UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549 FORM 10-QSB (Mark One) x
  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
  SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended September 30, 2005.o
  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
  EXCHANGE ACTFor the transition period from _______________________
  to ______________________ Commission file
number:  0-26525 BREDA
TELEPHONE CORP.
(Exact name of small business issuer as specified in its charter) Iowa
  
  42-0895882(State or other
  jurisdiction
  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) (712) 673-2311
(Issuers telephone number) Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x    No
  o Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes x    No
  o State the number of
shares outstanding of each of the issuers classes of common equity, as of the
latest practicable date: 31,036 shares of common stock, no par value, at
September 30, 2005. Transitional
Small Business Disclosure Format (Check one): Yes  o   No  x    PART I - FINANCIAL INFORMATION

Item
  1.
  Financial
  Statements.Breda
Telephone Corporation
And Subsidiaries
Breda, IA

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



BREDA
TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

September
  30, 
  2005
  
  December
  31,
  2004ASSETSCURRENT ASSETSCash and
cash
  equivalents
  
  $
  692,309
  
  $
  1,036,804Marketable
  securities
  
  
  753,563
  
  
  232,645Accounts
  receivable
  
  
  626,533
  
  
  656,036Interest
  receivable
  
  
  67,695
  
  
  65,210Current
portion
  of note receivable
  
  
  144,000
  
  
  144,000Inventory,
at
  average cost
  
  
  141,608
  
  
  103,617Other
  
  
  37,987
  
  
  57,508Deferred
income
  taxes
  
  
  50,176
  
  
  49,1432,513,871
  
  
  2,344,963OTHER NONCURRENT ASSETSMarketable
  securities
  
  
  5,282,277
  
  
  5,417,170Investments
in
  unconsolidated affiliates at equity
  
  
  5,179,922
  
  
  4,679,772Other
  investments at cost
  
  
  786,726
  
  
  793,935Goodwill
  
  
  896,812
  
  
  896,812Note
receivable,
  less allowance of $172,974 in 2005 and 2004
  
  
  74,577
  
  
  121,57712,220,314
  
  
  11,909,266PROPERTY, PLANT AND EQUIPMENT, NET
  
  
  5,219,435
  
  
  4,703,083TOTAL ASSETS
  
  $
  19,953,620
  
  $
  18,957,312LIABILITIES AND
  STOCKHOLDERS EQUITYCURRENT LIABILITIESCurrent
portion
  of long-term debt
  
  $
  161,823
  
  $
  154,013Accounts
payable
  
  
  491,392
  
  
  272,507Accrued
taxes
  
  
  323,118
  
  
  198,969Other
  
  
  97,288
  
  
  78,0191,073,621
  
  
  703,508LONG-TERM DEBT, less current portion
  
  
  1,357,086
  
  
  1,479,448OTHER NONCURRENT LIABILITIES
  
  
  823,110
  
  
  876,668STOCKHOLDERS EQUITYCommon
stock -
  no par value, 5,000,000 shares authorized, 31,036 and 31,170 shares issued and
  outstanding at $357 and $326 stated values, respectively
  
  
  11,079,852
  
  
  10,161,420Retained
  earnings
  
  
  5,619,951
  
  
  5,736,26816,699,803
  
  
  15,897,688TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
  
  $
  19,953,620
  
  $
  18,957,312The accompanying
notes are an integral part of these condensed consolidated financial
statements.

2

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

For the Three Months Ended
  
  For the Nine Months Ended2005
  
  2004
  
  2005
  
  2004OPERATING REVENUES
  
  $
  1,835,563
  
  $
  1,592,394
  
  $
  5,484,358
  
  $
  4,847,861OPERATING
  EXPENSESCost of services
  
  
  942,638
  
  
  712,276
  
  
  2,623,799
  
  
  2,047,469Depreciation and
  amortization
  
  
  220,691
  
  
  265,088
  
  
  686,307
  
  
  765,518Selling,
  general, and administrative
  
  
  509,324
  
  
  555,411
  
  
  1,500,985
  
  
  1,478,2621,672,653
  
  
  1,532,775
  
  
  4,811,091
  
  
  4,291,249OPERATING INCOME
  
  
  162,910
  
  
  59,619
  
  
  673,267
  
  
  556,612OTHER INCOME
  (EXPENSES)Interest and
  dividend income
  
  
  69,375
  
  
  51,802
  
  
  267,374
  
  
  212,678Interest expense
  
  
  (28,623
  )
  
  (31,362
  )
  
  (87,963
  )
  
  (96,044
  )Loss on note
  receivable
  
  
  
  
  
  
  
  
  
  
  
  (75,000
  )Income from
  equity investments
  
  
  280,177
  
  
  346,954
  
  
  790,420
  
  
  977,573Other, net
  
  
  36,341
  
  
  (10,975
  )
  
  25,880
  
  
  (15,540
  )357,270
  
  
  356,419
  
  
  995,711
  
  
  1,003,667INCOME BEFORE
  INCOME TAXES
  
  
  520,180
  
  
  416,038
  
  
  1,668,978
  
  
  1,560,279INCOME TAXES
  
  
  196,337
  
  
  154,109
  
  
  600,835
  
  
  563,754NET INCOME
  
  $
  323,843
  
  $
  261,929
  
  $
  1,068,143
  
  $
  996,525INCOME PER
  COMMON SHARE
  
  $
  10.43
  
  $
  8.39
  
  $
  34.33
  
  $
  31.75The accompanying notes are an integral part of these condensed
consolidated financial statements.

3

BREDA
TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(UNAUDITED)

Common
  StockRetained
  EarningsShares
  
  Amount
  
  
  TotalBalance at
  December 31, 2003
  
  
  31,694
  
  $
  9,603,282
  
  $
  5,161,365
  
  $
  14,764,647Comprehensive
  income:Net Income
  
  
  
  
  
  
  
  
  1,393,675
  
  
  1,393,675Dividends paid
  
  
  
  
  
  
  
  
  (94,479
  )
  
  (94,479
  )Common stock
  redeemed, net
  
  
  (524
  )
  
  (166,155
  )
  
  
  
  
  (166,155
  )Stated value
  stock adjustment
  
  
  
  
  
  724,293
  
  
  (724,293
  )Balance at
  December 31, 2004
  
  
  31,170
  
  
  10,161,420
  
  
  5,736,268
  
  
  15,897,688Comprehensive
  income:Net Income
  
  
  
  
  
  
  
  
  1,068,143
  
  
  1,068,143Dividends paid
  
  
  
  
  
  
  
  
  (218,190
  )
  
  (218,190
  )Common stock
  redeemed, net
  
  
  (134
  )
  
  (47,838
  )
  
  
  
  
  (47,838
  )Stated value
  stock adjustment
  
  
  
  
  
  966,270
  
  
  (966,270
  )Balance at September 30, 2005
  
  
  31,036
  
  $
  11,079,852
  
  $
  5,619,951
  
  $
  16,699,803The accompanying notes are an integral part of these condensed
consolidated financial statements.

4

BREDA TELEPHONE CORPORATION
AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2005 and 2004
(UNAUDITED)

2005
  
  2004CASH FLOWS
  FROM OPERATING ACTIVITIESNet
income
  
  $
  1,068,143
  
  $
  996,525Adjustments
to reconcile net income to cash
  provided by operating activities:Depreciation and amortization
  
  
  686,307
  
  
  765,518Deferred
income taxes
  
  
  (50,383
  )
  
  275,842Amortization of investment tax credits
  
  
  (4,208
  )
  
  (7,327
  )Amortization of investment premium/discount
  - net
  
  
  48,319
  
  
  61,487Equity
income in unconsolidated affiliates,
  net of distributions received of $740,251 and $283,844 in 2005 and
  2004, respectively
  
  
  (50,169
  )
  
  (693,729
  )Note
receivable discount
  
  
  (4,717
  )
  
  (8,246
  )Loss on
impairment of note receivable
  
  
  
  
  
  75,000Changes in
assets and liabilities:(Increase)
Decrease in assets
  
  
  8,548
  
  
  (24,082
  )Increase
(Decrease) in liabilities
  
  
  191,046
  
  
  76,540Net cash
provided by operating activities
  
  
  1,892,886
  
  
  1,517,528CASH FLOWS
  FROM INVESTING ACTIVITIESCapital
expenditures
  
  
  (1,031,403
  )
  
  (510,312
  )Purchase of
investments
  
  
  (812,965
  )
  
  (1,132,174
  )Purchase of
equity investments
  
  
  (403,264
  )
  
  Issuance of
notes receivable
  
  
  
  
  
  (45,307
  )Proceeds
from the sale of investments
  
  
  385,831
  
  
  441,608Repayment
of notes receivable
  
  
  5,000
  
  
  37,333Net cash
used in investing activities
  
  
  (1,856,801
  )
  
  (1,208,852
  )CASH FLOWS
  FROM FINANCING ACTIVITIESRepayment
of long term debt
  
  
  (114,552
  )
  
  (107,240
  )Common
stock redeemed, net
  
  
  (47,838
  )
  
  (155,723
  )Dividends
paid
  
  
  (218,190
  )
  
  (94,479
  )Net cash
used in financing activities
  
  $
  (380,580
  )
  $
  (357,442
  )Net Increase
  (Decrease) in Cash and Cash Equivalents
  
  $
  (344,495
  )
  $
  (48,766
  )Cash and
  Cash Equivalents at Beginning of Period
  
  
  1,036,804
  
  
  1,205,550Cash and
  Cash Equivalents at End of Period
  
  $
  692,309
  
  $
  1,156,784Supplemental
  Disclosures of Cash Flow InformationCash paid
during the period for:Interest
  
  $
  87,963
  
  $
  96,044Income
taxes
  
  $
  215,300
  
  $
  310,375The accompanying notes are an integral part of
these condensed consolidated financial statements.

