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

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**FORM 10-Q**

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(Mark One)
|   |                                                                                         |
|--------|----------------------------------------------------------------------------------------------|
| **x**  | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|   | For the quarterly period ended March 31, 2008                                                |
|   |                                                                                         |
|   | or                                                                                           |
|   |                                                                                         |
| **o**  | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|   | For the transition period from ______________________ to _______________________             |

Commission File Number: 0-26525

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**BREDA TELEPHONE CORP.**(Exact name of registrant as specified in its charter)

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|                                                           |   |                                 |
|----------------------------------------------------------------|--------|--------------------------------------|
| **Iowa**                                                       |   | **42-0895882**                       |
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |
|                                                           |   |                                 |
| **112 E. Main, P.O. Box 190, Breda, Iowa**                     |   | **51436**                            |
| (Address of principal executive offices)                       |   | (Zip Code)                           |

**712-673-2311**(Registrant’s telephone number, including area code)

N/A            (Former name, former address and former fiscal year, if changed since last report)

----

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

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|                                        |   |                                         |
|---------------------------------------------|--------|----------------------------------------------|
| Large accelerated filer    o |   | Accelerated filer    o        |
|                                        |   |                                         |
| Non-accelerated filer   o    |   | Smaller reporting company   x |

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

          Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 30,851 shares of common stock, no par value, at May 1, 2008.

----

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**BREDA TELEPHONE CORP.            FORM 10-Q            For the Quarter Ended March 31, 2008**

**INDEX**

|                                                    |   |                                                                                        |   |   |   |
|---------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                    |   |                                                                                        |   | Page   |
|                                                    |   |                                                                                        |   |        |
| Part I. Financial Information                           |   |                                                                                        |   |
|                                                    |   |                                                                                        |   |   |   |
| Item 1.                                                 |   | Unaudited Financial Statements                                                              |   | 1      |   |
|                                                    |   |                                                                                        |   |   |   |
|                                                    |   | a) Balance Sheets                                                                           |   | 2      |   |
|                                                    |   | b) Statements of Income                                                                     |   | 3      |   |
|                                                    |   | c) Statements of Stockholders’ Equity                                                 |   | 4      |   |
|                                                    |   | d) Statements of Cash Flows                                                                 |   | 5      |   |
|                                                    |   | e) Notes to Unaudited Financial Statements                                                  |   | 6      |   |
|                                                    |   |                                                                                        |   |   |   |
| Item 2.                                                 |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 8      |   |
| Item 3.                                                 |   | Quantitative and Qualitative Disclosures About Market Risk                                  |   | 35     |   |
| Item 4T.                                                |   | Controls and Procedures                                                                     |   | 35     |   |
|                                                    |   |                                                                                        |   |   |   |
| Part II. Other Information                              |   |                                                                                        |   |
|                                                    |   |                                                                                        |   |   |   |
| Item 1.                                                 |   | Legal Proceedings                                                                           |   | 35     |   |
| Item 1A.                                                |   | Risk Factors                                                                                |   | 36     |   |
| Item 2.                                                 |   | Unregistered Sales of Equity Securities and Use of Proceeds                                 |   | 36     |   |
| Item 3.                                                 |   | Defaults Upon Senior Securities                                                             |   | 37     |   |
| Item 4.                                                 |   | Submission of Matters to a Vote of Security Holders                                         |   | 38     |   |
| Item 5.                                                 |   | Other Information                                                                           |   | 38     |   |
| Item 6.                                                 |   | Exhibits                                                                                    |   | 39     |   |
|                                                    |   |                                                                                        |   |   |   |
| Signatures                                              |   |                                                                                        |   | 41     |   |
|                                                    |   |                                                                                        |   |   |   |
| Exhibits Filed With This Report                         |   |                                                                                        |   |
| Rule 13a-14(a) Certification of Chief Executive Officer |   | E-1                                                                                         |   |
| Rule 13a-14(a) Certification of Chief Financial Officer |   | E-3                                                                                         |   |
| Section 1350 Certification of Chief Executive Officer   |   | E-5                                                                                         |   |
| Section 1350 Certification of Chief Financial Officer   |   | E-6                                                                                         |   |

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**PART I - FINANCIAL INFORMATION**

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

**Breda Telephone Corp.            And Subsidiaries            Breda, IA**

**Condensed Consolidated Financial Statements            For the Periods            Ended March 31, 2008 and 2007            And the Year Ended December 31, 2007**

1

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

**CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)            March 31, 2008 and December 31, 2007**

|                                                                                                                                                            |   |                                  |       |                                     |   |       |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|------------------------------------------|--------|------------|--------|
|                                                                                                                                                            |   | March 31,                        2008 |       | December 31,                        2007 |   |
|                                                                                                                                                            |   |                                       |       |                                          |   |
| ASSETS                                                                                                                                                          |   |                                  |       |                                     |   |       |   |
| CURRENT ASSETS                                                                                                                                                  |   |                                  |       |                                     |   |       |   |
| Cash and cash equivalents                                                                                                                                       |   | $                                     | 1,636,536  |                                     | $      | 1,104,327  |   |
| Marketable securities                                                                                                                                           |   |                                  | 811,703    |                                     |   | 480,311    |   |
| Accounts receivable, net of allowances of $1,178,846 and $676,422 in 2008 and 2007, respectively                                                                |   |                                  | 2,668,208  |                                     |   | 1,740,266  |   |
| Interest receivable                                                                                                                                             |   |                                  | 116,654    |                                     |   | 98,013     |   |
| Notes receivable                                                                                                                                                |   |                                  | 734,383    |                                     |   | 734,383    |   |
| Inventory, at average cost                                                                                                                                      |   |                                  | 156,832    |                                     |   | 152,857    |   |
| Other                                                                                                                                                           |   |                                  | 29,800     |                                     |   | 17,973     |   |
| Deferred income taxes                                                                                                                                           |   |                                  | 238,486    |                                     |   | 14,294     |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |   |                                  | 6,392,602  |                                     |   | 4,342,424  |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
| OTHER NONCURRENT ASSETS                                                                                                                                         |   |                                  |       |                                     |   |       |   |
| Marketable securities                                                                                                                                           |   |                                  | 6,688,926  |                                     |   | 7,374,754  |   |
| Investments in unconsolidated affiliates at equity                                                                                                              |   |                                  | 7,682,097  |                                     |   | 7,950,825  |   |
| Other investments at cost                                                                                                                                       |   |                                  | 602,921    |                                     |   | 611,707    |   |
| Goodwill                                                                                                                                                        |   |                                  | 896,812    |                                     |   | 896,812    |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |   |                                  | 15,870,756 |                                     |   | 16,834,098 |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |
| PROPERTY, PLANT AND EQUIPMENT                                                                                                                                   |   |                                  | 5,361,603  |                                     |   | 5,015,302  |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |
| TOTAL ASSETS                                                                                                                                                    |   | $                                     | 27,624,961 |                                     | $      | 26,191,824 |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                      |   |                                  |       |                                     |   |       |   |
|                                                                                                                                                            |   |                                  |       |                                     |   |       |   |
| CURRENT LIABILITIES                                                                                                                                             |   |                                  |       |                                     |   |       |   |
| Current portion of long-term debt                                                                                                                               |   | $                                     | 190,831    |                                     | $      | 187,710    |   |
| Accounts payable                                                                                                                                                |   |                                  | 1,485,499  |                                     |   | 850,431    |   |
| Accrued taxes                                                                                                                                                   |   |                                  | 554,736    |                                     |   | 390,660    |   |
| Other                                                                                                                                                           |   |                                  | 400,106    |                                     |   | 116,034    |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |   |                                  | 2,631,172  |                                     |   | 1,544,835  |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |
| LONG-TERM DEBT, less current portion                                                                                                                            |   |                                  | 902,601    |                                     |   | 951,495    |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |
| OTHER NONCURRENT LIABILITIES                                                                                                                                    |   |                                  | 1,386,246  |                                     |   | 1,213,607  |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                      |   |                                  |       |                                     |   |       |   |
| Common stock, Class A - no par value, 5,000,000 shares authorized, 28,418 and 28,923 shares issued and outstanding at $509 and $457 stated values, respectively |   |                                  | 14,464,762 |                                     |   | 13,217,811 |   |
| Common stock, Class B - no par value, 5,000,000 shares authorized, 2,433 and 2,013 shares issued and outstanding at $509 and $457 stated values, respectively   |   |                                  | 1,238,397  |                                     |   | 919,941    |   |
| Retained earnings                                                                                                                                               |   |                                  | 7,001,783  |                                     |   | 8,344,135  |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |   |                                  | 22,704,942 |                                     |   | 22,481,887 |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |
|                                                                                                                                                            |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                |   | $                                     | 27,624,961 |                                     | $      | 26,191,824 |   |
|                                                                                                                                                            |   |                                       |            |                                     |        |            |   |

