The decrease resulted from the closure of
      Pacific Junction's telemarketing center on July 26, 2001. Breda received
      local services revenue on approximately 70 telemarketing call center lines
      for the three-month period ended March 31, 2001, but there was no
      corresponding revenue for the three-month period ended March 31, 2002.

      Network access revenue decreased $14,701, or 2.3%, when comparing the
      three-month period ended March 31, 2002, to the three-month period ended
      March 31, 2001. The decrease was due primarily to the reduction of access
      revenues for the three-month period ended March 31, 2001, which resulted
      from the closing of Pacific Junction's telemarketing center on July 26,
      2001. Pacific Junction's telemarketing calls had generated an average of
      approximately $4,400 per month in access revenues for Breda. Breda does
      not believe that Pacific Junction's telemarketing center will ever be
      reopened, so no future access revenues will be generated from Pacific
      Junction's telemarketing calls.

      Billing and collection services revenue is a function of the amount of
      billing and collection services provided by Breda to other carriers such
      as AT&T. The revenues from billing and collection services decreased
      $4,929, or 30.1%, for the three-month period ended March 31, 2002, when
      compared to the three-month period ended March 31, 2001. The decrease is
      attributable to the fact that carriers, such as AT&T, are performing more
      of their own billing and collection work.


                                      -11-
<PAGE>

      Miscellaneous revenue decreased $12,325, or 4.8%, for the three-month
      period ended March 31, 2002, when compared with the three-month period
      ended March 31, 2001. The decrease in miscellaneous revenue resulted
      primarily from decreased cellular service commissions and cellular
      accessories revenue. Cellular sales decreased by almost $43,000 when
      comparing the two three-month periods. Breda believes the decrease is
      attributable to the economic slowdown that occurred after the terrorist
      attacks on September 11, 2001. The decrease in cellular related revenues
      was, however, partially offset by revenues generated from new services,
      such as the sale of key systems for business applications.

      Broadcast services revenue decreased $8,299, or 3.3%, when comparing the
      three-month period ended March 31, 2002, to the three-month period ended
      March 31, 2001. The decrease was directly attributable to a 3.0% decrease
      in the customer base when comparing the two three-month periods. Breda
      believes the decrease in the customer base resulted from competition from
      satellite dish providers and declining population bases in the small rural
      communities where Breda's broadcast systems are located.

      There was a decrease in Internet services revenue for the three-month
      period ended March 31, 2002, when compared to the same period in 2001, of
      $7,165, or 3.8%. Breda's Internet customer base increased 6.9% for the
      three-month period ended March 31, 2002, when compared to the three-month
      period ended March 31, 2001, but the revenue decrease is attributable to
      Breda reducing its pricing of monthly Internet services by
      $3.05/customer/month for those customers not receiving bundled services,
      and to Breda's bundling Internet services with its long distance services
      at a discounted price. There was, however, also a 24.7% decrease in the
      associated expenditures to provide those services to Internet customers,
      resulting in a positive impact on operating income. As is discussed
      elsewhere in this report, Breda switched to a new underlying Internet
      service provider in October of 2001 in order to allow Breda to further
      reduce costs. While Breda has lost Internet customers because of
      competition, Breda's overall Internet operations have continued to grow.

      Telemarketing services revenue is reported as other services revenue, and
      it decreased $80,797, or 100.0%, when comparing the three-month period
      ended March 31, 2002, to the same period in 2001. The decrease resulted
      from the closing of Pacific Junction's telemarketing center on July 26,
      2001. The telemarketing center has not been operational since that date,
      and it is unlikely that the telemarketing center will again become
      operational.

      There was a decrease in total operating expenses of $109,495, or 7.7%, for
      the three-month period ended March 31, 2002, when compared to the
      three-month period ended March 31, 2001. The components making up
      operating expenses are cost of services, depreciation and amortization,
      and selling, general and administration expenditures.


                                      -12-
<PAGE>

      Cost of services expenses decreased $56,791, or 9.5%, for the three-month
      period ended March 31, 2002, when compared to the three-month period ended
      March 31, 2001. The cost of services components are plant specific
      operations, plant non-specific operations, programming, and Internet
      costs, and those components are discussed in the following four
      paragraphs.