5

BREDA TELEPHONE
CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1.
  CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only normal
recurring items) necessary to present fairly the financial position as of September
30, 2005 and December 31, 2004 and the results of operation and changes in cash
flows for the three and nine months ended September 30, 2005 and 2004.

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

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

NOTE 2.
  NONCASH INVESTING ACTIVITIESNoncash investing activities included $171,256 during the nine months
ended September 30, 2005 relating to plant and equipment additions under
construction during the period, which are reflected in accounts payable at
September 30, 2005.

NOTE 3.
  OPERATING SEGMENTSThe Company organizes its business into three reportable segments:
local exchange carrier (LEC) services, broadcast services and Internet service
provider (ISP) services. The LEC services segment provides telephone, data
services and other services to customers in local exchanges. The broadcast
services segment provides cable television services to customers in Iowa and Nebraska.
The ISP services segment provides Internet access to customers within the local
exchanges and the surrounding areas.

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

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

6

BREDA TELEPHONE
CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 3.
  OPERATING SEGMENTS (Continued)BREDA TELEPHONE
CORPORATION AND SUBSIDIARIES

Local
  
  
  
  InternetNine
  Months Ended
  
  
  Exchange
  
  
  
  ServiceSeptember
  30, 2005
  
  
  Carrier
  
  Broadcast
  
  Provider
  
  TotalRevenuesExternal
customers
  
  $
  4,444,306
  
  $
  614,226
  
  $
  425,826
  
  $
  5,484,358Intersegment
  
  
  
  
  
  
  
  
  
  
  
  Segment
profit (loss)
  
  
  1,432,743
  
  
  (143,352
  )
  
  (221,248
  )
  
  1,068,143Local
  
  
  
  
  InternetNine
  Months Ended
  
  
  Exchange
  
  
  
  
  ServiceSeptember
  30, 2004
  
  
  Carrier
  
  Broadcast
  
  Provider
  
  TotalRevenuesExternal
customers
  
  $
  3,748,988
  
  $
  638,915
  
  $
  459,958
  
  $
  4,847,861Intersegment
  
  
  
  
  
  
  
  
  
  
  
  Segment
profit (loss)
  
  
  1,088,589
  
  
  (166,723
  )
  
  74,659
  
  
  996,525Local
  
  
  
  
  InternetThree months ended
  
  
  Exchange
  
  
  
  
  ServiceSeptember 30, 2005
  
  
  Carrier
  
  Broadcast
  
  Provider
  
  TotalRevenuesExternal
customers
  
  $
  1,494,736
  
  $
  200,374
  
  $
  140,453
  
  $
  1,835,563Intersegment
  
  
  
  
  
  
  
  
  
  
  
  Segment
profit (loss)
  
  
  462,617
  
  
  (46,531
  )
  
  (92,243
  )
  
  323,843Local
  
  
  
  InternetThree
  months ended
  
  
  Exchange
  
  
  
  ServiceSeptember
  30, 2004
  
  
  Carrier
  
  Broadcast
  
  Provider
  
  TotalRevenuesExternal
customers
  
  $
  1,223,748
  
  $
  218,136
  
  $
  150,510
  
  $
  1,592,394Intersegment
  
  
  
  
  
  
  
  
  
  
  
  Segment
profit (loss)
  
  
  225,464
  
  
  (52,983
  )
  
  89,448
  
  
  261,929Three
  months ended
  
  Nine
  Months EndedSep 30,
  
  Sep 30,
  
  Sep 30,
  
  Sep 30,Reconciliation
  of Segment Information
  
  
  2005
  
  2004
  
  2005
  
  2004REVENUES:Total
revenues for reportable segments
  
  $
  1,835,563
  
  $
  1,592,394
  
  $
  5,484,358
  
  $
  4,847,861Other
revenues
  
  
  
  
  
  
  
  
  
  
  
  Consolidated Revenues
  
  $
  1,835,563
  
  $
  1,592,394
  
  $
  5,484,358
  
  $
  4,847,861PROFIT:Total
profit for reportable segments
  
  $
  323,843
  
  $
  261,929
  
  $
  1,068,143
  
  $
  996,525Other
profit (loss)
  
  
  
  
  
  
  
  
  
  
  
  Net
Income
  
  $
  323,843
  
  $
  261,929
  
  $
  1,068,143
  
  $
  996,5257

BREDA, IOWA

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(UNAUDITED)

NOTE 4.
  NET INCOME PER COMMON SHARENet income per common share for September 30, 2005 and 2004 was
computed by dividing the weighted average number of shares of common stock outstanding
into the net income. The weighted average number of shares of common stock
outstanding for the three and nine months ended September 30, 2005 and 2004
were 31,041 and 31,203 and 31,113 and 31,378, respectively.

NOTE 5.
  STOCK VALUE ADJUSTMENTDuring May 2005, the board of directors authorized a $31 increase in
the stated value of each share of common stock from $326 to $357. There were
31,170 shares outstanding at the time of the value adjustment, which reduced
retained earnings by $966,270.

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

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

8

Item 2.
  Managements Discussion and Analysis of Financial Condition and
  Results of Operations.Various discussions and statements in this quarterly report contain
  forward-looking statements, which can be identified by the use of
  forward-looking terminology such as expects, estimates, plans,
  anticipates, forecasts, predicts, projects, believes, should,
  could, or other similar expressions or variations of those words, or by
  discussions of strategy. No assurance can be given that the future results
  covered by the forward-looking statements will be achieved. Some of the
  matters set forth in the Cautionary Statement on Forward Looking Statements
  section of Bredas Annual Report on Form 10-KSB for the year ended December
  31, 2004 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.OverviewGeneralBreda is a small provider of telecommunication services to
  residential and business customers in the west central region and the
  southwest region of rural Iowa. Breda and its subsidiaries, Prairie Telephone
  Co., Inc., Westside Independent Telephone Company, Tele-Services, Ltd. and
  BTC, Inc., all conduct business under the names W.I.N. or Western Iowa
  Networks.Breda and its subsidiaries operate seven telephone exchanges as the
  incumbent or historical local exchange carrier (ILEC). BTC, Inc. began in
  October 2003 to offer competitive local exchange carrier services (CLEC) to
  residential and business customers in Carroll, Iowa, where Qwest is the
  incumbent local exchange carrier. Other telecommunications services provided
  include long distance services, dial-up and high speed Internet services,
  cable TV services, and satellite Internet services.Operating SegmentsBreda 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. Tele-Services, Ltd. sold
  its Neola, Iowa cable TV system to Walnut Telephone Co. in September 2005, so
  Tele-Services, Ltd. now provides cable TV service to seventeen, instead of
  eighteen, towns in Iowa.9

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 CarrierBredaPrairie
  Telephone Co., Inc.Westside
  Independent Telephone CompanyBTC, Inc.
  (competitive local exchange carrier)Broadcast ServicesTele-Services,
  Ltd.Internet Service ProviderBTC, Inc.Factors Affecting Bredas Operating PerformanceBreda 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.
  Breda additionally seeks to maximize its telecom industry offerings by
  partnering with surrounding telcos in wireless service ventures and through
  investment in cellular partnerships within the state of Iowa and surrounding
  states. Breda has additionally 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 TV or satellite TV) for a10

competitive price. Breda anticipates that the triple play bundled
  services offerings will be available from both Qwest and Mediacom, and will be a
  competitive factor for Breda in 2006.Breda is presently implementing new switching capabilities for the
  Carroll, Iowa market that will allow Breda to offer another flavor of
  high-speed Internet services, in addition to its voice, long distance and
  present Internet services. It will also allow Breda to look at bringing fiber
  to the home, which would be an overbuild of the Carroll market, and would
  allow Breda to be self-reliant in providing communication services to that
  community by no longer needing to lease access lines from Qwest to provide
  services. Breda continues to 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
  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 again 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 to provide the service.
  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, has not
  only decreased the minutes of use on Bredas networks, which results in
  less access revenue, but it has caused the industry access payment structure
  to be renegotiated by the new technology providers and wireless providers.Breda has negotiated an interconnection agreement with five 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 is now able to receive payments for
  consolidating and switching not only its own traffic, but also the traffic of
  two surrounding telcos.RevenuesThe following table reflects, on a consolidated basis for Breda and
  its subsidiaries, the approximate percentage of Bredas and its subsidiaries
  aggregate revenue which was derived from the three segments described above
  and from investments during, respectively, the third quarter of 2005 and the
  third quarter of 2004:11