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

2

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

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)            For the Three Months Ended March 31, 2008 and 2007**

|                                 |   |                       |      |   |   |      |   |
|--------------------------------------|--------|----------------------------|-----------|--------|--------|-----------|--------|
|                                 |   | For the Three Months Ended |      |
|                                 |   | 2008                       |      | 2007   |   |
|                                 |   |                            |      |        |   |
|                                 |   |                       |      |   |   |
| OPERATING REVENUES                   |   | $                          | 2,974,358 |   | $      | 2,397,041 |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| OPERATING EXPENSES                   |   |                       |      |   |   |      |   |
| Cost of services                     |   |                       | 1,608,632 |   |   | 1,151,777 |   |
| Depreciation and amortization        |   |                       | 251,941   |   |   | 234,426   |   |
| Selling, general, and administrative |   |                       | 666,686   |   |   | 624,806   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       | 2,527,259 |   |   | 2,011,009 |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| OPERATING INCOME                     |   |                       | 447,099   |   |   | 386,032   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| OTHER INCOME (EXPENSES)              |   |                       |      |   |   |      |   |
| Interest and dividend income         |   |                       | 165,435   |   |   | 144,172   |   |
| Gain on sale of investments          |   |                       | (4,301    | )      |   | (4,795    | )      |
| Gain or (Loss) on disposal of assets |   |                       | 9,065     |   |   | 1,800     |   |
| Interest expense                     |   |                       | (20,936   | )      |   | (24,162   | )      |
| Income from equity investments       |   |                       | 233,674   |   |   | 416,515   |   |
| Other, net                           |   |                       | (9,870    | )      |   | (11,939   | )      |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       | 373,067   |   |   | 521,591   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| INCOME BEFORE INCOME TAXES           |   |                       | 820,166   |   |   | 907,623   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| INCOME TAXES                         |   |                       | 311,458   |   |   | 318,778   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| NET INCOME                           |   | $                          | 508,708   |   | $      | 588,845   |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| NET INCOME PER COMMON SHARE          |   | $                          | 16.47     |   | $      | 18.99     |   |
|                                 |   |                            |           |   |        |           |   |
|                                 |   |                       |      |   |   |      |   |
| DIVIDENDS PER COMMON SHARE           |   | $                          | 8.00      |   | $      | 7.00      |   |
|                                 |   |                            |           |   |        |           |   |

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

3

----

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

**CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
|-------------------------------|--------|-----------------------------|--------|------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                          |   | Common Stock, A and B Class |   | Retained                        Earnings |   |       |   |   |
|                          |   |                             |   |                                     |   |       |   |
|                          |   | Shares                      |   | Amount                                   |   |       | Total  |   |
|                          |   |                             |        |                                     |        |            |   |        |            |   |        |            |   |
|                          |
| Balance at December 31, 2006  |   |                        | 31,016 |                                     | $      | 12,220,304 |   | $      | 8,036,925  |   | $      | 20,257,229 |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Comprehensive income:         |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Net Income                    |   |                        |   |                                     |   |       |   |   | 2,478,330  |   |   | 2,478,330  |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Dividends paid                |   |                        |   |                                     |   |       |   |   | (217,112   | )      |   | (217,112   | )      |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Common stock redeemed, net    |   |                        | (80    | )                                        |   | (36,560    | )      |   |       |   |   | (36,560    | )      |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Stated value stock adjustment |   |                        |   |                                     |   | 1,954,008  |   |   | (1,954,008 | )      |   |       |   |
|                          |   |                             |        |                                     |        |            |   |        |            |   |        |            |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Balance at December 31, 2007  |   |                        | 30,936 |                                     |   | 14,137,752 |   |   | 8,344,135  |   |   | 22,481,887 |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Comprehensive income:         |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Net Income                    |   |                        |   |                                     |   |       |   |   | 508,708    |   |   | 508,708    |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Dividends declared            |   |                        |   |                                     |   |       |   |   | (246,808   | )      |   | (246,808   | )      |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Common stock redeemed, net    |   |                        | (85    | )                                        |   | (38,845    | )      |   |       |   |   | (38,845    | )      |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Stated value stock adjustment |   |                        |   |                                     |   | 1,604,252  |   |   | (1,604,252 | )      |   |       |   |
|                          |   |                             |        |                                     |        |            |   |        |            |   |        |            |   |
|                          |   |                        |   |                                     |   |       |   |   |       |   |   |       |   |
| Balance at March 31, 2008     |   |                        | 30,851 |                                     | $      | 15,703,159 |   | $      | 7,001,783  |   | $      | 22,704,942 |   |
|                          |   |                             |        |                                     |        |            |   |        |            |   |        |            |   |

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

4

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

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)            For the Three Months Ended March 31, 2008 and 2007**

|                                                                                                                              |   |   |      |   |   |      |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|--------|
|                                                                                                                              |   | 2008   |      | 2007   |   |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                                                              |   |   |      |   |   |      |   |
| Net income                                                                                                                        |   | $      | 508,708   |   | $      | 588,845   |   |
| Adjustments to reconcile net income to cash provided by operating activities:                                                     |   |   |      |   |   |      |   |
| Depreciation and amortization                                                                                                     |   |   | 251,941   |   |   | 234,426   |   |
| Deferred income taxes                                                                                                             |   |   | (51,553   | )      |   | (142,404  | )      |
| Amortization of investment premium/discount - net                                                                                 |   |   | 12,729    |   |   | 12,787    |   |
| Equity income in unconsolidated affiliates, net of distributions received of $527,402 and $483,590 in 2008 and 2007, respectively |   |   | 293,728   |   |   | 67,075    |   |
| Realized (gain) or loss on sale of property                                                                                       |   |   | (8,985    | )      |   | (1,800    | )      |
| Gain on sale of marketable securities                                                                                             |   |   | 4,302     |   |   | 4,795     |   |
| Changes in assets and liabilities:                                                                                                |   |   |      |   |   |      |   |
| (Increase) Decrease in assets                                                                                                     |   |   | (962,385  | )      |   | (149,939  | )      |
| Increase (Decrease) in liabilities                                                                                                |   |   | 517,680   |   |   | 501,895   |   |
|                                                                                                                              |   |   |      |   |   |      |   |
|                                                                                                                              |   |        |           |   |        |           |   |
| Net cash provided by operating activities                                                                                         |   |   | 566,165   |   |   | 1,115,680 |   |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                                                              |   |   |      |   |   |      |   |
| Capital expenditures                                                                                                              |   |   | (279,514  | )      |   | (171,296  | )      |
| Proceeds from the sale of assets                                                                                                  |   |   | 8,985     |   |   | —   |   |
| Purchase of marketable securities                                                                                                 |   |   | (165,545  | )      |   | (183,992  | )      |
| Purchase of equity investments                                                                                                    |   |   | (25,000   | )      |   | —   |   |
| Proceeds from the sale of marketable securities                                                                                   |   |   | 502,950   |   |   | 120,586   |   |
| Proceeds from the sale of other investments - at cost                                                                             |   |   | 8,786     |   |   | 8,226     |   |
|                                                                                                                              |   |        |           |   |        |           |   |
| Net cash provided by (used in) investing activities                                                                               |   |   | 50,662    |   |   | (226,476  | )      |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                                                              |   |   |      |   |   |      |   |
| Repayment of long term debt                                                                                                       |   |   | (45,773   | )      |   | (42,851   | )      |
| Common stock redeemed, net                                                                                                        |   |   | (38,845   | )      |   | —   |   |
|                                                                                                                              |   |        |           |   |        |           |   |
| Net cash used in financing activites                                                                                              |   | $      | (84,618   | )      | $      | (42,851   | )      |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| Net Increase in Cash and Cash Equivalents                                                                                         |   | $      | 532,209   |   | $      | 846,353   |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| Cash and Cash Equivalents at Beginning of Period                                                                                  |   |   | 1,104,327 |   |   | 777,708   |   |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| Cash and Cash Equivalents at End of Period                                                                                        |   | $      | 1,636,536 |   | $      | 1,624,061 |   |
|                                                                                                                              |   |        |           |   |        |           |   |
|                                                                                                                              |   |   |      |   |   |      |   |
| Supplemental Disclosures of Cash Flow Information                                                                                 |   |   |      |   |   |      |   |
| Cash paid during the period for:                                                                                                  |   |   |      |   |   |      |   |
| Interest                                                                                                                          |   | $      | 20,936    |   | $      | 24,162    |   |
| Income taxes                                                                                                                      |   | $      | 151,047   |   | $      | 57,000    |   |

The accompanying notes are an integral part of these condensed 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 March 31, 2008 and December 31, 2007 and the results of operation and changes in cash flows for the three months ended March 31, 2008 and 2007.                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | 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, 2007                        financial statements. The results of operations for the three-month period ended March 31, 2008 are not necessarily indicative of the operating results of the entire year. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | Certain reclassifications have been made to the 2007 financial statements to conform with the 2008 presentations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

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

|   |                                                                                                                                                                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Noncash investing activities included $318,728 and $5,400 during the three months ended March 31, 2008 and March 31, 2007, respectively, relating to plant and equipment additions under construction during the period, which are reflected in accounts payable at March 31, 2008 and March 31, 2007. |

|        |                   |
|-------------|------------------------|
| **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

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

**NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

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

|                                                     |   |                                                                 |      |      |   |                                                                    |   |   |     |   |   |      |   |
|----------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|----------|--------|--------|-----------|--------|
| Three Months Ended                        March 31, 2008 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |     |
|                                                          |   |                                                                      |      |           |   |                                                                         |   |        |     |
| Revenues                                                 |   | $                                                                    | 2,628,301 |      | $      | 170,946                                                                 |   | $      | 175,111  |   | $      | 2,974,358 |   |
| Segment profit (loss)                                    |   |                                                                 | 698,861   |      |   | (46,192                                                                 | )      |   | (143,961 | )      |   | 508,708   |   |

|                                                     |   |                                                                 |      |      |   |                                                                    |   |   |     |   |   |      |   |
|----------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|----------|--------|--------|-----------|--------|
| Three Months Ended                        March 31, 2007 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |     |
|                                                          |   |                                                                      |      |           |   |                                                                         |   |        |     |
| Revenues                                                 |   | $                                                                    | 2,062,933 |      | $      | 178,273                                                                 |   | $      | 155,835  |   | $      | 2,397,041 |   |
| Segment profit (loss)                                    |   |                                                                 | 814,701   |      |   | (53,121                                                                 | )      |   | (172,735 | )      |   | 588,845   |   |