      There was a decrease of $16,503, or 4.2%, in plant specific operations
      expense when comparing the three-month period ended March 31, 2002, to the
      three-month period ended March 31, 2001. The decrease was primarily
      attributable to a decrease of approximately $36,000 in cellular operating
      expense for such items as inventory, personnel costs, and other expense.
      Those expenses were higher in the three-month period ended March 31, 2001,
      because of the increased cellular sales in that period. Increases in
      repairs for central office equipment and in subscriber carrier expense
      offset some of the decrease in cellular operating expense for the
      three-month period ended March 31, 2002, when compared to the three-month
      period ended March 31, 2001. There was no plant specific expense for
      Pacific Junction for the three-month period ended March 31, 2002, as
      compared to the $10,386 in such expense for Pacific Junction in the
      three-month period ended March 31, 2001. As noted previously, Pacific
      Junction's telemarketing center has not been in operation since July 26,
      2001.

      Plant nonspecific operations expense decreased $19,843, or 55.0%, for the
      three-month period ended March 31, 2002, when compared to the three-month
      period ended March 31, 2001. The decrease is mainly accounted for by rate
      and volume decreases in utilities and postage.

      There was an increase of $872, or 1.1%, in programming expense for cable
      TV services when comparing the three-month period ended March 31, 2002,
      with the three-month period ended March 31, 2001. The increase resulted
      from increases in programming fees.

      Internet costs decreased $21,317, or 24.7%, for the three-month period
      ended March 31, 2002, when compared to the three-month period ended March
      31, 2001. The decrease is directly attributable to the reduction in costs
      of providing Internet services to the customer base. These costs include
      rental of fiber lines, help desk and customer services fees from the
      underlying Internet service provider, and internal costs to provide
      customer service and billing service to additional customers. As discussed
      below in this report, Breda changed its underlying Internet service
      provider on October 31, 2001 in order to reduce its costs to provide
      Internet service.

      Depreciation and amortization expense decreased $26,932, or 9.7%, for the
      three-month period ended March 31, 2002, when compared to the same period
      in 2001. Breda allocated part of the purchase price paid for Westside
      Independent Telephone Company and its cable TV subsidiary in 1998 to
      goodwill. Effective January 1, 2002, however, generally accepted
      accounting principles established by the Financial Accounting Standards
      Board no longer allow the expensing, or amortizing, of a


                                      -13-
<PAGE>

      portion of this goodwill over a fifteen-year period. Approximately $23,000
      of the decrease in depreciation and amortization expense for the
      three-month period ended March 31, 2002, is attributable to the
      termination of this expense amortization. The remaining decrease in
      depreciation and amortization expense is attributable to the fact that
      there was no depreciation expense for Pacific Junction during the three
      months ended March 31, 2002 since Pacific Junction's telemarketing center
      was not in operation during that time period.

      Selling, general and administrative expenses decreased $25,772, or 4.8%,
      for the three-month period ended March 31, 2002, when compared to the same
      period in 2001. There was an increase of $9,789, or 4.7%, in customer
      operations when comparing these two three-month time periods. The increase
      in customer operations resulted primarily from increased labor and benefit
      costs which occurred due to the adding of a supervisory position to this
      department in August 2001. Corporate operations decreased $28,125, or
      9.8%, during the three-month period ended March 31, 2002 when compared to
      the three-month period ended March 31, 2001. The decrease in corporate
      operations resulted from the elimination of a supervisory position in
      early 2002, and the reduction in professional fees. General taxes paid by
      Breda decreased $7,436, or 18.7%, for the three-month period ended March
      31, 2002, when compared to the three-month period ended March 31, 2001,
      and resulted from decreased tax rates levied by the taxing authorities in
      the various counties.

      The net result of the operating services revenue and operating expenses
      was a decrease of $20,911, or 13.5%, in operating income for the
      three-month period ended March 31, 2002, when compared to the same
      three-month period in 2001.

      Other income (expense) increased $126,024, or 62.5%, during the
      three-month period ended March 31, 2002, when compared to the same
      three-month period in 2001. Interest and dividend income increased
      $13,750, or 26.8%, when comparing the three-month periods. The increase in
      interest and dividend income was mainly the result of increased funds
      drawing interest in temporary and long-term investments. Interest expense
      decreased $2,084, or 5.3%, when comparing the same three-month periods.
      The decrease in interest expense was the result of the quarterly principal
      payments reducing the overall debt on which interest is paid in the
      following quarters. Breda did not undertake any additional debt during the
      three-month period ended March 31, 2002.

      Income from equity investments increased $108, 902, or 57.4%, during the
      three-month period ended March 31, 2002, when compared to the same
      three-month period in 2001. In the first quarter 2002, Breda began to
      report its cellular investments and its Alpine investment on the equity
      method. The corresponding three-month period ended March 31, 2001, has
      been restated in accordance with generally accepted accounting principles
      as discussed below in this report. The income from equity investments
      reported on Breda's financial statements is Breda's pro-rata share of the
      net income or net loss of each equity investment, based on Breda's
      percentage of ownership in each equity investment. The increase in equity
      investments reported on


                                      -14-
<PAGE>

      Breda's income statement for the three-month period ended March 31, 2002,
      when compared to the three-month period ended March 31, 2001, is a
      reflection of the overall increase in the net operating income of these
      investments.