Three Months Ended 
  September 30,
  
  %of
Total Revenues 
  for the Three Months 
  Ended September 30,2005
  
  2004
  
  2005
  
  2004OPERATING REVENUESLocal exchange carrier
services
  
  $
  1,494,736
  
  $
  1,223,748
  
  
  81.4
  %
  
  76.8
  %Broadcast services
  
  $
  200,374
  
  $
  218,136
  
  
  10.9
  %
  
  13.7
  %Internet services
  
  $
  140,453
  
  $
  150,510
  
  
  7.7
  %
  
  9.5
  %$
  1,835,563
  
  $
  1,592,394
  
  
  100.0
  %
  
  100.0
  %The following table summarizes Bredas revenues on a
  consolidated basis from these same sources for the nine-month periods ended,
  respectively, September 30, 2005, and September 30, 2004.Nine Months Ended 
  September 30,
  
  %of
Total Revenues 
  for the Nine Months
  Ended September 30,2005
  
  2004
  
  2005
  
  2004OPERATING REVENUESLocal exchange carrier
services
  
  $
  4,444,306
  
  $
  3,748,988
  
  
  81.0
  %
  
  77.3
  %Broadcast services
  
  $
  614,226
  
  $
  638,915
  
  
  11.2
  %
  
  13.2
  %Internet services
  
  $
  425,826
  
  $
  459,958
  
  
  7.8
  %
  
  9.5
  %$
  5,484,358
  
  $
  4,847,861
  
  
  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, MCI, WorldCom, 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 Services Fund was started as a
  mechanism to promote phone service accessibility for everyone at affordable
  rates and comparable service. The access charges for long distance services
  within Iowa are based on rates approved by the Iowa Utilities Board. Switched
  and special access charges for interstate and international services are
  based on rates approved by the Federal Communications Commission. The
  transport and termination charges paid by wireless carriers are specified in
  interconnection agreements negotiated with each individual wireless carrier.3.
  Long Distance Services. Breda
  generates revenues for providing long distance services to its customers.
  This revenue category includes fees related to the provision of directory
  assistance and operator assistance services.12

4.
  Cellular Services. Breda is a
  partner in, and 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 its 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 for 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 new satellite Internet service in
  September 2005 is also included in Internet Services revenues.Operating ExpensesOperating 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;
  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;13

advertising and promotion costs; dues and
  subscriptions; property taxes; and all customer service operations, marketing
  and sales operations, and administrative operations costs.Results of OperationsThe following table sets forth certain items
  reflected in Bredas consolidated statements of operations for the periods
  indicated, expressed as a percentage of total revenues:Three Months Ended 
  September 30,
  
  Nine Months Ended 
  September 30,2005
  
  2004
  
  2005
  
  2004Operating revenues
  
  
  100
  %
  
  100
  %
  
  100
  %
  
  100
  %Cost of services
  
  
  51
  %
  
  45
  %
  
  48
  %
  
  42
  %Depreciation and
amortization
  
  
  12
  %
  
  17
  %
  
  13
  %
  
  16
  %Selling, general and
administrative
  
  
  28
  %
  
  35
  %
  
  27
  %
  
  30
  %Operating income
  
  
  9
  %
  
  4
  %
  
  12
  %
  
  11
  %Other income
(expenses)
  
  
  19
  %
  
  22
  %
  
  18
  %
  
  21
  %Net income
  
  
  18
  %
  
  16
  %
  
  19
  %
  
  21
  %Three Months Ended September 30,
  2005 and 2004The table below sets forth the components of Bredas
  revenues for the three months ended September 30, 2005, compared to the same
  period in 2004.Three Months Ended 
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOPERATING REVENUESLocal
Exchange CarrierLocal
network services
  
  $
  212,381
  
  $
  192,117
  
  
  20,264
  
  
  10.5
  %Network
access services
  
  $
  768,840
  
  $
  588,139
  
  
  180,701
  
  
  30.7
  %Long
distance services
  
  $
  80,437
  
  $
  64,137
  
  
  16,300
  
  
  25.4
  %Cellular
services
  
  $
  351,170
  
  $
  304,368
  
  
  46,802
  
  
  15.4
  %Billing and
collection services
  
  $
  6,335
  
  $
  6,883
  
  
  (548
  )
  
  -8.0
  %Miscellaneous
  
  $
  75,573
  
  $
  68,104
  
  
  7,469
  
  
  11.0
  %$
  1,494,736
  
  $
  1,223,748
  
  
  270,988
  
  
  22.1
  %Broadcast Services
  
  $
  200,374
  
  $
  218,136
  
  
  (17,762
  )
  
  -8.1
  %Internet services
  
  $
  140,453
  
  $
  150,510
  
  
  (10,057
  )
  
  -6.7
  %$
  1,835,563
  
  $
  1,592,394
  
  
  243,169
  
  
  15.3
  %There was an increase in total operating revenues
  for the three-month period ended September 30, 2005, when compared to the
  three-month period ended September 30, 2004, of $243,169, or 15.3%.Local Exchange Carrier Services -
  $270,988Local exchange carrier services revenues accounted
  for 81.4% of all operating revenue in the three-month period ended September
  30, 2005. There was a $270,988, or 22.1%, increase in14

local exchange carrier services revenues for the
  three-month period ended September 31, 2005, when compared to the three-month
  period ended September 30, 2004.Local network services revenues increased $20,264,
  or 10.5%, for the three months ended September 30, 2005, as compared to the
  same period in 2004, primarily because of the increased number of customers
  taking phone service from Breda in its CLEC town of Carroll, IA.  Bredas long distance services revenue
  also increased $16,300, or 25.4%, for the three months ended September 30,
  2005, as compared to the three-month period ended September 30, 2004, for the
  same reason.  Breda has received a
  good response to its package offerings that include local and long distance
  service from both residential and business customers.Network access services increased $180,701, or
  30.7%, for the three-month period ended September 30, 2005, when compared to
  the three-month period ended September 30, 2004.  This increase mainly resulted from increased originating and terminating
  access revenues received on toll traffic generated by Bredas Internet
  service subscribers in Bredas southern Iowa exchanges to reach Bredas
  Internet service equipment in Breda, Iowa.
  This method of provisioning allows Breda to offer its own Internet
  services to these customers instead of reselling the Iowa Network Services
  Internet product.  Breda also
  negotiated wireless agreements with five wireless carriers in the first
  quarter of 2005, and is now billing and receiving payments from those
  carriers.  While the overall payment
  rate is significantly less than what Breda originally received in access
  revenues from interexchange carriers for this traffic, Breda has received
  settlement payments going back to April 1999 from two of the carriers.  There was no corresponding access revenue
  from wireless carriers during the three-month period ended September 30,
  2004.  Bredas access revenue has also
  increased because of its increased customer base taking its long distance
  services.  These customers generate
  access revenue when they use Bredas networks to make long distance calls.Cellular services increased $46,802, or 15.4%, for
  the three-month period ended September 30, 2005, when compared to the
  three-month period ended September 30, 2004.
  This increase was a direct reflection of the 20.5% increase in
  customers served by Bredas retail locations during this time period.Broadcast Services  ($17,762)Broadcast services decreased $17,762, or 8.1%, for
  the three-month period ended September 30, 2005, when compared to the
  three-month period ended September 30, 2004.
  Bredas subsidiary, Tele-Services, Ltd. 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 able to also
  include local channels in their package offerings.  Tele-Services completed a fiber construction project during the
  quarter ended September 30, 2005, which allowed it to combine its Sidney and
  Riverton cable TV head ends. Breda continues to explore other consolidation
  opportunities in its cable TV communities in order to reduce its operating
  costs through consolidation of equipment and maintenance costs.  Rate increases will be implemented in
  November 2005 for the one community that received additional channels from
  the consolidation of head ends.
  During the third quarter of 2005, Breda upgraded its software and
  operating systems on its local channel equipment and therefore was able to implement
  a paid advertising program for businesses and individuals on the local
  channels in the communities that have the local channels.  Breda hopes to generate some customer
  loyalty through this avenue of information on local community events, as well
  as the weather and local news.
  Another factor faced by Tele-Services is the declining population base
  in the small rural communities served by Tele-Services.15