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

|   |                                                                                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Net income per common share for March 31, 2008 and 2007 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, 2008 and 2007 were 30,881 and 31,016 respectively. |

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

|   |                                                                                                                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | During March 2008, the board of directors authorized a $52 increase in the stated value of each share of common stock from $457 to $509. There were 30,851 shares outstanding at the time of the value adjustment, which reduced retained earnings by $1,604,252. |
|   |                                                                                                                                                                                                                                                              |
|   | 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. |

7

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|        |                                                                                             |
|-------------|--------------------------------------------------------------------------------------------------|
| **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, 2007 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 Telephone Corp. is an Iowa corporation with its principal offices in Breda, Iowa. Breda was incorporated in 1964 to provide local telephone services to Breda, Iowa and the surrounding rural area.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Breda’s principal business is still providing telephone services. Telephone services are also provided by three of Breda’s wholly owned subsidiaries, Prairie Telephone Co., Inc., Westside Independent Telephone Company and BTC, Inc. A total of eight Iowa towns and their surrounding rural areas currently receive telephone services from Breda, Prairie Telephone, Westside Independent or BTC,                        Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Prairie Telephone is an Iowa corporation that was incorporated in 1968.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Westside Independent is an Iowa corporation that was incorporated in 1957. Breda acquired the stock of Westside Independent in June 1998.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | BTC, Inc. is an Iowa corporation that was incorporated in 1997. BTC, Inc. has provided Internet access services in the Carroll, Iowa market area since 1997. BTC, Inc. also provides Internet access services to the customers of Breda, Prairie Telephone and Westside Independent who subscribe for Internet services. BTC, Inc. has provided long distance services in the Carroll, Iowa market area since July                        2000, and local telephone services since October, 2003. BTC, Inc. also provides long distance services to the customers of Breda, Prairie Telephone and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

8

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Westside Independent who subscribe for long distance services. BTC, Inc. is a wholly owned subsidiary of Prairie Telephone.                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Tele-Services, Ltd. is also a wholly owned subsidiary of Breda. Tele-Services provides cable television services to seventeen towns in Iowa and one town in Nebraska. Tele-Services provided cable television services to eighteen towns in Iowa until October 1, 2005, when it sold its Neola, Iowa cable system to Walnut Telephone Company. Tele-Services is an Iowa corporation that was incorporated in                        1983. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | 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’s and its subsidiaries’ telephone, Internet services and cable television businesses are discussed in more detail below. Some of the other miscellaneous business operations of Breda and its subsidiaries are also discussed below.                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | *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:                                                                                                                                                                                                                                                                                                                                                                  |

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

9

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|   |   |                          |                |
|--------|--------|-------------------------------|---------------------|
|   |   | **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 younger 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 has also undertaken to compete 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                                                                                                                                                                                                                                                          |

10

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | TV or satellite TV) for a competitive price. Breda now competes with the “triple play” bundled services offerings from both Qwest and Mediacom.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   |   | Breda has switching capabilities for the Carroll, Iowa market that allows 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 consider 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 modify its package offerings, and to evaluate and adjust its pricing structures in order to attempt to remain competitive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | • | The effect on Breda’s revenues from decreased customer counts for dial-up Internet as well as cable TV services. Competition and bundled services, declining population bases in some of Breda’s rural service areas, and cost of technology upgrades play a role in the competition for and retention of customers. Breda continues to consolidate 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.                                                            |
|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | • | 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 wireless (cell) phone usage, and the designation of new technology by the FCC as data services, instead of voice services, have 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 has negotiated an interconnection agreement with six wireless carriers and continues to work with industry associations in order to receive some form of payment for the use of its networks. Breda also implemented tandem switching capabilities on September 1, 2005, with the installation of its new switch in Carroll, Iowa, and from January 2006 has been able to receive payments for consolidating                        and switching its own traffic. Breda also provided tandem switching services to neighboring telephone companies from July 2006 to September 1, 2007. During third quarter 2006, Breda                        |

11

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | partnered with vendors that allowed Breda to offer conference-bridging services over its networks. Breda bills and receives access revenue for the conference bridge traffic actually utilizing its networks. Breda continues to investigate new opportunities in the industry that the installation of the soft switch in Carroll now 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, March 31, 2008, and March 31, 2007: |

|                            |   |                                                    |      |                                                                                                             |   |      |   |     |   |   |   |   |   |
|---------------------------------|--------|---------------------------------------------------------|-----------|------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|----------|--------|--------|--------|--------|--------|
|                            |   | **Three Months Ended                        March 31,** |      | **% of Total Revenues                        for the Three Months Ended                        Ended March 31,** |   |
|                            |   |                                                         |      |                                                                                                                  |   |
|                            |   | **2008**                                                |      | **2007**                                                                                                         |   | **2008**  |   | **2007** |   |
|                            |   |                                                         |      |                                                                                                                  |   |           |   |          |   |
| OPERATING REVENUES              |   |                                                    |      |                                                                                                             |   |      |   |     |   |   |   |   |   |
| Local exchange carrier services |   | $                                                       | 2,628,301 |                                                                                                             | $      | 2,062,933 |   |     | 88.4   | %      |   | 86.1   | %      |
| Broadcast services              |   |                                                    | 170,946   |                                                                                                             |   | 178,273   |   |     | 5.7    | %      |   | 7.4    | %      |
| Internet services               |   |                                                    | 175,111   |                                                                                                             |   | 155,835   |   |     | 5.9    | %      |   | 6.5    | %      |
|                            |   |                                                         |           |                                                                                                             |        |           |   |          |        |   |        |        |   |
|                            |   | $                                                       | 2,974,358 |                                                                                                             | $      | 2,397,041 |   |     | 100.0  | %      |   | 100.0  | %      |
|                            |   |                                                         |           |                                                                                                             |        |           |   |          |        |   |        |        |   |

|   |                                                                                                       |
|--------|------------------------------------------------------------------------------------------------------------|
|   | *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 |

12

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|   |   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   |   | 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.* Revenues are generated in this segment from the monthly fees charged to customers for basic and premium cable TV services.                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   | *Internet Services.* Monthly dial-up and high-speed Internet access services fees billed to residential and business customers generate the bulk of this segment’s revenue. Revenues are also generated from the sale of Internet equipment modems and routers, and from customer trouble-shooting and maintenance support fees. Revenue generated through the offering of a satellite-based Internet                        service is also included in Internet Services revenues. |

13

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **Operating Expenses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *Operating Expense Categories.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Breda’s operating expenses are categorized as cost of services; depreciation and amortization; and selling, general and administration.                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *Cost of Services.* This category includes expense 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 Administration.* 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                        March 31,** |   |
|                                |   |                                                         |   |
|                                |   |                                                    |   |     |   |   |   |
|                                |   | **2008**                                                |   | **2007** |   |
|                                |   |                                                         |   |          |   |
|                                |   |                                                    |   |     |   |   |   |
| Operating revenues                  |   |                                                    | 100    | %        |   | 100    | %      |
| Cost of services                    |   |                                                    | 54     | %        |   | 48     | %      |
| Depreciation and amortization       |   |                                                    | 8      | %        |   | 10     | %      |
| Selling, general and administrative |   |                                                    | 23     | %        |   | 26     | %      |
|                                |   |                                                         |        |     |        |        |   |
|                                |   |                                                    |   |     |   |   |   |
| Operating income                    |   |                                                    | 15     | %        |   | 16     | %      |
| Other income (expenses)             |   |                                                    | 12     | %        |   | 22     | %      |
| Income taxes                        |   |                                                    | 10     | %        |   | 13     | %      |
|                                |   |                                                         |        |     |        |        |   |
|                                |   |                                                    |   |     |   |   |   |
| Net income                          |   |                                                    | 17     | %        |   | 25     | %      |
|                                |   |                                                         |        |     |        |        |   |