      Income before income taxes increased $105,113, or 29.5%, for the three
      month-period ended March 31, 2002, when compared to the three-month period
      ended March 31, 2001. Income taxes increased $40,175, or 32.3%, during the
      same comparative three-month periods. Income before cumulative effect of
      accounting change increased $64,938, or 27.9%, for the three-month period
      ended March 31, 2002, when compared to the three-month period ended March
      31, 2001.

      A new line item reported as cumulative effect of accounting change, net of
      tax, decreased Breda's income by $70,768 during the three-month period
      ended March 31, 2002, when compared to the three-month period March 31,
      2001. This net of tax item is impairment of goodwill expense for which
      there was no corresponding entry during the three-month period ended March
      31, 2001. The Financial Accounting Standards Board issued Financial
      Accounting Statement No. 144 in August 2001 relating to the treatment of
      goodwill, and these accounting principles are incorporated into Breda's
      financial statement beginning January 1, 2002. As noted previously in the
      discussion on the decrease in Breda's depreciation and amortization
      expense for the three-month period ended March 31, 2002 as compared to the
      three-month period ended March 31, 2001, Breda is no longer able to
      expense over a fifteen-year period the portion of the Westside purchase
      price which had been allocated to goodwill. The goodwill is now reviewed
      for impairment, that is, written down and expensed against earnings, only
      in the periods in which the recorded value of goodwill is more than its
      fair value. Financial Accounting Statement No. 144 requires that Breda 1)
      recognize an impairment loss only if the carrying amount of the long-lived
      asset is not recoverable from its undiscounted cash flows, and 2) measure
      an impairment loss as the difference between the carrying amount and fair
      value of the asset. These tests have been applied to the goodwill and
      intangible assets of Breda and its subsidiaries, and the $70,768
      net-of-tax, impairment expense is Breda's estimate of the expense to
      offset earnings for the carrying amount of the Westside purchase goodwill
      attributable to broadcast services which is in excess of the fair value of
      that asset based on discounted cash flow valuation.

      Net income decreased $5,830, or 2.5%, for the three-month period ended
      March 31, 2002, when compared to the same period in 2001.


                                      -15-
<PAGE>

      Liquidity and Capital Resources at Twelve Months Ended December 31, 2001.

      Breda's net working capital was a positive $2,664,323 at December 31,
      2001. Breda had an increase of $727,002 in current assets during the
      twelve-month period ended December 31, 2001. The increase resulted from a
      $692,838 increase in cash and cash equivalents, and a $366,329 increase in
      temporary investments. These funds were being held for the possible
      redemption of additional shares of stock in Breda during the normal course
      of business, and for the payment of the construction of Breda's new
      corporate headquarters, which is scheduled for completion by late third
      quarter 2002. While inventories increased $970, and other current assets
      increased $94,882, those items were offset by a $167,090 decrease in
      accounts receivable and a $285,185 decrease in prepaid income taxes. The
      increase in other current assets of $94,882 reflected the prepayment of
      first quarter 2002 employee benefit premiums, which had been paid at
      year-end 2001. There was a decrease in accounts receivable that was
      attributable to the receipt of National Exchange Carrier Association
      reimbursements, and the one-time write-off of Qwest access underpayments
      because of the strong likelihood that those access fees would never be
      received. The amount written off by Breda and its subsidiaries as of
      December 31, 2001 with respect to Qwest's underpayment of access charges
      was $67,671. Qwest filed a Petition for Declaratory Order on May 19, 2000,
      with the Iowa Utilities Board with respect to adjustments Qwest had made
      related to wireless participating companies in Iowa. The Iowa Utilities
      Board ruled in Qwest's favor, but that decision was appealed by some rural
      Iowa independent telephone associations. In March 2002, however, the Iowa
      Utilities Board issued an order affirming its earlier decision. The
      consequence of this order, unless it is changed by the courts on judicial
      review, is that Qwest will not be required to make the payments that it
      unilaterally withheld from Breda for the wireless phone traffic that it
      unilaterally pushed through its toll trunks in Iowa. The state industry
      associations involved in this case on behalf of member companies are
      reviewing what action to pursue now that the IUB has issued its final
      ruling.