Internet Services  ($10,057)Internet services revenue decreased $10,057, or
  6.7%, for the three-month period ended September 30, 2005, when compared to
  the three-month period ended September 30, 2004.  The decrease is directly attributable to the decrease in BTC,
  Inc.s Internet service customer base, which is the result of the intense
  competition by multiple suppliers in the Carroll, Iowa market area.  Breda is gaining high-speed Internet
  customers in the Carroll, Iowa area because BTC, Inc. is offering bundled
  services packages that include Internet services, as well as local telephone
  and other communication services.
  However, Breda was forced by competitive pressures to reduce its
  pricing on its high speed Internet services as of October 1, 2004.  This price decrease is reflected in
  Internet services revenue during the three-month period ended September 30,
  2005.OPERATING EXPENSESThe table below sets forth the components of Bredas
  operating costs for the three months ended September 30, 2005, compared to
  the same period in 2004.Three Months Ended
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOPERATING
  EXPENSESCost of
  services
  
  $
  942,638
  
  $
  712,276
  
  $
  230,362
  
  
  32.3
  %Depreciation
  and amortization
  
  $
  220,691
  
  $
  265,088
  
  $
  (44,397
  )
  
  -16.7
  %Selling,
  general and administration
  
  $
  509,324
  
  $
  555,411
  
  $
  (46,087
  )
  
  -8.3
  %$
  1,672,653
  
  $
  1,532,775
  
  $
  139,878
  
  
  9.1
  %Cost of Services - $230,362Cost of services increased $230,362, or 32.3%, for
  the three-month period ended September 30, 2005, when compared to the
  three-month period ended September 30, 2004.
  As a result of customer growth in competitive local exchange carrier
  access lines, long distance services, and cellular services, the provisioning
  costs, which include labor and benefits, increased $145,394.  While overall customer growth declined for
  Bredas Internet services and cable TV services, Breda continues to
  experience programming fees increases for its cable TV offerings, and had
  additional start-up costs with the roll-out of its satellite Internet
  service, and some preparation costs for the roll-out of it ADSL flavor of
  high speed Internet in the last quarter of 2005.  Breda is allocating a portion of shared provisioning costs
  between its CLEC operation and its Internet services operation.Depreciation and Amortization 
  ($44,397)Depreciation and amortization expense decreased
  $44,397, or 16.7%, for the three-month period ended September 30, 2005, when
  compared to the three-month period ended September 30, 2004.  Some of Bredas plant assets are fully
  depreciated, which is reflected in the depreciation expense decrease for the
  three-month period ended September 30, 2005.
  Breda will have over $1,000,000 in new switch plant assets in its CLEC
  operations and Emergency Alert Equipment in its cable TV operations, which
  will become operational in the fourth quarter of 2005, and will generate
  additional depreciation expense at the time the equipment is put into
  service.16

Selling, General and
  Administration  ($46,087)Selling, general and administration expenses
  decreased $46,087, or 8.3%, for the three-month period ended September 30,
  2005, when compared to the three-month period ended September 30, 2004.  While property tax expense increased
  $23,510, or 37.8%, during the three-month period ended September 30, 2005,
  when compared to the same period in 2004, this increase was offset by
  decreased wage and benefits costs from decreased staffing in the Customer
  Service department and decreased outside consulting services.OTHER INCOME (EXPENSE)The table below sets forth the components of other
  income (expense) for the three-month period ended September 30, 2005,
  compared to the same period in 2004.Three Months Ended
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOTHER
  INCOME (EXPENSES)Interest
  and dividend income
  
  $
  69,375
  
  $
  51,802
  
  $
  17,573
  
  
  33.9
  %Interest
  expense
  
  $
  (28,623
  )
  $
  (31,362
  )
  $
  2,739
  
  
  -8.7
  %Income
  from equity investments
  
  $
  280,177
  
  $
  346,954
  
  $
  (66,777
  )
  
  -19.2
  %Other,
net
  
  $
  36,341
  
  $
  (10,975
  )
  $
  47,316
  
  
  -431.1
  %$
  357,270
  
  $
  356,419
  
  $
  851
  
  
  0.2
  %Interest and Dividend Income.Interest and dividend
  income increased $17,573, or 33.9%, for the three-month period ended
  September 30, 2005, when compared to the three-month period ended September
  30, 2004.  This increase in interest
  and dividend income was due to the increased investments in both temporary
  investments and marketable securities on which Breda generates interest
  income, and from an increase in interest rates earned on investments.Interest Expense.The $2,738, or 8.7%,
  decrease in interest expense for the three-month period ended September 30,
  2005, when compared to the three-month period ended September 30, 2004, is
  the result of a reduced Rural Telephone Finance Cooperative loan balance on
  which interest is figured because all scheduled principal payments have been
  made.  There has been no change in
  interest rate and no additional loan proceeds have been obtained.Income from Equity
  Investments.Income
  from equity investments decreased $66,777, or 19.2%, for the three-month
  period ended September 30, 2005, when compared to the three-month period
  ended September 30, 2004.  The equity
  investments income shown on Bredas financial statements is Bredas pro-rata
  share of the net income or net loss of each equity investment, based on Bredas
  percentage of ownership in each equity investment.  The decrease in equity investments income reported on Bredas
  income statement for the three-month period ended September 30, 2005 is a
  reflection of the net increases and decreases in the net operating income of
  Bredas equity investments. Most of Bredas equity investments are in
  cellular partnerships.  The cellular
  partnerships have been under market pressure from carriers such as AT&T,
  Sprint and Verizon, to renegotiate their roaming contracts at lower rates.  As a result, the cellular partnerships
  making up Bredas equity investments are receiving less roaming revenue, even
  though the number of customers and the minutes of use have increased.  Because of competition from other wireless
  carriers, more free evening and week-end minutes are being17

included for
  the same base rate in the customer package offerings, which has also
  decreased the overall service revenues in these cellular partnerships.Other, Net.Other net income
  increased $47,317, or 431.1%, for the three months ended September 30, 2005,
  when compared to the three-month period ended September 30, 2004.  Breda realized a $33,304 gain on the sale
  of its Neola, Iowa cable TV system in September 2005, for which there was no
  corresponding entry during the three-month period ended September 30,
  2004.  Breda also began leasing space
  on two towers to cellular providers during 2005, and for which there would be
  no corresponding revenue for the three-month period ended September 30, 2004.  Miscellaneous installation work for
  residential and business customers has also increased during the three-month
  period ended September 30, 2005, when compared to the three-month period
  ended September 30, 2004.Income Tax Expense.Income taxes
  increased $42,228, or 27.4%, for the three-month period ended September 30,
  2005, when compared to the same period in 2004.  The increase is a direct reflection of the increased income
  generated from operations and other income sources.  The effective tax rate in 2005 is 37.7%, compared to a 37.0%
  tax rate in 2004.  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 state income
  tax.Net Income.Net income increased
  $61,914, or 23.6%, for the three-month period ended September 30, 2005, when
  compared to the same period in 2004.Nine Months Ended September 30, 2005 and 2004The table
  below sets forth the components of Bredas revenues for the nine months ended
  September 30, 2005, compared to the same period in 2004.Nine Months Ended
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOPERATING REVENUESLocal Exchange
CarrierLocal network
services
  
  $
  622,134
  
  $
  543,547
  
  
  78,587
  
  
  14.5
  %Network access
services
  
  $
  2,303,430
  
  $
  1,993,094
  
  
  310,336
  
  
  15.6
  %Long distance
services
  
  $
  199,415
  
  $
  148,016
  
  
  51,399
  
  
  34.7
  %Cellular services
  
  $
  1,073,601
  
  $
  843,821
  
  
  229,780
  
  
  27.2
  %Billing and collection
services
  
  $
  16,506
  
  $
  20,330
  
  
  (3,824
  )
  
  -18.8
  %Miscellaneous
  
  $
  229,220
  
  $
  200,180
  
  
  29,040
  
  
  14.5
  %$
  4,444,306
  
  $
  3,748,988
  
  
  695,318
  
  
  18.5
  %Cable television
services
  
  $
  614,226
  
  $
  638,915
  
  
  (24,689
  )
  
  -3.9
  %Internet services
  
  $
  425,826
  
  $
  459,958
  
  
  (34,132
  )
  
  -7.4
  %$
  5,484,358
  
  $
  4,847,861
  
  
  636,497
  
  
  13.1
  %There was an
  increase in total operating revenues for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004, of $636,497, or 13.1%.18