14

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|   |                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **Three Months Ended March 31, 2008 and 2007**                                                                                                      |
|   |                                                                                                                                                |
|   | The table below sets forth the components of Breda’s revenues for the three months ended March 31, 2008, compared to the same period in 2007. |

|   |                            |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|--------|---------------------------------|--------|---------------------------------------------------------|-----------|------------|--------|------------|--------|-------------|-----------|--------|--------|--------|--------|
|   |                            |   | **Three Months Ended                        March 31,** |      | **Change** |   |
|   |                            |   |                                                         |      |            |   |
|   |                            |   | **2008**                                                |      | **2007**   |   | **Amount** |   | **Percent** |      |
|   |                            |   |                                                         |      |            |   |            |   |             |      |
|   | OPERATING REVENUES              |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|   | Local Exchange Carrier          |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|   | Local network services          |   | $                                                       | 232,421   |       | $      | 229,039    |   | $           | 3,382     |   |   | 1.5    | %      |
|   | Network access services         |   |                                                    | 2,442,982 |       |   | 1,332,717  |   |        | 1,110,265 |   |   | 83.3   | %      |
|   | Long distance services          |   |                                                    | 68,477    |       |   | 69,152     |   |        | (675      | )      |   | -1.0   | %      |
|   | Cellular services               |   |                                                    | 335,091   |       |   | 372,457    |   |        | (37,366   | )      |   | -10.0  | %      |
|   | Billing and collection services |   |                                                    | 2,983     |       |   | 3,246      |   |        | (263      | )      |   | -8.1   | %      |
|   | Miscellaneous                   |   |                                                    | (453,653  | )          |   | 56,322     |   |        | (509,975  | )      |   | -905.5 | %      |
|   |                            |   |                                                         |           |       |        |            |   |             |           |   |        |        |   |
|   |                            |   | $                                                       | 2,628,301 |       | $      | 2,062,933  |   | $           | 565,368   |   |   | 27.4   | %      |
|   |                            |   |                                                         |           |       |        |            |   |             |           |   |        |        |   |
|   |                            |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|   | Broadcast Services              |   | $                                                       | 170,946   |       | $      | 178,273    |   | $           | (7,327    | )      |   | -4.1   | %      |
|   |                            |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|   | Internet services               |   | $                                                       | 175,111   |       | $      | 155,835    |   | $           | 19,276    |   |   | 12.4   | %      |
|   |                            |   |                                                    |      |       |   |       |   |        |      |   |   |   |   |
|   |                            |   |                                                         |           |       |        |            |   |             |           |   |        |        |   |
|   |                            |   | $                                                       | 2,974,358 |       | $      | 2,397,041  |   | $           | 577,317   |   |   | 24.1   | %      |
|   |                            |   |                                                         |           |       |        |            |   |             |           |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There was an increase in total operating revenues for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007, of $577,317, or 24.1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | *Local Exchange Carrier Services - $565,368*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | Local exchange carrier services revenues accounted for 88.4% of all operating revenues in the three-month period ended March 31, 2008. There was a $565,368, or 27.4%, increase in local exchange carrier services revenues for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | Local network services revenues increased $3,382, or 1.5%, for the three months ended March 31, 2008, as compared to the same period in 2007, primarily because of the increased number of customers taking phone service from BTC, Inc. in Carroll, Iowa. Breda’s long distance services revenue decreased $675, or 1.0%, for the three months ended March 31, 2008, as compared to the three-month period                        ended March 31, 2007. 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 |

15

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | package offerings that include local and long distance service from both residential and business customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Network access services increased $1,110,265, or 83.3%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. This increase mainly resulted from increased terminating access revenues received from traffic delivered to Breda’s conference bridge in Carroll, Iowa. Breda has contracted with conference bridge vendors for the transport of long                        distance calls over Breda’s networks. Breda’s access revenue has also increased because, as noted previously, BTC, Inc.’s switch in its Carroll, Iowa location, allows BTC, Inc. to receive tandem switching payments for consolidating and switching its traffic from six 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 $37,366, or 10.0%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. Both Breda’s new cellular customer count and its returning customer base decreased during the three-month periods ended March 31, 2008, when compared to the three-month period ended March 31, 2007. The whole RSA #9 market area of which                        Breda is an agent for and a partner with U.S. Cellular experienced decreased numbers in the first quarter of 2008. U.S. Cellular and its agents face increasing competition from other wireless providers. Some of the online customer service applications available to U.S. Cellular allow them to handle services directly with U.S. Cellular instead of coming into an agent location, such as Breda, to complete their transactions. These self-help service options cause a decrease                        in Breda’s customer count and associated revenue streams. U.S. Cellular has come out with aggressive promotions for the second quarter of 2008, and Breda has seen its customer service statistics increase during the months of March and April 2008. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Miscellaneous revenues decreased $509,975, or 905.5%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. The decrease is mainly attributable to a $502,424 allowance for doubtful interexchange carrier accounts taken by Breda for estimated uncollectible conference bridge network access revenue. While Breda is not a party to any legal action                        with any carriers, Breda may have to initiate, and is seriously considering taking collection action through legal means to receive payment for some of the conference bridge network access revenue services. The second main component of miscellaneous revenue is 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. This source of                        miscellaneous revenue remained consistent when comparing the two three-month periods. The remaining decrease in miscellaneous revenues                                                                                                                             |

16

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | when comparing the three-month period ended March 31 2008 to the three-month period ended March 31, 2007 resulted from a $7,918 decrease in tandem switching revenue from unrelated neighboring telephone companies. BTC, Inc. provided switching services to neighboring telephone companies from July 2006 through August 2007. Because of industry requirements, BTC, Inc. was no longer able to provide this                        service to anyone other than its own exchanges after September 1, 2007. There is no comparable revenue for these switching services during the three month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Broadcast Services – ($7,327)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Broadcast services decreased $7,327, or 4.1%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. 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 now 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 June 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. 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. Tele-Services is actively trying to sell all of its cable TV systems except those with combined head ends that are provisioned out of its local telephone service communities. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Internet Services – $19,276*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Internet services revenue increased $19,276, or 12.4%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. Breda has seen an 63.7% 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

17

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 March 31, 2008. Also, with the advent of newer technologies that could 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. Breda was able to provide high speed Internet service to these previously unserved areas because reliable technology is now available in the industry, allowing Breda to provide service to customers residing a great distance from central office. 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. Breda began to market a high-speed wireless Internet service in the first quarter of 2008, which has received great acceptance in some of the rural areas that Breda had been unable to reach with their                        high speed Internet service. Breda also continues to face intense competition by multiple suppliers in the Carroll, Iowa market area. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | OPERATING EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The table below sets forth the components of Breda’s operating costs for the three months ended March 31, 2008, compared to the same period in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|   |                                |   |                                                    |      |       |   |       |   |        |    |   |   |   |   |
|--------|-------------------------------------|--------|---------------------------------------------------------|-----------|------------|--------|------------|--------|-------------|---------|--------|--------|--------|--------|
|   |                                |   | **Three Months Ended                        March 31,** |      | **Change** |   |
|   |                                |   |                                                         |      |            |   |
|   |                                |   | **2008**                                                |      | **2007**   |   | **Amount** |   | **Percent** |    |
|   |                                |   |                                                         |      |            |   |            |   |             |    |
|   | OPERATING EXPENSES                  |   |                                                    |      |       |   |       |   |        |    |   |   |   |   |
|   | Cost of services                    |   | $                                                       | 1,608,632 |       | $      | 1,151,777  |   | $           | 456,855 |   |   | 39.7   | %      |
|   | Depreciation and amortization       |   |                                                    | 251,941   |       |   | 234,426    |   |        | 17,515  |   |   | 7.5    | %      |
|   | Selling, general and administration |   |                                                    | 666,686   |       |   | 624,806    |   |        | 41,880  |   |   | 6.7    | %      |
|   |                                |   |                                                         |           |       |        |            |   |             |         |   |        |        |   |
|   |                                |   | $                                                       | 2,527,259 |       | $      | 2,011,009  |   | $           | 516,250 |   |   | 25.7   | %      |
|   |                                |   |                                                         |           |       |        |            |   |             |         |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Cost of Services - $456,855*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Cost of services increased $456,855, or 39.7%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. There was a $554,493 increase in costs incurred for the provisioning of the conference bridge services for the three-month period ended March 31, 2008 when compared to the three-month period ended March 31, 2007. All other plant specific costs                        decreased $31,659 when comparing the two three-month periods and resulted mainly from a decrease in labor overtime hours and decreases in fiber lease expense. Cellular provisioning costs for the purchase of phones and accessories decreased slightly by 1.3%, or $3,734, for the three-month period ended March 31, 2008 when compared to the three-month period ended March 31, 2007. Overall Internet costs decreased $67,296, or 37.8%, during the three- |

18

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | month period ending March 31, 2008, when compared to the three-month period March 31, 2007. With the conversion of dial-up customers to Breda’s high-speed Internet services, Breda no longer has the magnitude of long distance charges and local telephone provisioning services costs especially for its customers in its southern Iowa telephone exchanges. Breda has also been able to provision its high                        speed Internet services over more cost effective network connections.                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | 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 7.7% increase in customers subscribing                        to Breda’s long distance services for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007, which still resulted in a $2,729, or 4.9%, decrease in long distance provisioning costs when comparing these two three-month periods.                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | While Tele-Services’ overall customer growth for cable TV services continued to decline, its programming costs increased $9,843, or 9.2%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. 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 – $17,515*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Depreciation and amortization expense increased $17,515, or 7.5%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. Breda had significant capital investments in outside plant equipment and in new financial and provisioning software during 2007. The depreciation on these items are now showing in the three-month period ended March 31, 2008,                        when compared to the three-month period ended March 31, 2007.                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | *Selling, General and Administration – $41,880*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | Selling, general and administration expenses increased $41,880, or 6.7%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. Customer operations increased $9,067, or 4.2%, for the three-month period ended March 31, 2008 when compared to the three-month period ended March 31, 2007, and mainly resulted from increased labor and benefit costs for                        the three-month period ended March 31, 2008. Corporate operations increased $25,861, or 7.1%, when comparing the three-month periods and was mainly attributable to increased computer and software maintenance costs, increased employer insurance costs, and increased labor and benefit costs when comparing the three-month period ended March 31, 2008 to the three- |