      Breda is now reporting its cellular investment holdings and its Alpine
      investment on the equity method for those investments in which Breda has a
      20% interest and for those investments where Breda does not have at least
      a 20% equity interest, but for which Breda has determined that Breda
      currently has significant influence with respect to the investment. This
      accounting change is discussed further below. The comparative balance
      sheet included in this report for the twelve-month period ended December
      31, 2001, has been restated to reflect Breda's cellular investments and
      the Alpine investment on the equity method as of December 31, 2001. The
      net effect of the equity method is a $536,472 increase to other noncurrent
      assets net of the deferred income taxes as of December 31, 2001, as
      opposed to a decrease of $187,275 during the twelve month period ended
      December 31, 2001 as was the case under the prior method.


                                      -16-
<PAGE>

      Breda's net working capital was a positive $2,664,323 at December 31,
      2001. The $889,545 increase in working capital for the twelve-month period
      ended December 31, 2001, resulted mainly from the $164,557 decrease in
      accounts payable and the net increase in current assets as explained
      above. The accounts payable decrease for the twelve-month period ended
      December 31, 2001, resulted primarily because a $116,794 plant under
      construction payable on December 31, 2000, was paid before December 31,
      2001, and because of a $31,070 payment to the National Exchange Carrier
      Association during the twelve months ended December 31, 2001.

      Common stock had a net increase of $284,815 during the twelve-month period
      ended December 31, 2001. The increase resulted primarily from two items.
      One was the $23 per share increase in outstanding shares value on May 16,
      2001, and the other was a decrease in the number of outstanding shares
      through the redemption of 2,216 shares of common stock by Breda during the
      twelve-month period ended December 31, 2001. Breda's December 31, 2001,
      financial statements reported retained earnings of $4,053,092, which was a
      $23,322 decrease from twelve-month period ended December 31, 2000. The
      decrease in retained earnings during the twelve-month period ended
      December 31, 2001, was the net effect of the stated value stock adjustment
      of $851,483, the dividends paid in 2001 of $111,087, and the year-to-date
      net income as of December 31, 2001. Breda's comparative, restated balance
      sheet for December 31, 2001, included in this filing and stating the
      effect of the use of the equity method for its cellular and Alpine
      investments, reports a $421,908 increase in retained earnings, after
      netting deferred tax credits of $114,564.

      Liquidity and Capital Resources at Three Months Ended March 31, 2002.

      Breda had a decrease of $387,647 in current assets during the three-month
      period ended March 31, 2002, when compared to the year ended December 31,
      2001. The decrease resulted from a $176,518 decrease in cash and cash
      equivalents, and a $119,281 decrease in temporary investments. These funds
      were applied to the construction costs of Breda's new corporate office.
      While inventories increased $2,967, and other current assets increased
      $18,227, those items were offset by a $77,682 decrease in accounts
      receivable and a $51,280 decrease in prepaid income taxes. The increase in
      other current assets of $18,227 mainly reflects the 9.71% premium increase
      in the 2002 cost of prepaid quarterly employee benefits. The $77,682
      decrease in accounts receivable is attributable to the reduction in
      accounts receivable due from cellular commissions, exchange carriers, and
      the payment by March 31, 2002, of key system projects that were in
      progress as of December 31, 2001. There was a $51,280 decrease in prepaid
      income taxes because there is no corresponding entry for the three-month
      period ended March 31, 2002, and is the result of Breda now reporting all
      of its cellular investments and the Alpine investment on the equity
      method. Breda's tax effect of these investments is included in the
      deferred credits and accrued taxes in the liability section of its balance
      sheet.

      Noncurrent assets, which mainly consist of longer-term investments,
      increased


                                      -17-
<PAGE>

      $699,138 during the three-month period ended March 31, 2002, when compared
      to year-end December 31, 2001. Long term investments such as municipal
      bonds, U.S. Treasury notes and governmental securities increased $545,645
      during the three-month period ended March 31, 2002, and reflects the
      transfer of cash on hand into longer-term investments during this time
      period as well as positive adjustments to the fair market value of some of
      these investments. Breda's other investments, which are outlined in Note 6
      to the Consolidated Financial Statements, increased $268,982, during the
      three-month period ended March 31, 2002, as compared to the restated
      financial statements included in this filing for the twelve-month period
      ended December 31, 2001.