Local Exchange Carrier Services - $78,587Local
  exchange carrier services revenues accounted for 81.0% of all operating
  revenue in the nine-month period ended September 30, 2005.  There was a $695,318, or 18.5%, increase
  in local exchange carrier services revenues for the nine-month period ended
  September 31, 2005, when compared to the nine-month period ended September
  30, 2004.Local
  network services revenues increased $78,587, or 14.5%, for the nine months
  ended September 30, 2005, as compared to the same period in 2004, primarily
  because of the increased number of customers taking phone service from Breda
  in its CLEC town of Carroll, IA.
  Bredas long distance services revenue also increased $51,399, or
  34.7%, for the nine months ended September 30, 2005, as compared to the
  nine-month period ended September 30, 2004, for the same reason.  Breda has received a good response to its
  package offerings that include local and long distance service from both
  residential and business customers.Network
  access services increased $310,336, or 15.6%, for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004.  This increase mainly
  resulted from increased originating and terminating access revenues received
  on toll traffic generated by Bredas Internet service subscribers in Bredas
  southern Iowa exchanges to reach Bredas Internet service equipment in Breda,
  Iowa.  This method of provisioning
  allows Breda to offer its own Internet services to these customers instead of
  reselling the Iowa Network Services Internet product. Breda began offering
  its Internet services to its phone customers in southern Iowa in the latter
  part of 2004, so there would be no corresponding network access revenue
  during the nine-month period ended September 30, 2004.  Breda also negotiated wireless agreements
  with five wireless carriers in the first quarter of 2005, and is now billing
  and receiving payments from those carriers.
  While the overall payment rate is significantly less than what Breda
  originally received in access revenues from interexchange carriers for this
  traffic, Breda has received settlement payments going back to April 1999 from
  two of the carriers.  There was no
  corresponding access revenue from wireless carriers during the nine-month
  period ended September 30, 2004.
  Bredas access revenue has also increased because of its increased
  customer base, and particularly the Carroll, IA, CLEC customer base,  taking its long distance services.  These customers generate
access revenue
  when they use Bredas networks to make long distance calls.Cellular
  services increased $229,780, or 27.2%, for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004.  This increase was a direct
  reflection of the 29.0% increase in customers served by Bredas retail
  locations during this time period.Broadcast Services  ($24,689)Broadcast
  services decreased $24,689, or 3.9%, for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004.  Bredas subsidiary,
  Tele-Services, Ltd. 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 able to also include local channels in their
  package offerings.  Tele-Services
  completed a fiber construction project during the quarter ended September 30,
  2005, which allowed it to combine its Sidney and Riverton cable TV head ends.
  Breda continues to explore other consolidation opportunities in its cable TV
  communities in order to reduce its operating costs through consolidation of
  equipment and maintenance costs.  Rate
  increases will be implemented in19

November
  2005 for the one community that received additional channels from the
  consolidation of head ends.  During
  the third quarter of 2005, Breda upgraded its software and operating systems
  on its local channel equipment and therefore was able to implement a paid
  advertising program for businesses and individuals on the local channels in
  the communities that have the local channels.  Breda hopes to generate some customer loyalty through this
  avenue of information on local community events, as well as the weather and
  local news.  Another factor faced by
  Tele-Services is the declining population base in the small rural communities
  served by Tele-Services.Internet Services  ($34,132)Internet
  services revenue decreased $34,132, or 7.4%, for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004.  The decrease is directly
  attributable to the decrease in BTC, Inc.s Internet service customer base,
  which is the result of the intense competition by multiple suppliers in the
  Carroll, Iowa market area.  Breda is
  gaining high-speed Internet customers in the Carroll, Iowa area because BTC,
  Inc. is offering bundled services packages that include Internet services, as
  well as local telephone and other communication services.  However, Breda was forced by competitive
  pressures to reduce its pricing on its high speed Internet services as of
  October 1, 2004.  This price decrease
  is reflected in Internet services revenue during the nine-month period ended
  September 30, 2005.OPERATING
  EXPENSESThe table
  below sets forth the components of Bredas operating costs for the nine
  months ended September 30, 2005, compared to the same period in 2004.Nine Months Ended
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOPERATING EXPENSESCost of services
  
  $
  2,623,799
  
  $
  2,047,469
  
  $
  576,330
  
  
  28.1
  %Depreciation and
amortization
  
  $
  686,307
  
  $
  765,518
  
  $
  (79,211
  )
  
  -10.3
  %Selling, general and
administration
  
  $
  1,500,985
  
  $
  1,478,262
  
  $
  22,723
  
  
  1.5
  %$
  4,811,091
  
  $
  4,291,249
  
  $
  519,842
  
  
  12.1
  %Cost of Services - $576,330Cost of
  services increased $576,330, or 28.1%, for the nine-month period ended
  September 30, 2005, when compared to the nine-month period ended September
  30, 2004.  As a result of customer
  growth in competitive local exchange carrier access lines, long distance
  services, and cellular services, the provisioning costs, which include labor
  and benefits, increased $367,486.
  While overall customer growth declined for Bredas Internet services
  and cable TV services, Breda continues to experience programming fees
  increases for its cable TV offerings, and had additional start-up costs with
  the roll-out of its satellite Internet service, and some preparation costs
  for the roll-out of it ADSL flavor of high speed Internet, which will be
  launched in the last quarter of 2005.
  Breda is allocating a portion of shared provisioning costs between its
  CLEC operation and its Internet services operation.20

Depreciation and Amortization  ($79,211)Depreciation and amortization expense decreased
  $79,211, or 10.3%, for the nine-month period ended September 30, 2005, when
  compared to the nine-month period ended September 30, 2004. Some of Bredas
  plant assets are fully depreciated, which is reflected in the depreciation
  expense decrease for the nine-month period ended September 30, 2005. Breda
  will have over $1,000,000 in new plant assets for a switch in its CLEC
  operations and for Emergency Alert Equipment in its cable TV operations,
  which will become operational in the fourth quarter of 2005, and will
  generate additional depreciation expense at the time the equipment is put
  into service.Selling, General and
  Administration  ($22,723)Selling, general and administration expenses
  decreased $22,723, or 1.5%, for the nine-month period ended September 30,
  2005, when compared to the nine-month period ended September 30, 2004. While
  property tax expense increased $34,102, or 26.4%, during the nine-month
  period ended September 30, 2005, when compared to the same period in 2004,
  this increase was offset by decreased wage and benefits costs from decreased
  staffing in the Customer Service department and decreased outside consulting
  services.OTHER INCOME (EXPENSE)The table below sets forth the components of other
  income (expense) for the nine-month period ended September 30, 2005, compared
  to the same period in 2004.Nine Months Ended
  September 30,
  
  Change2005
  
  2004
  
  Amount
  
  PercentageOTHER
          INCOME (EXPENSES)Interest and dividend
  income
  
  $
  267,374
  
  $
  212,678
  
  $
  54,696
  
  
  25.7
  %Loss on note receivable
  impairment
  
  $
  
  
  $
  (75,000
  )
  $
  75,000
  
  
  -100.0
  %Interest expense
  
  $
  (87,963
  )
  $
  (96,044
  )
  $
  8,081
  
  
  -8.4
  %Income from equity
  investments
  
  $
  790,420
  
  $
  977,573
  
  $
  (187,153
  )
  
  -19.1
  %Other, net
  
  $
  25,880
  
  $
  (15,540
  )
  $
  41,420
  
  
  -266.5
  %$
  995,711
  
  $
  1,003,667
  
  $
  (7,956
  )
  
  -0.8
  %Interest and Dividend Income.
  Interest and dividend income increased $54,696, or 25.7%, for the nine-month
  period ended September 30, 2005, when compared to the nine-month period ended
  September 30, 2004. This increase in interest and dividend income was due to
  the increased investments in both temporary investments and marketable
  securities on which Breda generates interest income.Loss on Note Receivable
  Impairment. There was a positive adjustment to Other Income
  (Loss) for the nine-month period ended September 30, 2005, when compared to
  the nine-month period ended September 30, 2004. A $75,000 loss on a note
  receivable to Desk Top Media, L.L.C. had been recorded during the nine-month
  period ended September 30, 2004. Since there is no corresponding entry during
  the nine-month period ended September 30, 2005, there is a positive $75,000
  adjustment when comparing the two nine-month periods.Interest Expense.
  The $8,081, or 8.4%, decrease in interest expense for the nine-month period
  ended September 30, 2005, when compared to the nine-month period ended
  September 30,21