19

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | month period ended March 31, 2007. There was a decrease in legal and consulting fees during the three-month period ended March 31, 2008, because Breda had incurred fees and costs to participate in the AWS auction in early 2007, and for which, there is no corresponding fees in the three-month period ended March 31, 2008. Property tax expense increased $6,952, or 14.7%, when comparing the three-month                        period ended March 31, 2008 to the three-month period ended March 31, 2007. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | OTHER INCOME (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | The table below sets forth the components of other income (expense) for the three-month period ended March 31, 2008, compared to the same period in 2007.                                                                                                                                                                                                                                                                                                                                                            |

|                                  |   |                                                    |    |       |   |       |   |        |     |   |   |   |   |
|---------------------------------------|--------|---------------------------------------------------------|---------|------------|--------|------------|--------|-------------|----------|--------|--------|--------|--------|
|                                  |   | **Three Months Ended                        March 31,** |    | **Change** |   |
|                                  |   |                                                         |    |            |   |
|                                  |
|                                  |   | **2008**                                                |    | **2007**   |   | **Amount** |   | **Percent** |     |
|                                  |   |                                                         |    |            |   |            |   |             |     |
| OTHER INCOME (EXPENSE)                |   |                                                    |    |       |   |       |   |        |     |   |   |   |   |
| Interest and dividend income          |   | $                                                       | 165,435 |       | $      | 144,172    |   | $           | 21,263   |   |   | 14.7   | %      |
| Gain or (Loss) on sale of investments |   |                                                    | (4,301  | )          |   | (4,795     | )      |        | 494      |   |   | 10.3   | %      |
| Gain or (Loss) on disposal of assets  |   |                                                    | 9,065   |       |   | 1,800      |   |        | 7,265    |   |   | 100.0  | %      |
| Interest expense                      |   |                                                    | (20,936 | )          |   | (24,162    | )      |        | 3,226    |   |   | -13.4  | %      |
| Income from equity investments        |   |                                                    | 233,674 |       |   | 416,515    |   |        | (182,841 | )      |   | -43.9  | %      |
| Other, net                            |   |                                                    | (9,870  | )          |   | (11,939    | )      |        | 2,069    |   |   | -17.3  | %      |
|                                  |   |                                                         |         |       |        |            |   |             |          |   |        |        |   |
|                                  |   | $                                                       | 373,067 |       | $      | 521,591    |   | $           | (148,524 | )      |   | -28.5  | %      |
|                                  |   |                                                         |         |       |        |            |   |             |          |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest and Dividend Income.* Interest and dividend income increased $21,263, or 14.7%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. $17,899 of the 14.7% increase in interest and dividend income when comparing the two three-month periods resulted from an extraordinary dividend payout from Westside Telephone and Prairie                        Telephone’s investments in Iowa Network Services for the first quarter of 2008. While Breda’s temporary and marketable security investments decreased slightly, and interest rates declined in the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007, Breda’s interest income also increased approximately $10,200, which was the amount of accrued interest on the promissory note to Spiralight Network,                        LLC |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Loss on sale of investments.* Both the $4,301 loss on sale of investments for the three-month period ended March 31, 2008, and the $4,795 loss on sale of investments for the three-month period ended March 31, 2007, represent the loss on the redemption of temporary investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Gain on disposal of assets.* The $9,065 gain on disposal of assets for three-month period ended March 31, 2008, represents the gain from the sale of a service vehicle. The $1,800 gain on disposal of assets for the three-month period ended March 31, 2007, represents the gain from the trade-in of a service vehicle.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

20

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest Expense.* The $3,226, or 13.4%, decrease in interest expense for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007, 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 $182,841, or 43.9%, for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007. 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 March 31, 2008 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 $2,069 increase in other net income for the three-month period ended March 31, 2008, when compared to the three-month period ended March 31, 2007, is mainly attributable to decreased partnership-related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | *Income Tax Expense.* Income taxes decreased $7,320, or 2.3%, for the three-month period ended March 31, 2008, when compared to the same period in 2007. The decrease is a direct reflection of the decreased income generated from operations and other income sources. The effective tax rate for the three-month period ended March 31, 2008 is 38.0%, compared to a 35.1% tax rate for the same three-month                        period in 2007. 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 decreased $80,137, or 13.6%, for the three-month period ended March 31, 2008, when compared to the same period in 2007, and was attributable to a decrease in income from equity investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | **Liquidity and Capital Resources**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Breda’s short-term and long-term liquidity requirements arise primarily from: operations and working capital requirements; capital expenditures; interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

21

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 three months ended March 31, 2008 and March 31, 2007, cash provided by operating activities was $566,165 and                        $1,115,680 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 believes that its 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 March 31, 2008, and December 31, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

|                             |   |                                      |      |                                         |   |      |   |
|----------------------------------|--------|-------------------------------------------|-----------|----------------------------------------------|--------|-----------|--------|
|                             |   | **As of**                                 |      |
|                             |   |                                           |      |
|                             |   | **March 31,                        2008** |      | **December 31,                        2007** |   |
|                             |   |                                           |      |                                              |   |
|                             |   |                                      |      |                                         |   |      |   |
| **Short-Term Liquidity**         |   |                                      |      |                                         |   |      |   |
| Current Assets                   |   | $                                         | 6,392,602 |                                         | $      | 4,342,424 |   |
| Current Liabilities              |   |                                      | 2,631,172 |                                         |   | 1,544,835 |   |
|                             |   |                                           |      |                                              |   |
| Net Working Capital              |   | $                                         | 3,761,430 |                                         | $      | 2,797,589 |   |
|                             |   |                                           |      |                                              |   |
|                             |   |                                      |      |                                         |   |      |   |
| Cash and Cash Equivalents        |   | $                                         | 1,636,536 |                                         | $      | 1,104,327 |   |
| Short Term Marketable Securities |   | $                                         | 811,703   |                                         | $      | 480,311   |   |
| Available on Line of Credit      |   | $                                         | 2,000,000 |                                         | $      | 2,000,000 |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Current assets increased $2,050,178, or 47.2%, for the three-month period ended March 31, 2008, when compared to the year ended December 31, 2007. The increase was due mainly to the $962,882 increase in cash, cash equivalents, and marketable securities, and the $1,075,431 increase in accounts receivable, which was due to unpaid conference bridge network access services. As discussed previously,                        interexchange carriers such as Verizon, Sprint and AT&T are refusing to pay for these services. |

22

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | At March 31, 2008, and at December 31, 2007, Breda held a $480,000 note receivable from Jaguar Communications, Inc. earning interest at the rate of 4.81%, and which was acquired with Prairie Telephone’s sale of its interest in Desktop Media, LLC in September 2007. Breda also holds a promissory note to its unconsolidated affiliate, Spiralight Network, LLC, which earns interest at the rate of 8.5%                        per annum. These notes account for the increase in interest receivable when comparing the two three-month periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Current liabilities increased $1,086,337, or 70.3%, for the three-month period ended March 31, 2008, when compared to the year ended December 31, 2007. Accounts payable increased $635,068, or 74.7%, when comparing the two periods, which is mainly attributable to an increase in the amount incurred as of March 31, 2008 for the provisioning of conference bridge services, as compared to the amounts                        incurred for those services as of December 31, 2007. Other increased accounts payable resulted from construction projects and associated consulting fees. Accrued taxes increased $164,076, or 42.0%, for the three-month period ended March 31, 2008, when compared to the year ended December 31, 2007. The increase is attributable to an increase in the provision for income taxes for the first quarter of 2008. There was also an increase in other accrued liabilities of $284,072.                        Breda’s Board of Directors declared an $8.00 per share dividend on March 11, 2008 to shareholders of record on March 12, 2008. The dividend declaration is recorded in Other Payables as a $246,808 dividend payable as of March 31, 2008, and there was no corresponding dividend payable amount as of December 31, 2007. The remaining increase in other accrued liabilities is mainly attributable to an increase in accrued payroll for the three-month period ended March 31,                        2008, when compared with the year ended December 31, 2007. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The following table summarizes Breda’s sources and uses of cash for the three months ended March 31, 2008 and 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|                         |   |                                                            |    |     |   |      |   |
|------------------------------|--------|-----------------------------------------------------------------|---------|----------|--------|-----------|--------|
|                         |   | **For the Three Months Ended                        March 31,** |    |
|                         |   |                                                                 |    |
|                         |
|                         |   | **2008**                                                        |    | **2007** |   |
|                         |   |                                                                 |    |          |   |
| **Net Cash Provided (Used)** |   |                                                            |    |     |   |      |   |
| Operating Activities         |   | $                                                               | 566,165 |     | $      | 1,115,680 |   |
| Investing Activities         |   |                                                            | 50,662  |     |   | (226,476  | )      |
| Financing Activities         |   |                                                            | (84,618 | )        |   | (42,851   | )      |

|   |                                                                                                                                                          |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For the three months ended March 31, 2008 and March 31, 2007, cash provided by operating activities was $566,165 and $1,115,680, respectively.                |
|   |                                                                                                                                                          |
|   | Cash received from investing activities was $50,662 for the three-months ended March 31, 2008. Cash used for investing activities was $226,476 for the three- |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | month period ended March 31, 2007. There was a decrease in cash used to purchase marketable securities of $18,447, or 10.0%, for the three-month period ended March 31, 2008, when compared to the same period in 2007. This decrease was offset by an increase in cash used for capital expenditures of $108,218, as well as an increase in proceeds from the redemption of marketable securities of $382,364, for                        the three-month period ended March 31, 2008, when compared to the same period in 2007.                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | Cash used in financing activities was $84,618 for the three-month period ended March 31, 2008, and $42,851 for the three-month period ended March 31, 2007. Cash used to repay Rural Telephone Finance Cooperative long-term debt was 45,773 and $42,851 respectively. Cash was also used during the three-month period ended March 31, 2008, to redeem eighty-five shares of Breda Telephone Corp. common                        stock.                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | **Long Term Debt**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | As of March 31, 2008, Breda had $902,601 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 three months ended March 31, 2008, capital expenditures were $279,514.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | Breda’s contractual obligations as of March 31, 2008 are:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|           |   |   |    |   |
|----------------|--------|--------|---------|--------|
| 2008           |   | $      | 190,831 |   |
| 2009           |   |   | 197,228 |   |
| 2010           |   |   | 210,675 |   |
| 2011           |   |   | 225,038 |   |
| 2012           |   |   | 240,380 |   |
| 2013 and After |   |   | 29,280  |   |