      As discussed above, Breda is now reporting its investments in Alpine
      Communications, L.C. and its cellular investments in RSA#1, RSA#7, RSA#8,
      and RSA#9 on the equity method. Breda has made this change because it
      believes that it exercises significant influence over the operations and
      financial policies of Alpine and the referenced cellular investments
      within the meaning of Accounting Principles Board Opinion No. 18, and that
      it therefore must report these investments on the equity method. Breda
      previously reported these investments at their cost, which was Breda's
      actual cash outlay to purchase these investments, in the other investments
      section on its balance sheet. Any cash distributions were correspondingly
      included in other income when the distributions were received. Because
      Breda owns more than 20% of Quad County Communications, Carroll County
      Wireless, L.L.C. and The Guthrie Group, L.L.C., Breda's interest in these
      entities were already being reported on the equity method. On May 2, 2001,
      Breda entered into a contractual agreement through its subsidiary, Prairie
      Telephone Co., Inc., to advance $500,000 to Desktop Media, L.L.C. This
      transaction is shown as a discounted Note Receivable for $455,958 at March
      31, 2002. Breda also has as a 10% equity interest in Desktop Media,
      L.L.C., which included in other investments. Breda is continuing to report
      this Desktop Media, L.L.C. investment on the cost basis since Breda's
      ownership is a 10% equity interest, and control of the entity remains with
      the 70% owner, who is also the manager.

      The remaining other noncurrent asset is intangibles, net of accumulated
      amortization, which showed a $119,945 decrease for the three-month period
      ended March 31, 2002, when compared to the twelve-month period ended
      December 31, 2001. As discussed previously, Breda recognized an impairment
      loss of $119,945 (net of tax loss of $70,768) as of March 31, 2002, on the
      goodwill from its 1998 purchase of the cable TV system assets in its
      Westside purchase. This impairment loss was the entire remaining
      unamortized goodwill on Breda's records from the Westside cable TV system
      purchase. The corresponding reduction in the asset account is reflected in
      the intangibles.


                                      -18-
<PAGE>

      Breda's net working capital was a positive $2,119,655 at March 31, 2002.
      The $544,668 decrease in net working capital for the three-month period
      ended March 31, 2002, resulted mainly from the decrease in Breda's short
      term cash on hand as discussed above, along with increases in accounts
      payable, accrued federal and state income taxes, and accrued payroll and
      benefits for the three-month period ended March 31, 2002.

      The long-term debt decrease of $30,814 is the result of the scheduled
      quarterly principal payment being paid in the first quarter of 2002 on
      Breda's only outstanding loan. Breda has not incurred additional debt
      during the three-month period ended March 31, 2002.

      Common stock had a net decrease of $62,952 during the three-month period
      ended March 31, 2002, when compared to the year ended December 31, 2001.
      The decrease is the result of a decrease in the number of outstanding
      shares through redemption of stock by Breda from 35,025 shares to 34,781
      shares during the three-month period ended March 31, 2002. The increase in
      the Retained Earnings during the three-month period ended March 31, 2002,
      when compared to year-end December 31, 2001, is the net effect of the
      year-to-date net income as of March 31, 2002.

      Other Activities.

      Breda's primary ongoing capital investment activity will currently
      continue to be additions to property, plant and equipment. For example,
      Breda continues to make investments in state-of-the-art technology in
      order to try to offer subscribers the best possible service. Capital
      expenditures for 2001 were approximately $624,270, and are currently
      expected to be approximately $1,341,490 in 2002.

      As of March 31, 2002, Breda had approximately $2,008,176 on its
      outstanding loan with the Rural Telephone Finance Cooperative. The
      interest rate on the loan was fixed on July 17, 1998 at 7.35%. The loan
      has a fifteen-year term that matures in September, 2013. Breda and Prairie
      Telephone also have lines of credit available from the Rural Telephone
      Finance Cooperative in the amounts of, respectively, $1,500,000 and
      $500,000. Those lines of credit will expire in 2005. No amounts were
      outstanding under either of those lines of credit on March 31, 2002.

      Breda anticipates that substantial expenditures will need to be made for
      software upgrades that will be necessary in order for Breda, Prairie
      Telephone and Westside Independent to become compliant with the
      requirements of the Communications Assistance for Law Enforcement Act
      ("CALEA"). CALEA was passed by Congress in 1994 and sets forth the
      assistance capabilities that telecommunications carriers need to maintain
      to support law enforcement in the conduct of lawfully authorized
      electronic surveillance. Pursuant to a court order or other lawful
      authorization, carriers must be able to 1) isolate all wire and electronic
      communications of a target


                                      -19-
<PAGE>

      transmitted by the carrier within its service territory; 2) isolate
      call-identifying information of a target; 3) provide the intercepted
      communications and call-identifying information of a target; 4) provide
      the intercepted communications and call-identifying information to law
      enforcement; 5) carry out the intercepts unobtrusively, so targets are not
      made aware of the electronic surveillance, and in a manner that does not
      compromise the privacy and security of other communications.