2004, is the result of the declining Rural Telephone
  Finance Cooperative loan balance on which interest is figured because all
  scheduled principal payments have been made. There has been no change in
  interest rate and no additional loan proceeds have been obtained.Income from Equity Investments.
  Income from equity investments decreased $187,153, or 19.1%, for the
  nine-month period ended September 30, 2005, when compared to the nine-month
  period ended September 30, 2004. 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 nine-month period ended September 30, 2005
  is a reflection of the net increases and decreases in the net operating
  income of Bredas equity investments. Most of Bredas equity investments are
  in cellular partnerships. The cellular partnerships have been under market
  pressure from carriers such as AT&T, Sprint and Verizon, to renegotiate
  their roaming contracts at lower rates. As a result, the cellular
  partnerships making up Bredas equity investments are receiving less roaming
  revenue, even though the number of customers and the minutes of use have
  increased. Because of competition from other wireless carriers, more free
  evening and week-end minutes are being included for the same base rate in the
  customer package offerings, which has also decreased the overall service
  revenues in these cellular partnerships.Other, Net. Other
  net income increased $41,420, or 266.5%, for the nine months ended September
  30, 2005, when compared to the nine-month period ended September 30, 2004. Breda
  realized a $33,304 gain on the sale of its Neola, Iowa cable TV system in
  September 2005, for which there was no corresponding entry during the
  nine-month period ended September 30, 2004. Breda also began leasing space on
  two towers to cellular providers during 2005, and for which there would be no
  corresponding revenue for the nine-month period ended September 30, 2004. Miscellaneous
  installation work for residential and business customers has also increased
  during the nine-month period ended September 30, 2005, when compared to the
  nine-month period ended September 30, 2004.Income Tax Expense.
  Income taxes increased $108,699, or 7.0%, for the nine-month period ended
  September 30, 2005, when compared to the same period in 2004. The increase is
  a direct reflection of the increased income generated from operations and
  other income sources. The effective tax rate in 2005 is 36.0%, compared to a
  36.1% tax rate in 2004. 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 state income tax.Net Income. Net
  income increased $71,618, or 7.2%, for the nine-month period ended September
  30, 2005, when compared to the same period in 2004.Liquidity and Capital ResourcesBredas short-term and long-term liquidity requirements
  arise primarily from: working capital requirements; capital expenditures;
  interest payments on the long term financing from the Rural Telephone Finance
  Cooperative; dividend payments on Bredas common stock; redemption of Bredas
  common stock; and potential industry-related acquisitions or investments.Breda intends to fund the operations, working
  capital requirements, capital expenditures, interest payments, dividend
  payments, and stock redemptions from cash from operations. Breda also intends
  to fund smaller industry-related acquisitions or investments from cash from22

operations. For the nine months ended September 30,
  2005 and 2004, cash provided by operating activities was $1,892,886 and
  $1,517,528, 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 line of
  credits with the Rural Telephone Finance Cooperative; or the addition of
  long-term debt from industry lenders. Breda presently has an unused line of
  credit with the Rural Telephone Finance Cooperative of $1,500,000, and
  Prairie Telephone has an unused line of credit with the Rural Telephone
  Finance Cooperative of $500,000. Bredas consolidated debt to equity ratio is
  9.1%. Comparable ratios within the industry for companies with a similar
  number of consolidated access lines would be 21%. Bredas present revenues
  would be able to sustain the costs of additional debt if the need arose. However,
  all potential acquisitions or investments would be evaluated on their own
  merits for cash and revenue production, and if the return on investment was
  sufficient to incur the additional debt.Breda has historically funded its operations and
  capital expenditure requirements primarily from cash from operations. The
  following table summarizes Bredas short-term liquidity, as of September 30,
  2005, and December 31, 2004.As ofSeptember 30,
  2005
  
  December 31,
  2004Short-Term
  LiquidityCurrent Assets
  
  $
  2,513,871
  
  $
  2,344,963Current
Liabilities
  
  $
  (1,073,621
  )
  $
  (703,508
  )Net Working
Capital
  
  $
  1,440,250
  
  $
  1,641,455Cash and Cash
Equivalents
  
  $
  692,309
  
  $
  1,036,804Short Term Marketable
Securities
  
  $
  753,563
  
  $
  232,645Available on Line of
Credit
  
  $
  2,000,000
  
  $
  2,000,000The increase in current liabilities from December
  31, 2004 to September 30, 2005 is primarily due to the receipt of invoices
  for the payment of plant under construction costs for the switch installation
  in the Carroll CLEC exchange, and for other capital projects, that will be
  paid after September 30, 2005. Dollars added to accounts payable for these
  plant under construction and new equipment expenditures totaled $171,256. Accrued
  taxes also increased current liabilities by $124,149 as of September 30,
  2005, and was primarily the result of the 23.5% increase in property taxes
  resulting from new property assessments implemented by county assessors. The
  amount Breda will pay in the future based on the new assessed rates has been
  accrued for the time period July 1, 2004 through September 30, 2005.The following table summarizes Bredas sources and
  uses of cash for the nine months ended September 30, 2005 and 2004.For the Nine Months Ended
  September 30,2005
  
  2004Net Cash
  Provided (Used)Operating
Activities
  
  $
  1,892,886
  
  $
  1,517,528Investing
Activities
  
  $
  (1,856,801
  )
  $
  (1,208,852
  )Financing
Activities
  
  $
  (380,580
  )
  $
  (357,442
  )23

For the nine months ended September 30, 2005 and
  2004, cash provided by operating activities was $1,892,886 and $1,517,528,
  respectively.Cash used in investing activities increased $647,949
  for the nine-month period ended September 30, 2005, when compared to the
  nine-month period ended September 30, 2004, and is mainly attributable to the
  purchase of a new switch in Bredas CLEC community of Carroll, Iowa.During the third quarter of 2005, Prairie Telephone
  purchased an additional 2,462.264 units of Bug Tussel Wireless, L.L.C. for
  $113,264.15.  With Prairie Telephones
  initial purchase of 5,000 units for $200,000 in March 2005, Prairie Telephone
  now has a 9.75% interest in Bug Tussell Wireless, L.L.C.Cash used in financing activities was $380,580 for
  the nine-month period ended September 30, 2005, and $357,442 for the
  nine-month period ended September 30, 2004. During the nine-month period
  ended September 30, 2005, cash was used to repay $114,552 of long term debt,
  to pay dividends to the shareholders of $7 per share totaling $218,190, and
  to redeem common stock for $47,838.
  Breda used cash during the nine-month period ended September 30, 2004
  to repay $107,240 of Rural Telephone Finance Cooperative long term debt, to
  pay dividends to shareholders of $3 per share totaling $94,479, and to redeem
  common stock for $155,723.Long Term DebtAs of September 30, 2005, Breda had outstanding
  $1,518,909 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
  minimum net worth exceeds 40% and distributions are limited to certain levels
  of prior year cash margins.  In
  addition, Breda is 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 CommitmentsBredas ongoing capital commitments include capital
  expenditures and debt service requirements.
  For the nine months ended September 30, 2005, capital expenditures
  were $1,031,403.Bredas contractual obligations as of September 30,
  2005 are:September  December 2005
  
  $
  39,4612006
  
  $
  164,5132007
  
  $
  175,7292008
  
  $
  187,7102009
  
  $
  200,5072010 and After
  
  $
  750,98924

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 would 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 RiskBreda 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, 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 PronouncementIn May 2005, the FASB issued SFAS No. 154, Accounting
  Changes and Error Corrections, a replacement of APB Opinion No. 20 and SFAS
  No. 3.  SFAS No. 154 requires
  retrospective application to prior periods financial statements of a
  voluntary change in accounting principle unless it is impracticable.  SFAS No. 154s retrospective application
  requirement replaces APB No. 20s requirement to recognize most voluntary
  changes in accounting principle by including the cumulative effect of
  changing to the new accounting principle in net income of the period of the
  change.  SFAS No. 154 is effective for
  accounting changes and corrections of errors made in fiscal years beginning
  after December 15, 2005 (as of January 1, 2006, for Breda).  Breda does not expect adoption of SFAS No.
  154 to have a material effect on its results of operations or financial
  position.Regulatory and Industry MattersAccess 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. The FCC has indicated that it will be particularly receptive to any
  plans25