24

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                                                                                                 |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------|
|   | 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. However, Breda’s actual          cash needs and the availability of required funding may 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | 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 Pronouncements**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | 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 we recognize in our 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 are effective as of the beginning of our 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 our financial position,          results of operations or cash flows. |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        | In May 2008,          The Financial Accounting Standards Board (FASB) issued a Statement of          Financial Accounting Standards FAS No. 157 – Fair Value Measurements.          This Statement defines fair value, establishes a framework for measuring          fair value in generally accepted accounting principles (GAAP), and expands          disclosures about fair value measurements. This Statement does not require          any new fair value measurements, but for some entities, the application          of the Statement would change current practice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        | While the          fair value concept has been in place for many decades, the FASB has          deferred the use of fair value for all assets and liabilities, and currently          only mandates it for financial assets and liabilities. The new required          estimates are intended to provide investors with the value of an asset          or liability on the measurement day, rather than reporting a value based          on some future date, such as a future settlement or maturity date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|        | Whether          and when fair value is required depends on the types of financial assets          that are the subject of the accounting and, to varying degrees, the          reporting entity’s intent with respect to those assets. Fair value          is used on an ongoing basis principally for derivatives, trading securities,          and available-for-sale securities. Fair value also is used to recognize          impairments, that is, declines in the value of financial assets in down          markets. And while loans held for investment are subject to impairment,          they are not necessarily written down to fair value, but more typically          to the present value of expected future cash flows discounted at the          loan’s original effective interest rate.                                                                                                                                                                                                                                                                                                                                                                                                                     |
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|        | Breda’s          marketable securities are held-to-maturity securities, not trading securities.          Breda therefore reports the fair value of these bonds and securities          as a footnote to its financial statements. The issuance of the Statement          of Financial Accounting Standards FAS No. 157 – Fair Value Measurements          had no effect on the company’s financial position, results of          operations or cash flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
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|   | **Other Activities and Issues**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | ***Regulatory and Competitive***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 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. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | While various industry organizations have compiled and submitted data in 2005 and 2006, and the FCC continues to solicit comments on specifics in the Missoula Plan and new filings, the complexity of the issue has resulted in no final plan being adopted. 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 has put the Missoula Plan for ICC reform and the Federal Benchmark mechanism amendment out for public comment.         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

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|   | 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 Iowa Utilities Board regarding intrastate rates, and whether alternative intrastate intercarrier compensation mechanisms should be investigated. While various industry organizations have compiled data and worked on this issue since                        2003, no final plan has been adopted on a statewide level. Since access charge revenues constitute a substantial portion of Breda’s total consolidated revenues, this is an area of material risk to Breda and its subsidiaries.                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | The Iowa Utilities Board conducted a hearing on the ITA Intrastate Access Tariff on April 1 and 2, 2008. Sprint, Verizon and AT&T asked the IUB to reduce the intrastate access rates in the ITA tariff from present levels down to the NECA interstate levels. Specifically, the interexchange carriers requested that the IUB eliminate the 1.5-cent transport interconnection charge, reduce the local                        switching charge by 1.9 cents, and eliminate the 3-cent common carrier line charge. The total requested reduction would be 6.4 cents on each intrastate minute. The parties involved in the hearing had until April 25, 2008 to file post-hearing briefs. The IUB will issue a final order sometime after April 25, 2008. No final order has been issued as of the date of this filing. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Breda believes that any increase in intrastate access rates is extremely unlikely and that, at best, intrastate access rates will stay the same. It is also possible, however, that intrastate access rates will be lowered, and if that occurs, it will have a negative impact on Breda’s operating income. Breda does not believe, however, that it is possible to predict at this time whether intrastate                        access rates will be lowered, or if intrastate access rates are lowered, the amount of the decrease in those rates. It is therefore uncertain at this time whether this issue will result in an adverse effect on Breda’s operating income. Breda does, however, anticipate continuing pressure for the lowering of both state and federal 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                                                                                                                                                                                                                                                                                                                                                                                                                            |

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|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | On May 1, 2008, the FCC voted in favor of an interim cap on payments to competitive eligible telecommunications carriers under the USF High Cost funding program. Most CETC recipients are wireless carriers, and the FCC is attempting to slow the growth of payments to CETC’s, which have grown from approximately $1.5 million in 2000 to more than $1 billion in 2007. Breda supports this action of the                        FCC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | Breda believes that federal universal service fund criteria will continue to change but is unable to determine estimated time frames 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 24-month transition plan to help companies adjust to reduced settlements.                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | During the nine-month period from July 1, 2007 through March 31, 2008, Breda and its subsidiaries experienced an overall increase in average monthly settlement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

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|   | revenue mainly due to the increase in interstate access rate payments for the individual elements making up the interstate access rate that also became effective on July 1, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Phantom traffic is another issue related to intercarrier compensation. Studies have shown that a sizable portion (sometimes up to 20-30%) of traffic now terminating on ILEC switches is being delivered in a form in which billing information is absent, lost, stripped or altered. Studies have also shown that ILEC’s, such as Breda, could be losing between 10-15% of revenue as a result of phantom                        traffic. Another problem is that even when the originating service provider of the phantom traffic is discovered, it is difficult to get proper payment from the provider, in part because there are no penalties imposed for failing to make payment. In November 2006, supporters of the Missoula Plan filed a proposal for a uniform process for the creation and exchange of call detail data to be implemented as part of an interim phantom traffic solution. The proposal sets forth                        standards and details responsibilities by which carriers are to create call detail records and call summary information, as well as applicable charges for the records. The FCC has put this proposal out for public comment. Breda and other carriers believe that penalty and arbitration provisions should also be implemented in addition to the proposed “truth in labeling” requirements. The Iowa Telecommunications Association “Qwest Committee” is also                        working with Qwest to address the issue of phantom traffic that traverses its network, and for which Qwest refuses to pay terminating access charges to ILEC’s. No final resolution had come out of these efforts as of the date of this filing. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | 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 was being paid for conference bridging services by most carriers. However, beginning in May 2007, and continuing through to January 2008, BTC, Inc. began to receive dispute notifications from the various major interexchange carriers disputing the volume of minutes and disputing interstate and intrastate switched access charges                        billed by BTC, Inc. to them. BTC, Inc. has contacted legal counsel for assistance in its collection actions against Verizon Business, Sprint, AT&T and Qwest. In addition to working with legal and industry consultants on collection actions, 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

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|   | 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 FCC ruled that the telephone company did generate an                        excessive rate of return, the telephone company’s tariff was found to be lawful under the Telecommunications Act, and therefore Qwest could not recover damages. Qwest filed a Petition for Partial Reconsideration of the FCC’s order on November 1, 2007, and the FCC issued an Order on January 29, 2008 granting in part Qwest’s request to have Farmers produce certain documents that it had produced in a related proceeding before the Iowa Utilities Board. The                        FCC also granted Qwest’s petition for additional FCC proceedings to consider the relevance of that new evidence. 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 and Westside Independent, price-cap LECs, and CLECs such as BTC, Inc. No final determinations have been made as of the date of this filing.                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | 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 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 the installation of stand-alone switches in five small exchange locations throughout its service territory. Breda estimates that its final cost to upgrade the remaining switches will be close to $2,000,000.                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   | On May 12, 2006, the Federal Communications Commission adopted an order whereby all broadband Internet and interconnected voice over Internet protocol (VoIP) providers must comply with CALEA surveillance regulations by May 14,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | 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. Breda has timely filed all required CALEA reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Telephone service 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 potential 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. 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. provides telephone services in the Carroll, Iowa market area. There are various other companies providing telephone services in that area. For example, Mediacom, which is a large cable television operator in the United States and the local cable provider in the Carroll, Iowa market, has a phone service offering in the Carroll market through Mediacom’s partnership with Sprint.                        Mediacom’s offering includes a “triple play” option where a subscriber can receive phone, cable and Internet services through Mediacom. The incumbent local exchange carrier, Qwest, is also marketing a triple play offering through its agreement with DirecTV which allows it to provide a satellite television offering along with Qwest’s phone service and high speed Internet offerings.                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   | Breda also anticipates that it will face competition from other providers of newer VoIP (voice over Internet protocol) technologies, such as Vonage and Skype, in all of its exchanges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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|   | Breda anticipates that Mediacom’s and any such other offerings will result in a reduction of revenue. Breda believes there will also be reductions in revenue if any other telephone companies at some point determine to provide service in any of Breda’s, Prairie Telephone’s, Westside Independent’s or BTC, Inc.’s service areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Revenues are also generated from sales of cellular phones and related service packages, which are made pursuant to Breda’s June 1, 1999 agency agreement with U.S. Cellular. The agreement allows Breda to sell cellular phones and related packages to the public, and Breda receives commissions on those sales. The agency agreement provides that it automatically renews for a period of one year on each                        June 1, unless either Breda or U.S. Cellular gives the other written notice of nonrenewal at least thirty days before the end of the current one-year term, but subject to immediate termination if there is a material breach of the agency agreement. Breda anticipates that a new agency agreement will need to be entered into with U.S. Cellular at some point. Breda is hopeful, however, based on its past negotiations with U.S. Cellular, that any new agreement will, at worst,                        have a neutral impact on Breda’s cellular commissions revenue.                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda had two retail outlets in the Carroll, Iowa market during the twelve months ended December 31, 2007. The two retail outlets were located at Breda’s and BTC, Inc.’s office in Carroll, Iowa and the Wal-Mart store in Carroll, Iowa. On February 22, 2008, Breda combined its Wal-Mart retail outlet with its Carroll office outlet when Wal-Mart moved its former operations to a new Super                        Walmart store at the edge of Carroll. Breda was informed that Super Walmart space allocations would only allow for the corporate cellular account, which is a competing service provider to Breda’s U.S. Cellular service. Breda is continuing to pursue a second retail outlet location in Carroll, but has not experienced a slowdown in its cellular traffic because it expanded its office hours in its Carroll office outlet.                                                                                                                                                                                                                                                                                                                            |
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|   | Tele-Services faces competition in various forms. For example, Tele-Services experiences strong competition from wireless and satellite dish providers, and that competition has been increasing in recent years. The FCC began to allow satellite dish providers to provide local channels in 1999, which had an adverse effect on Tele-Services because its ability to provide local channels was, in the past,                        one reason subscribers might choose Tele-Services’ cable services over a satellite dish. Other rulings and decisions by the FCC are possible, and may provide satellite dish or other providers with equal or greater advantages than Tele-Services, which could have further adverse effects on Tele-Services’ business. The telecommunications and cable industry are also continually changing, and technological advances may provide Tele-Services’ subscribers with                        other options. For example, Iowa Network Services is offering cable services in Iowa over existing telephone lines, and it is estimated that up to 70 independent telephone companies in mostly rural Iowa are able to offer cable television |