      Breda and all carriers were ordered to meet the J-Standard (basic)
      capabilities by June 30, 2000, and the "punch list" (six additional
      capabilities) by September 30, 2001. Breda filed a petition on June 30,
      2000, under Section 107(c) of the Act, which permits a carrier to file a
      petition with the FCC for a maximum extension of two years. Breda prepared
      a Flexible Deployment Assistance Guide that was sent to the FBI
      identifying Breda's switch specific information and a deployed generic
      timeline that indicated when Breda's switch would be CALEA compliant. The
      FBI reviewed the Flexible Deployment Guides and then recommended to the
      FCC that the FCC approve Breda's 107(c) Petition. Breda received an
      extension until June 30, 2002.

      On September 21, 2001, the FCC released an Order, which mandated that
      carriers implement two of the "punch list" items by September 30, 2001.
      However, since the due date was so close the FCC granted carriers until
      November 19, 2001 to be in compliance or ask for an extension. The FBI
      issued a Flexible Deployment Assistance guide for "Packet-Mode
      Communications" that dealt with carriers offering services such as DSL and
      ISDN. The FCC allowed carriers to file a packet-mode flex guide and amend
      their initial 107(c) Petition to file for a two-year extension with a
      deadline of November 19, 2001. Breda was in compliance with the
      packet-mode requirements as of November 19, 2001. Given the conversion to
      Desktop Media, L.L.C. as its internet service provider, however, Breda is
      again working with its consultant to determine what, if any, further
      action may be necessary on its part in order to maintain its adherence to
      the packet-mode requirements.

      On April 11, 2002, after review by the courts, the FCC ordered carriers to
      install the "punch list" capabilities by June 30, 2002. Breda has been
      working with its software vendor in order to become compliant. However, it
      is still doubtful that switch manufacturers will be able to respond and
      that carriers will be able to install these capabilities in time to meet
      the June 30, 2002 deadline. It is anticipated that the FCC will grant
      additional extensions until software capabilities are available from
      vendors.

      The latest, revised estimate of the cost for upgrading Breda's, Prairie
      Telephone's and Westside Independent's software to become compliant with
      CALEA is $405,000.

      Breda and Prairie Telephone have purchased spectrum for providing personal
      communications services in the Breda, Lidderdale and Yale telephone
      exchange areas. Prairie Telephone has also become a member in Guthrie
      Group, L.L.C.


                                      -20-
<PAGE>

      Guthrie Group, L.L.C. has purchased spectrum for providing personal
      communications services in some areas in Guthrie County, Iowa.

      Breda is a member in Carroll County Wireless, L.L.C. Carroll County
      Wireless, L.L.C. has purchased spectrum for providing personal
      communications services in Carroll County, Iowa. Breda has transferred its
      personal communication services licenses for its Breda and Lidderdale
      exchange areas to Carroll County Wireless, L.L.C.

      Breda estimates that it will take at least 1 to 3 years for the
      surrounding areas to build out their personal communications systems to
      the point where Breda, Prairie Telephone, Guthrie Group, L.L.C. or Carroll
      County Wireless, L.L.C. could connect to these systems.

      Personal communications services are competitive with telephone and
      cellular services. Breda does not believe, however, that investments in
      personal communications services or in ventures which may be involved in
      personal communications services are inconsistent or in conflict with
      Breda's, Prairie Telephone's or Westside Independent's overall business.
      Breda also believes positioning itself to be able to offer personal
      communication services or investing in other ventures which may offer
      personal communications services are methods of attempting to diversity
      across the various telecommunications markets which are available today or
      may become important in the future.

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

      Breda, Prairie Telephone and Westside Independent currently have no
      definite plans to provide any material additional or improved services to
      their subscribers. This determination may change quickly, however, given
      the rapidly changing technology in the telecommunications and cable
      industries.

      Breda will be converting the financial and billing software utilized by
      Westside Independent to the same financial system software now utilized by
      Breda and its other subsidiaries in the second and third quarters of 2002.
      Decisions regarding staffing and office locations will also be finalized
      in this process. The costs of the upgrades and conversions will not be
      material to Breda.

      There are no current plans to expand the cable services areas of, or the
      cable services provided by, Tele-Services, Ltd. Tele-Services will,
      however, be making significant capital expenditures to become compliant
      with new regulations requiring Emergency Alert System ("EAS") notification
      at the bottom of screen on all channels carried on its cable TV systems.
      These capital expenditures are estimated to cost $130,000 and


                                      -21-
<PAGE>

      are to be completed by October 1, 2002.