that offer expanded choices and lower rates to rural
  consumers.  Breda continues to work
  with two Iowa industry associations in reviewing and submitting comments on
  the various proposals before the FCC.The National Exchange Carrier Association (NECA)
  filed updates to the FCC Tariff No. 5 that became applicable to interstate
  traffic on July 1, 2005.  This tariff
  is Bredas legal billing authority for its interstate access service
  charges.  The rates in this tariff are
  normally updated twice a year and become effective on July 1st and
  January 1st of each year.
  The tariffed rates effective July 1, 2005, reflected an overall 10.2%
  decrease in the traffic sensitive switched access category, and a 12.3%
  decrease in the traffic sensitive special access category.  The ITA also submitted the NECA Access
  Service Tariff Number 1 changes to the IUB on July 11, 2005, and these
  intrastate access charge rates became effective on September 1, 2005.  Since the intrastate access charge rates
  are also based on the NECA interstate access charge rates, Breda will
  experience a decrease in its network access revenue for both interstate and
  intrastate access revenue.Breda and its subsidiaries are also subject to risk
  regarding changes in intrastate access charge rates because concerns have
  been raised by the Iowa legislature and the IUB regarding intrastate rates,
  and whether alternative intrastate intercarrier compensation mechanisms
  should be investigated.  Breda does
  not believe, however, that it is possible to predict at this time whether
  intrastate access rates will be lowered, or if intrastate access rates are
  lowered, the amount of the decrease in those rates.  It is therefore uncertain at this time whether this issue will
  result in an adverse effect on Bredas operating income.  Breda does, however, anticipate continuing
  pressure for the lowering of intrastate access charge rates.Universal service funding is also an important part
  of Bredas consolidated revenues, and the regulation of universal service
  funding by the FCC is another area of material risk to Breda and its
  subsidiaries.  The universal service
  funds are also now being paid to more telecommunications providers than in
  the past.  Breda anticipates that
  there may be changes in the future on how universal service funds are
  disbursed among the numerous eligible telecommunications providers.Another revenue recovery issue present in the
  industry since April of 1999 has been the nonpayment of access revenue by
  wireless carriers on traffic originating and terminating within the same
  major trading area.  Breda and other
  local exchange carriers were not receiving payment for the termination of
  this wireless traffic over their networks to the end user.The primary result of numerous industry negotiations
  and actions was Bredas entering into agreements with Sprint, US Cellular,
  i-wireless, and Midwest Wireless for each of Breda, Prairie Telephone,
  Westside Independent and BTC, Inc.
  The agreements with Sprint, US Cellular and i-wireless became
  effective as of May 1, 2004, and the Midwest Wireless agreement became
  effective January 27, 2005.  Breda
  also entered into an agreement with Verizon for each of Breda, Prairie
  Telephone and Westside Independent on June 1, 2005, but the agreements were
  made retroactively effective as of May 1, 2004.  Verizon would not sign an agreement with BTC, Inc. because BTC,
  Inc. is a competitive local exchange carrier.  The agreements generally provide for compensation for the
  termination of wireless traffic only on a going forward basis.  The agreements also provide for
  significantly less revenue per minute, compared to receiving interstate
  access revenue, and are reciprocal compensation agreements, which means
  generally that each of the two carriers receives compensation from the other
  carrier for the transport and termination on each carriers network
  facilities of wireless traffic that originates on the network facilities of
  the other carrier.26

Breda was notified on July 19, 2005, and on
  September 2, 2005, that the ITA Wireless Termination Team had reached an
  agreement with Verizon Wireless and U. S. Cellular, respectively, for payment
  of past compensation for minutes terminated from April 1999 through March 31,
  2004.  Breda subsequently signed these
  agreements for each of Breda, Prairie Telephone and Westside
  Independent.  Bredas portion of the
  total compensation package of over $700,000 that Verizon Wireless agreed to
  pay was $20,190.  Breda and its
  subsidiaries should receive $4,073 out of the estimated $900,000 that U.S.
  Cellular has agreed to pay to Iowa local exchange carriers and competitive
  local exchange carriers.  Breda does
  not anticipate recovering any compensation for the termination of wireless
  traffic for any time periods prior to the date of its agreements with the
  other wireless carriers.Telephone services providers like Breda, Prairie
  Telephone, Westside Independent and BTC, Inc. are subject to competition from
  other providers.  As a result of the
  Telecommunications Act of 1996, telephone companies are no longer afforded
  exclusive franchise service areas.
  Under that Act, competitors can now offer telephone services to Bredas,
  Prairie Telephones, Westside Independents and BTC, Inc.s subscribers, and
  also request access to their lines and network facilities in order to offer
  any type of service that can be provided through those lines and
  facilities.  The Act and the
  regulations promulgated by the FCC and state regulatory agencies to implement
  various parts of the Act could have a material adverse effect on Breda,
  Prairie Telephone, Westside Independent and BTC, Inc. because they open up
  Breda, Prairie Telephone, Westside Independent and BTC, Inc. to competition
  that they were not subject to in the past.There were various occurrences in 2004 which serve
  as examples of the increasing competition in Iowa.  For example, in October of 2004 the IUB issued an order to MCC
  Telephony of Iowa which will allow MCC Telephony of Iowa to provide service
  in any area of Iowa where any MCC Telephony of Iowa affiliates own and
  operate a cable system and offer high speed cable modems.  MCC Telephony of Iowa is a subsidiary of
  Mediacom.  Another example of the increasing
  competition in Iowa was the various deregulation actions that were taken by
  the IUB during 2004, which included the deregulation of approximately 21
  exchanges.There are numerous telephone companies which have
  filed to provide telephone services throughout all of Iowa, and Breda
  anticipates that more of those types of filings will be made by other
  telephone companies.  To date,
  however, no company has chosen to compete in any of Bredas, Prairie
  Telephones or Westside Independents service areas.  Breda does not know the plans of any
  companies, but Breda currently believes the possibility of any company
  entering any of those service areas in 2005 is small.BTC, Inc., however, provides telephone services in
  the Carroll, Iowa market area, and there are already other companies
  providing telephone services in that area.
  Breda also believes that there will be additional local exchange
  carriers entering the Carroll, Iowa market area in 2005 and in 2006.  For example, Mediacom, which is the 9th
  largest cable television operator in the United States and the local cable
  provider in the Carroll, Iowa market, has expressed an intention to provide a
  phone service offering through Mediacoms partnership with Sprint.  Mediacom filed and has received approval
  on the service territory maps and exchange tariffs from the IUB.   The IUB also granted MCC a certificate of
  public convenience to offer service in numerous areas throughout Iowa.  Breda believes that Mediacom and MCC will
  roll out their voice offering along with a high-speed internet offering in
  the Carroll, Iowa market in the very near future.  Mediacom now has packaged offerings available according to its
  marketing material.27

Breda also anticipates that it will face new
  competition from other providers of newer VoIP (voice over internet protocol)
  technologies, such as Vonnage and Skype, in all of its exchanges.  Breda anticipates that Mediacoms and any
  such other offerings will result in a reduction of revenue.  A reduction in revenue will also result if
  any other telephone companies at some point determine to provide services in
  any of Bredas, Prairie Telephones, Westside Independents or BTC, Inc.s
  service areas.Breda, Prairie Telephone, Westside Independent and
  BTC, Inc. continue to face ever-increasing competition in providing dial-up
  and high-speed Internet access.  For
  example, Breda has been experiencing price-point competition for Internet
  services from Iowa Telecom in three communities since the late fourth quarter
  2000, and Breda has lost Internet customers in those three communities.  BTC, Inc. is experiencing intense pricing
  and free services competition in providing Internet access in its Carroll,
  Iowa market.  There are at least five
  competitors in this relatively small market area, and BTC, Inc. experienced a
  19.2% decrease in its dial-up customer base in this market during the
  calendar year 2004.  BTC, Inc. had
  experienced an 18.9% decrease in its dial-up customer base in the Carroll,
  Iowa market area in 2003, and a 15.5% decrease in 2002.Breda continues to investigate new technology and
  product offerings in the Internet field that it can provide to its customers,
  or that could be considered value-added features to its already existing
  product.For example, Breda began offering a dial-up accelerator product in
  June 2004, which allows Internet service providers, such as BTC, Inc., to
  deliver data services over their existing dial-up and wireless networks at up
  to six times the normal speed.In May 2005, Breda began to offer its dial-up
  and high-speed Internet customers a value-added product, which eliminates
  customer problems due to Internet security threats.  This product is fully-automated and integrated, and protects
  against viruses, spyware, popups, and automatically installs tested Microsoft
  Security patches, and performs diskeeper functions. Breda anticipates that
  there will be good future demand for this product from its Internet
  customers.Breda entered into a marketing and distribution
  agreement with the National Rural Telecommunications Cooperative (NRTC) on
  May 13, 2004, for the distribution of satellite and high speed Internet
  service.  One reason Breda entered
  into this agreement was so that Breda would have a means to provide high
  speed Internet service to its rural customers who may otherwise lack the
  opportunity to obtain high speed Internet service through existing broadband
  options, such as cable modem, DSL, and wireless, because of distance and
  location factors.  NRTC has a master
  distribution agreement with WildBlue Communications, Inc., through which NRTC
  has obtained rights to market, promote, sell and distribute satellite-based
  Internet access services and related products to end users in the continental
  United States, including through NRTCs eligible members, such as Breda.  Breda also entered into an agreement with
  DIRECTV, Inc. to offer direct broadcast satellite service (video) in
  conjunction with its satellite Internet service.  The Anik F2 satellite was launched by August 30, 2004.  The testing for
Bredas gateway was
  completed by June 30, 2005, but Breda and the rest of the distributors were
  delayed in the rollout of this product because of equipment shortages.  Bredas marketing campaign originated on
  September 1, 2005, and Breda has received good response to this service, and
  has installed over 25 units.Breda still believes, however, that it will need to
  continue to pursue new marketing approaches in order to attempt to retain and
  increase its Internet customer base, and that there will be28