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|   | programming over their telephone lines. This option, and others which might arise through other changes or advancements in technology, could have material adverse effects on Tele-Services in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | The Deficit Reduction Omnibus Reconciliation Act of 2005 includes the digital television transition legislation. The Act establishes February 17, 2009 as the deadline for broadcasters to transition from analog to digital spectrum. The Act also includes up to $1.5 billion to subsidize set-top box purchases, and $1 billion for public safety interoperability. All of Tele-Services’ cable service                        systems are analog systems so for any channels presently transmitted digitally and when the remaining channels are transmitted digitally by February 17, 2009, Tele-Services must have new antennas and receivers to receive the digital channel signals. Tele-Services will have to convert those signals back to an analog signal before sending the signals out to its customers over its analog system. Tele-Services is working to obtain cost estimates to determine its options and                        to formulate a business plan in order to meet the February 17, 2009 deadline. Tele-Services, Ltd. is actively seeking buyers for eleven of its eighteen cable TV systems that do not have combined head ends associated with Breda’s independent telephone exchange communities.                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | On September 11, 2007, the FCC approved rules which require cable operators to guarantee that analog-only cable subscribers will receive broadcast channels until February 2012. The rules require that cable operators make the signals of must-carry stations “viewable” to all of their subscribers, and the operator could be required to carry the broadcaster’s digital signal in digital                        and analog form. Tele-Services is working with consultants on how to best implement the rules.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | The State of Iowa passed a state-wide cable franchise bill on May 30, 2007 with an immediate effective date. The utilities division of the Iowa Department of Commerce will now issue franchises. A competitive provider must notify the communities it intends to serve. At that time, an incumbent operator with an active local franchise can decide whether to also seek a state franchise. The Department will                        have 15 days to award the franchises, which will be for a term of 10 years. Competitive providers will have to pick up a portion of the basic maintenance of current, noncommercial institutional networks, but municipalities will have to take over that cost after 10 years. This bill allows incumbent cable providers to utilize the current franchising process, or, upon expiration of their local franchise, to opt in to the state-issued franchise. New cable providers can chose                        to use either the state or a local franchise. The legislation caps the franchise fee for a new market entrant under the state franchise at the lower of the same percentage as the incumbent provider or five percent of gross revenues. The legislation also requires competitive cable providers under the state franchise to provide the same amount of public, education and government access (PEG) channels as an incumbent provider, and to pay PEG fees if the incumbent is paying                        PEG fees. In the state franchise, build-out requirements are eliminated |

33

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | and          cities maintain control over rights-of-way. Tele-Services does not believe          the new legislation will have an effect on its operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | As          of December 31, 2007, Breda was a 33.33% owner of Carroll County Wireless,          L.L.C. As of the date of this filing, Breda is exercising its right          of first refusal to purchase the 33.33% interest of one of the partners          in Carroll County Wireless, L.L.C. Carroll County Wireless, L.L.C. and          the other 33.33% partner have already signed a consent and waiver to          the purchase of the additional 33.33% interest in Carroll Co. Wireless,          L.L.C. by Breda. This transaction is not material to Breda’s operations          but Breda’s 66.66% interest will require that the operations of          this asset be reported on a consolidated basis with Breda’s other          subsidiaries. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | On          January 7, 2008, Breda became a founding member with a 25% interest          in an entity called Telephone Acquisition Company, L.L.C. This limited          liability corporation was formed to acquire and operate a telecommunication          company. Subsequent to the date of this filing, Breda will participate          in a capital call for Telephone Acquisition Company, L.L.C., which will          allow it to purchase all of the stock of Swisher Telephone Company in          Swisher, Iowa. This transaction is not material to Breda’s operations.                                                                                                                                                                                        |

34

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|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item 3.**  | **Quantitative and Qualitative Disclosures About Market Risk.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|         | Not applicable to smaller reporting companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Item 4T.** | **Controls and Procedures.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|         | ***Evaluation of Disclosure Controls and Procedures***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|         | Breda’s management, under the supervision and with the participation of Breda’s chief executive officer and Breda’s chief financial officer, have evaluated the effectiveness of Breda’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Based on that evaluation,                        Breda’s chief executive officer and Breda’s chief financial officer have concluded that, as of the end of the period covered by this quarterly report, Breda’s disclosure controls and procedures have been effective to provide reasonable assurance that the information required to be disclosed in the reports Breda files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified                        in the Securities and Exchange Commission’s rules and forms, and (ii) accumulated and communicated to management, including Breda’s principal executive and principal financial officers or persons performing such functions, as appropriate, to allow timely decisions regarding disclosure. Breda believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no                        evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|         | ***Changes in Internal Control Over Financial Reporting***                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|         | 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 material pending legal proceeding to which Breda was a party or of which any of Breda’s property was the subject, other than ordinary 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

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|         |                                                                                                                                                                          |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item 1A.** | **Risk Factors.**                                                                                                                                                             |
|         |                                                                                                                                                                          |
|         | Not applicable to smaller reporting companies.                                                                                                                                |
|         |                                                                                                                                                                          |
| **Item 2.**  | **Unregistered Sales of Equity Securities and Use of Proceeds.**                                                                                                              |
|         |                                                                                                                                                                          |
|         | Breda did not issue any shares of its common stock during the period of January 1, 2008 through March 31, 2008.                                                               |
|         |                                                                                                                                                                          |
|         | The following table provides information regarding Breda’s purchases of its common stock from shareholders during the period of January 1, 2008 through March 31, 2008. |

ISSUER PURCHASES OF EQUITY SECURITIES

|   |                                           |                                                                                                   |                                                                        |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                         |
|--------|------------------------------------------------|--------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Period                                         | Total                        Number of                        Shares                        Purchased1 | Average                        Price Paid                        per Share2 | Total Number                        of Shares                        Purchased as                        Part of                        Publicly                        Announced                        Plans or                        Programs1 | Maximum                        Number (or                        Approximate                        Dollar Value)                        of Shares that                        May Yet Be                        Purchased                        Under the                        Plans or                        Programs1 |
|   |                                                |                                                                                                        |                                                                             |                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                              |
|   | Month #1 (January 1, 2008-January 31, 2008)    | -0-                                                                                                    | N/A                                                                         | -0-                                                                                                                                                                                                                                                | -0-                                                                                                                                                                                                                                                                                                                          |
|   |                                           |                                                                                                   |                                                                        |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                         |
|   | Month #2 (February 1, 2008- February 29, 2008) | 80                                                                                                     | $457                                                                        | -0-                                                                                                                                                                                                                                                | -0-                                                                                                                                                                                                                                                                                                                          |
|   |                                           |                                                                                                   |                                                                        |                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                         |
|   | Month #3 (March 1, 2008-March 31, 2008)        | 5                                                                                                      | $457                                                                        | -0-                                                                                                                                                                                                                                                | -0-                                                                                                                                                                                                                                                                                                                          |
|   | Total                                          | 85                                                                                                     | $457                                                                        | -0-                                                                                                                                                                                                                                                | -0-                                                                                                                                                                                                                                                                                                                          |

|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 1      | All of the shares of common stock were purchased by Breda pursuant to the redemption right or the right of first refusal granted to Breda in its Articles of Restatement, which rights are discussed in Breda’s most recent Annual Report on Form 10-KSB filed on March 28, 2008, or pursuant to the unsolicited request of the shareholder in question. Breda does not have any publicly announced plans or                        programs with respect to purchases of its common stock. |