      Breda has investigated and continues to explore re-engineering options and
      other help-desk and underlying Internet service provider options that
      would reduce Breda's costs in order to allow Breda to compete at a lower
      price point for Internet services. One step that Breda took to lower
      Breda's underlying Internet costs is through Prairie Telephone's
      acquisition of a 10% ownership interest in Desktop Media, L.L.C. Desktop
      Media, L.L.C. provides both dial-up and high-speed internet access in
      south central Minnesota, and is a full-scale internet service provider.
      Desktop Media, L.L.C. provides internet service provider support services
      to Prairie Telephone and the other telephone companies who have invested
      in Desktop Media, L.L.C. As indicated, one of the purposes of Prairie
      Telephone's relationship with Desktop Media, L.L.C. was to lower Breda's
      and its subsidiaries' costs of providing Internet services in order to
      compete at a lower price point for Internet services. Breda also reduced
      its pricing of Internet services and bundled Internet services with its
      long distance services in August, 2001 in order to compete at a lower
      price point for Internet services.

      Breda, Prairie Telephone and Westside Independent are providing dial-up
      and high speed Internet access to their customers. Breda anticipates that
      there will continue to be competitive pressure to lower the dial-up rates.
      Breda also anticipates that the number of potential customers will
      continue to increase and that Internet customers will continue to demand
      higher Internet speed. BTC is currently providing high speed Internet
      access by leasing lines from Qwest. BTC is in the process of installing
      equipment in the Qwest central office that will allow BTC to use a new
      product that Qwest offers called line sharing. It is estimated that the
      capital costs that will be incurred by BTC to switch to the line sharing
      product will reach approximately $50,000, and that this conversion will be
      completed in the second quarter of 2002. Upon the completion of the
      conversion, BTC will be able to offer a more competitively priced, high
      speed Internet service. Breda expects its customer base for high speed
      Internet to increase significantly during the remainder of 2002.

      Breda is continuing to evaluate the Federal Communications Commission's
      October 11, 2001 order on the Multi-Association Group plan regarding
      access charge rate reform and deregulation for non-price cap, incumbent
      local exchange carriers. Breda continues to currently believe, however,
      that the Federal Communications Commission's order on the plan will not,
      at least in 2002, have any materially adverse effects on Breda's or its
      subsidiaries' revenues. This conclusion is still subject to change,
      however, upon Breda's completion of its analysis of the Federal
      Communications Commission's order, and Breda has not yet reached any firm
      determination on the possible effects of the Federal Communications
      Commission's order on Breda's and its subsidiaries' access charge revenues
      in future years. Breda continues to anticipate, however, continuing
      pressure for the lowering of access charge rates. Access charge revenues
      constitute a substantial part of Breda's, Prairie Telephone's and Westside
      Independent's revenues, and a material risk to them arises


                                      -22-
<PAGE>

      from the regulation of access charge rates by the Federal Communications
      Commission and other regulatory authorities.

      Breda continues to anticipate that its new corporate office building will
      be completed in October of 2002, and within the estimated total cost
      budget of $500,000.

      Breda is continuing its negotiations with U.S. Cellular for another
      agreement for the sale of cellular phones and related service packages.
      Breda continues to expect the negotiations to finalize this agreement to
      occur during the second quarter of 2002, and that the new agreement will
      have a neutral impact on Breda's cellular commissions revenue.

      Breda's current employment agreements with Robert Boeckman and Jane Morlok
      each terminated by their terms on April 1, 2002. Breda is, however,
      continuing the employment of both Mr. Boeckman and Ms. Morlok under their
      existing employment agreements while it is negotiating new employment
      agreements with them. Breda does not believe there will be any break in
      the employment of either Mr. Boeckman or Ms. Morlok.

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

      Cautionary Statement on Forward Looking Statements.

      This item and other items in this quarterly report contain forward looking
      statements that involve and are subject to various risks, uncertainties
      and assumptions. Forward looking statements include, but are not limited
      to, statements with respect to anticipated future trends in revenues and
      net income, projections concerning operations and cash flow, growth and
      acquisition opportunities, management's plans and intentions for the
      future, and other similar forecasts and statements of expectation. Words
      such as "expects," "estimates," "plans," "anticipates," "contemplates,"
      "predicts," "intends," "believes," "seeks," "should," "thinks,"
      "objectives" and other similar expressions or variations thereof are
      intended to identify forward looking statements. Forward looking
      statements are made based on estimates, projections, views, beliefs and
      assumptions made or existing at the time of such statements and are not
      guarantees of future results or performance. Breda disclaims any
      obligation to update or revise any forward looking statements based on the
      occurrence of future events, the receipt of new information, or otherwise.

      Actual future performance, outcomes and results may differ materially from
      those expressed in forward looking statements as a result of numerous and
      varied risks, uncertainties and assumptions, nearly all of which are
      beyond the control of Breda and its management. The risks, uncertainties
      and assumptions affecting forward looking statements include, but are not
      limited to, the following:


                                      -23-
<PAGE>

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

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

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

            o     employee relations;

            o     management's business strategies;

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

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

            o     acts or omissions of competitors and other third parties;

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

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

            o     continued availability of financing, and on favorable terms.