continuing competitive pressures to lower dial-up
  rates and to provide higher speed Internet access.Breda expects the overall potential customer base
  for Internet access to continue to increase, but it is becoming more
  difficult to predict if Breda or its subsidiaries will experience any
  increases in their Internet customer base given the increasingly competitive
  pressures in this area.  It is also
  possible that Breda and its subsidiaries might continue to experience
  declines in their Internet customer base.
  Also, as noted above, competitive pressures regarding pricing may lead
  to little or no growth, or even declines, in Internet service revenues, even
  if Breda is successful in increasing its Internet customer base.Prairie Telephone became a 10% owner of Desktop Media,
  L.L.C. on May 2, 2001.    Prairie
  Telephone also loaned $500,000 to Desktop Media, L.L.C. on May 2, 2001, and
  advanced an additional $45,307 on June 9, 2004 to fund operational expenses
  until service revenues were collected.
  On September 17, 2003, Prairie Telephone signed a principal deferral
  agreement with Desktop Media, L.L.C. which deferred the principal payments
  due in the months of September through December 2003, and which also provided
  that Prairie Telephones ownership in Desktop Media, L.L.C. would be
  increased from 10% to 17% if at any time in the year 2004 Desktop Media,
  L.L.C. was not able to generate a minimum sustainable monthly profit of
  $36,000, or was unable to make a regularly scheduled principal payment.  Both of these stipulations were not met in
  the first quarter of 2004, and Prairie Telephone accordingly acquired an
  additional 7% ownership of Desktop Media, L.L.C.Prairie Telephone authorized the initiation of a
  default process against Desktop Media, L.L.C. in February 2005, and Prairie
  Telephone, along with the other two lenders, had been proceeding internally
  with this legal action.  Prairie
  Telephone and the other two lenders are now considering additional options
  prior to further pursuing legal actions.
  Prairie Telephone does not know at this time the outcome of these
  actions.In March 2005, Prairie Telephone purchased 5,000
  units of Bug Tussel Wireless, L.L.C. for $200,000, which gave Prairie
  Telephone a 7.87% ownership interest.
  In July 2005, Prairie Telephone purchased an additional 2,462.264
  units of Bug Tussel Wireless, L.L.C. for $113,264.15.  Prairie Telephone now has a 9.75% interest
  in Bug Tussel Wireless, L.L.C.  Bug
  Tussle Wireless, L.L.C. is located in Green Bay, Wisconsin, and its operating
  plan involves erecting tower sites for wireless services.The American Cable Association effectively lobbied
  the FCC for an amendment to waivers previously granted to cable television
  systems to extend the deadline to install Emergency Alert System equipment
  from October 1, 2005, to March 1, 2006.
  Tele-Services had received the initial 36-month extension, and all
  equipment and program modifications on all of Tele-Services cable TV systems
  were implemented by the original October 1, 2005 extension date.Item 3.
  Controls and Procedures.The principal executive officer and the principal
  financial officer of Breda have evaluated the effectiveness of Bredas
  disclosure controls and procedures as of the end of the period covered by
  this quarterly report, and they have concluded that the disclosure controls
  and procedures have been effective for the purposes for which they are
  intended.29

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

Item
  1.
  Legal
  Proceedings.As of the date of this quarterly report, Breda was
  not aware of any pending legal proceeding to which Breda was a party or to
  which any of Bredas property was subject, other than for any routine
  litigation, if any, that was incidental to its business. As of the date of
  this quarterly report, Breda was not aware that any governmental authority was
  contemplating any proceeding against Breda or any of its property.Item
  2.
  Unregistered
  Sales of Equity Securities and Use of Proceeds.Breda did not issue any shares of its common stock
  during the period of July 1, 2005 through September 30, 2005.The following table provides information regarding
  Bredas purchases of its common stock from shareholders during the period of
  July 1, 2005 through September 30, 2005.SMALL BUSINESS ISSUER
PURCHASES OF EQUITY SECURITIES

Period
  Total Number 
  of Shares 
  Purchased1
  Average Price 
  Paid per Share
  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
  Programs1Month #1 (July 1,
  2005-July 31, 2005)
  -0- Shares of
  Common 
  Stock
  N/A
  -0-
  -0-Month #2 
  (August 1, 2005 
  August 31, 2005)
  10 Shares of
  Common 
  Stock
  $357 per 
  Share2
  -0-
  -0-Month #3,
  (September 1, 
  2005-September 
  30, 2005)
  2 Shares of 
  Common 
  Stock
  $357 per 
  Share2
  -0-
  -0-Total
  12
  --
  -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 Amended and Restated Articles of Incorporation, or pursuant
  to the unsolicited request of the shareholder in question.  Breda30

does not have any publicly announced plans or
  programs with respect to purchases of its common stock.2
  All of the shares of common stock were purchased by
  Breda at the $357 per share redemption price that was announced by the board
  of directors at, and which became effective at, the May 17, 2005 annual
  meeting of Bredas shareholders.There were 4 transfers of
  shares of Bredas common stock during the period of July 1, 2005 through
  September 30, 2005 with respect to which Breda did not exercise Bredas right
  of first refusal to purchase the shares.
  One transfer involved 2 shares, which were sold for $357 per share,
  and another transfer involved 16 shares, which were sold for $367 per share.  The remaining two transfers involved the
  transfer of 92 shares and 2 shares, respectively, and were gifts between
  family members with no money being exchanged.Item
  3.
  Defaults
  Upon Senior Securities.There was no material default or any material arrearage
  or delinquency by Breda of the type required to be reported under this Item
  during the period of July 1, 2005 through September 30, 2005.Item
  4.
  Submission
  of Matters to a Vote of Security Holders.No matters were submitted to a vote of the shareholders
  of Breda, through the solicitation of proxies or otherwise, during the period
  of July 1, 2005 through September 30, 2005.Item
  5.
  Other
  Information.There were no material changes during the period of
  July 1, 2005 through September 30, 2005 to the procedures by which the
  shareholders of Breda may recommend nominees to Bredas board of directors.Item
  6.
  Exhibits.A list of the exhibits included as part of this
  quarterly report is set forth in the Exhibit Index which immediately precedes
  such exhibits and is incorporated herein by this reference.[THE
  REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]31

SIGNATURES

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

BREDA TELEPHONE CORP.Date:
  November 14, 2005.
  
  By:
  /s/ Robert BoeckmanRobert Boeckman, Chief Operations
  Officer and Co-Chief Executive OfficerDate:
  November 14, 2005.
  
  By:
  /s/ Jane MorlokJane Morlok, Chief Financial Officer
  and Co-Chief Executive officer32

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

Description of Exhibit
  
  Page3.
  Articles
  of Incorporation and Bylaws3.1
  Amended and Restated Articles of Incorporation of
  Breda Telephone Corp. (Filed as Exhibit 3.1 to Bredas Registration Statement
  on Form 10-SB, and incorporated herein by this reference.)3.2
  Amended and Restated Bylaws of Breda Telephone Corp. (Filed
  as Exhibit 3.2 to Bredas Form 10-QSB for the quarterly period ended June 30, 2004 and
filed August 13, 2004, and incorporated herein by this reference.)10.
  Material
  Contracts10.1
  Employment Agreement dated July 1, 2003 between Breda
  and Robert Boeckman. (Filed as Exhibit 10.1 to Bredas Form 10-QSB for the
  quarterly period ended June 30, 2003 and filed August 12, 2003, and
  incorporated herein by this reference.)10.2
  Employment Agreement dated July 1, 2003 between Breda
  and Jane Morlok. (Filed as Exhibit 10.2 to Bredas Form 10-QSB for the
  quarterly period ended June 30, 2003 and filed August 12, 2003, and
  incorporated herein by this reference.)*31.
  Rule 13a-14(a)/15d-14(a)
  Certifications31.1
  Rule 13a-14(a) Certification of Chief Operations
  Officer and Co-Chief Executive Officer
  
  E-131.2
  Rule 13a-14(a) Certification of Chief Financial
  Officer and Co-Chief Executive Officer
  
  E-2*32.
  Section 1350 Certifications32.1
  Section 1350 Certification of Chief Operations Officer
  and Co-Chief Executive Officer
  
  E-332.2
  Section 1350 Certification of Chief Financial Officer
  and Co-Chief Executive Officer
  
  E-4*Included with this filing.