36

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|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|-------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        | 2                                                                                                                                                                                                                                                                  | All of the shares of common stock were purchased by Breda at the $457 redemption price that was established by the board of directors and which became effective pursuant to a letter to the shareholders dated April 2, 2007. |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |
|        | There were eleven separate transfers of shares of Breda’s common stock during the period of January 1, 2008 through March 31, 2008 with respect to which Breda did not exercise Breda’s right of first refusal to purchase the shares:                 |
|        |                                                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                               | 1.                                                                                                                                                                                                                             | Ten shares were transferred from one spouse to another.                                                                                                                |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 2.                                                                                                                                                                                                                             | Two shares were sold for $460 per share.                                                                                                                               |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 3.                                                                                                                                                                                                                             | Thirteen shares were sold for $457 per share.                                                                                                                          |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 4.                                                                                                                                                                                                                             | One hundred sixty shares were transferred equally (thirty-two shares) to five family members and two shares were sold for $457 per share.                              |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 5.                                                                                                                                                                                                                             | Fifteen shares were sold for $457 per share.                                                                                                                           |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 6.                                                                                                                                                                                                                             | Ninety-two shares were transferred to family members as follows: eight individuals received eight shares each; four individuals received seven shares each.            |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 7.                                                                                                                                                                                                                             | Fifty shares were sold were sold for $462 per share.                                                                                                                   |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 8.                                                                                                                                                                                                                             | Sixty-seven shares were transferred to a family member.                                                                                                                |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 9.                                                                                                                                                                                                                             | One hundred shares were transferred to three family members as follows: two individuals received thirty-three shares each; one individual received thirty-four shares. |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 10.                                                                                                                                                                                                                            | One hundred eighty out of one hundred ninety-two shares were transferred equally (twenty shares) to nine individuals.                                                  |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
|        |                                                                                                                                                                                                                                                               | 11.                                                                                                                                                                                                                            | One hundred shares were sold for $457 per share.                                                                                                                       |
|        |                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                           |                                                                                                                                                                   |
| **Item 3.** | **Defaults Upon Senior Securities.**                                                                                                                                                                                                                               |
|        |                                                                                                                                                                                                                                                               |
|        | There has been no material default in the payment of principal, interest, a sinking or purchase fund installment, or any other material default not cured within thirty days, with respect to any indebtedness of Breda exceeding 5% of the total assets of Breda. |
|        |                                                                                                                                                                                                                                                               |
|        | No material arrearage in the payment of dividends or any other material delinquency has occurred with respect to any class of preferred stock of Breda which is registered or which ranks prior to any class of registered common stock of Breda.                  |

37

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|        |                                                                                                                                                                                                                                                                                                                                                                                        |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **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 January 1, 2008 through March 31, 2008.                                                                                                                                                                                                            |
|        |                                                                                                                                                                                                                                                                                                                                                                                        |
| **Item 5.** | **Other Information.**                                                                                                                                                                                                                                                                                                                                                                      |
|        |                                                                                                                                                                                                                                                                                                                                                                                        |
|        | There was no information required to be disclosed in a report on Form 8-K during the period covered by this quarterly report which was not reported on a Form 8-K.                                                                                                                                                                                                                          |
|        |                                                                                                                                                                                                                                                                                                                                                                                        |
|        | Breda’s board of directors declared a dividend of $8.00 per share on March 11, 2008, payable to shareholders of record on March 12, 2008. The aggregate amount of the dividend was $246,808. The dividend was paid to the shareholders on April 1, 2008.                                                                                                                              |
|        |                                                                                                                                                                                                                                                                                                                                                                                        |
|        | Breda’s board of directors adopted a resolution at a meeting on March 11, 2008 fixing the redemption price for Breda’s shares of common stock to be $509 per share. The $509 amount was determined based upon Breda’s 2007 unaudited financial statements, and was announced in a letter to the shareholders dated April 1, 2008, and became effective on March 12, 2008. |
|        |                                                                                                                                                                                                                                                                                                                                                                                        |
|        | There were no material changes during the period of January 1, 2008 through March 31, 2008 to the procedures by which the members of Breda may recommend nominees to Breda’s board of directors.                                                                                                                                                                                      |

38

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|        |                                                                                                                                  |
|-------------|---------------------------------------------------------------------------------------------------------------------------------------|
| **Item 6.** | **Exhibits.**                                                                                                                         |
|        |                                                                                                                                  |
|        | The following exhibits are filed as part of this quarterly report. Exhibits previously filed are incorporated by reference, as noted. |

|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |   |
|---------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|----------------------------------------------------|--------|---------------------------|--------|--------------------------------------|--------|---------|--------|------------------------------------|--------|
|                                  |   |                                                                                                                                |                                                                                   |                                               |   | Incorporated by Reference |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                           |
| Exhibit                        Number |   | Exhibit Description                                                                                                                 |                                                                                   | Filed Herewith;                        Page Number |   | Form                      |   | Period                        Ending |   | Exhibit |   | Filing                        Date |
|                                       |   |                                                                                                                                     |                                                                                   |                                                    |   |                           |   |                                      |   |         |   |                                    |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 3.1                                   |   | Articles of Restatement                        of Breda Telephone                        Corp.                                      |                                                                                   |                                               |   | 10-QSB                    |   | 3/31/07                              |   | 3.1     |   | 5/14/07                            |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 3.2                                   |   | Second Amended and                        Restated Bylaws of                        Breda Telephone Corp.                           |                                                                                   |                                               |   | 8-K                       |   |                                 |   | 3.2     |   | 4/4/07                             |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 10.1                                  |   | Employment                        Agreement dated                        November 13, 2006                        with Jane Morlok  |                                                                                   |                                               |   | 10-QSB                    |   | 9/30/06                              |   | 10.1    |   | 11/14/06                           |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 10.2                                  |   | Employment                                                                                                                          |                                                                                   |                                               |   | 10-QSB                    |   | 6/30/06                              |   | 10.2    |   | 8/11/06                            |
|                                  |   | Agreement dated June                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
|                                  |   | 14, 2006 with Steve                                                                                                                 |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
|                                  |   | Frickenstein                                                                                                                        |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 10.3                                  |   | Employment                        Agreement dated June                        14, 2006 with Charles                        Deisback |                                                                                   |                                               |   | 10-QSB                    |   | 6/30/06                              |   | 10.3    |   | 8/11/06                            |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
| 31                                    |   | Rule 13a-14(a)                        Certifications                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |
|                                  |   | 31.1                                                                                                                                | Certification of                        Chief Executive                        Officer |                                               | E-1    |                      |   |                                 |   |    |   |                               |   |
|                                  |   |                                                                                                                                |                                                                                   |                                               |   |                      |   |                                 |   |    |   |                               |   |
|                                  |   | 31.2                                                                                                                                | Certification of                        Chief Financial                        Officer |                                               | E-3    |                      |   |                                 |   |    |   |                               |   |

39

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|   |   |                                               |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|--------|--------|----------------------------------------------------|----------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| 32     |   | Section 1350                        Certifications |                                                                                   |   |   |   |   |   |   |   |   |   |
|   |   |                                               |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |   | 32.1                                               | Certification of                        Chief Executive                        Officer |   | E-5    |   |   |   |   |   |   |   |   |
|   |   |                                               |                                                                                   |   |   |   |   |   |   |   |   |   |   |
|   |   | 32.2                                               | Certification of                        Chief Financial                        Officer |   | E-6    |   |   |   |   |   |   |   |   |

40

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**SIGNATURES**

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|         |   |   |                   |                          |
|--------------|--------|--------|------------------------|-------------------------------|
|         |   |   |                   | BREDA TELEPHONE CORP.         |
|         |   |   |                   |                          |
| May 14, 2008 |   | By:    | /s/ Steve Frickenstein |
|         |   |   |                        |
|         |   |   | Name:                  |  Steve Frickenstein      |
|         |   |   | Title:                 |  Chief Executive Officer |
|         |   |   |                   |                          |
| May 14, 2008 |   | By:    | /s/ Jane Morlok        |
|         |   |   |                        |
|         |   |   | Name:                  |  Jane Morlok             |
|         |   |   | Title:                 |  Chief Financial Officer |

41

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**EXHIBIT INDEX**

**Exhibits Filed With Form 10-Q            of Breda Telephone Corp.            For the Quarter Ended March 31, 2008**

|                        |                                        |   |                                                                                                                                                                                                                                                       |   |
|-----------------------------|---------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| **Description of Exhibit.** | **Page**                                    |
|                             |                                             |
|                        |                                        |
|                        | **3. Articles of Incorporation and Bylaws** |   |
|                        |                                        |   |
|                        |                                        | (a)    | 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.)                                     |   |
|                        |                                        |   |                                                                                                                                                                                                                                                       |   |
|                        |                                        | (b)    | 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**                  |   |
|                        |                                        |   |
|                        |                                        | (a)    | 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.) |   |
|                        |                                        |   |                                                                                                                                                                                                                                                       |   |
|                        |                                        | (b)    | 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.)     |   |
|                        |                                        |   |                                                                                                                                                                                                                                                       |   |
|                        |                                        | (c)    | 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.)       |   |

42

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|    |                              |                                  |   |
|---------|-----------------------------------|---------------------------------------|--------|
| **31.** | **Rule 13a-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-3    |
|    |                              |                                  |   |
|    |                              |                                  |   |
| **32.** | **Section 1350 Certifications**   |                                  |
|    |                              |                                  |   |
|    | *32.1                             | Section 1350 Certification of Chief   |   |
|    |                              | Executive Officer                     | E-5    |
|    |                              |                                  |   |
|    | *32.2                             | Section 1350 Certification of Chief   |   |
|    |                              | Financial Officer                     | E-6    |

* Included with this filing.

43

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