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

                           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 routine litigation that was
      incidental to its business. As of the date of this quarterly report, Breda
      was not aware that any governmental authority was contemplating any
      proceeding against Breda or any of its property.


                                      -24-
<PAGE>

Item 2. Changes in Securities.

      No material modifications, limitations or qualifications of the type
      required to be reported under this Item were made to or placed upon the
      terms of Breda's shares of common stock during the period of January 1,
      2002 through March 31, 2002.

      Breda did not issue any shares of its common stock during the period of
      January 1, 2002 through March 31, 2002.

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 January 1, 2002 through March 31, 2002.

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

      No matters were submitted to a vote of the shareholders of Breda during
      the period of January 1, 2002 through March 31, 2002.

Item 5. Other Information.

      During the period of January 1, 2002 through March 31, 2002, Breda
      redeemed 244 shares of its common stock from 6 different shareholders at
      $258.00 per share, for a total amount of $62,952. The $258.00 per share
      redemption price was the per share redemption price that was announced by
      the board of directors at, and which became effective at, the May 16, 2001
      annual meeting of the shareholders of Breda.

      The board of directors contemplates announcing a new issuance price and
      redemption price for Breda's shares of common stock of $280.00 per share
      at the May 21, 2002 annual meeting of the shareholders of Breda.

      The board of directors declared a dividend of $3 per share on April 8,
      2002, payable to shareholders of record on April 9, 2002. The aggregate
      amount of the dividend will be $104,214.

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

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

      (b)   Breda did not file any reports on Form 8-K during the period of
            January 1, 2002 through March 31, 2002.


                                      -25-
<PAGE>

                                   SIGNATURES

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

                                       BREDA TELEPHONE CORP.


Date:    May 14, 2002.                 By: /s/ Dean Schettler
                                           -------------------------------------
                                                  Dean Schettler, President


Date:   May 14, 2002.                  By:/s/   David Grabner
                                           -------------------------------------
                                                  David Grabner, Treasurer


                                      -26-
<PAGE>

                                  EXHIBIT INDEX
                             Exhibits to Form 10-QSB
                        Three Months Ended March 31, 2002
                              BREDA TELEPHONE CORP.

Description of Exhibit

2.    Plan of Acquisition, Disposition, Reorganization, Arrangement, Liquidation
      or Succession

      (a)   Stock Purchase Agreement dated March 29, 2000, by and among AirTouch
            Iowa, LLC, Central Iowa Cellular, Inc., Prairie Telephone Company,
            Inc., Panora Telecommunications, Inc., Walnut Creek Communications,
            Inc., Minburn Telephone Company, and Interstate Enterprises, Ltd.
            (Filed as Exhibit 2.1 to Breda's Form 8-K dated March 29,2000 and
            filed April 12, 2000, and incorporated herein by this reference.)

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

3.    Articles of Incorporation and Bylaws

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

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

10.   Material Contracts

      (a)   Employment Agreement dated September 11, 2001 between Breda and
            Robert Boeckman. (Filed as Exhibit 10.1 to Breda's Form 10-QSB for
            the quarterly period ended September 30, 2001, and incorporated
            herein by this reference.)

      (b)   Employment Agreement dated September 11, 2001 between Breda and Jane
            Morlok. (Filed as Exhibit 10.2 to Breda's Form 10-QSB for the
            quarterly period ended September 30, 2001, and incorporated herein
            by this reference.)
<PAGE>

*18.  Letter on Change in Accounting Principles

*Included with this filing

<PAGE>

                                                                      EXHIBIT 18

To The Board of Directors
Breda Telephone Corporation
Hwy. 217 E.
PO Box 190
Breda, IA 51436

As discussed in Note 6 to the condensed consolidated financial statements for
the three months ended March 31, 2002, the Company changed its method of
accounting for certain investments from the cost method to the equity method. We
understand your basis for this decision rest with an evaluation of each
investment and the level of influence the Company currently has with respect to
each investment.

As you have requested, we have discussed with you the circumstances, business
judgment, and all other underlying factors that contributed to your decision to
make this accounting change.

Based on our review of the attendant circumstances and discussions with
management, we concur that the newly adopted accounting principle for certain
investments using the equity method as described in Note 6 is preferable under
the circumstances.

Because we have not audited any financial statements of the Company as of any
date or for any period subsequent to December 31, 2001, we do not express an
opinion on the financial statements for the three months ended March 31, 2002.


KIESLING ASSOCIATES LLP

Emmetsburg, Iowa
April 18, 2002