----

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

**FORM            10-QSB**

(Mark One)
|   |                                                                                                     |
|--------|----------------------------------------------------------------------------------------------------------|
| x      | QUARTERLY REPORT                        UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|   |                                                                                                     |
|   | For the quarterly                        period ended June 30, 2007.                                     |
|   |                                                                                                     |
| o      | TRANSITION REPORT                        UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT                   |
|   |                                                                                                     |
|   | For the transition                        period from ______________________ to ______________________   |

Commission file            number: 0-26525

BREDA TELEPHONE            CORP.            (Exact name of small business issuer as specified in its charter)
|                                                     |                                       |
|----------------------------------------------------------|--------------------------------------------|
| Iowa                                                     | 42-0895882                                 |
| (State or other                        jurisdiction      | (I.R.S.                        Employer    |
| of                        incorporation or organization) | Identification                        No.) |

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

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

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

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

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

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

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**PART I -            FINANCIAL INFORMATION**

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

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

**Condensed            Consolidated Financial Statements            For the Periods            Ended June 30, 2007 and 2006            And the Year Ended December 31, 2006**

1

----

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

**CONSOLIDATED            BALANCE SHEETS (UNAUDITED)            June 30, 2007 and December 31, 2006**

|                                                                                                                                                                                      |   |                                                        |       |                                     |   |   |       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|------------------------------------------|--------|--------|------------|
|                                                                                                                                                                                      |   | June                        30,                        2007 |       | December 31,                        2006 |   |
|                                                                                                                                                                                      |   |                                                             |       |                                          |   |
| ASSETS                                                                                                                                                                                    |   |                                                        |       |                                     |   |   |       |
|                                                                                                                                                                                      |   |                                                        |       |                                     |   |   |       |
| CURRENT                        ASSETS                                                                                                                                                     |   |                                                        |       |                                     |   |   |       |
| Cash and cash                        equivalents                                                                                                                                          |   | $                                                           | 1,530,267  |                                     |   | $      | 777,708    |   |   |
| Marketable                        securities                                                                                                                                              |   |                                                        | 776,762    |                                     |   |   | 643,119    |   |   |
| Accounts receivable,                        net of allowances of $46,750 and $46,750 in 2007 and 2006,                        respectively                                                |   |                                                        | 1,151,611  |                                     |   |   | 995,861    |   |   |
| Interest                        receivable                                                                                                                                                |   |                                                        | 82,368     |                                     |   |   | 82,241     |   |   |
| Current portion of note                        receivable, less allowance of $219,691 in each 2007 and 2006                                                                               |   |                                                        | 220,283    |                                     |   |   | 220,283    |   |   |
| Inventory, at average                        cost                                                                                                                                         |   |                                                        | 160,748    |                                     |   |   | 151,659    |   |   |
| Other                                                                                                                                                                                     |   |                                                        | 34,549     |                                     |   |   | 47,440     |   |   |
| Deferred income                        taxes                                                                                                                                              |   |                                                        | 12,353     |                                     |   |   | 12,291     |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |   |                                                        | 3,968,941  |                                     |   |   | 2,930,602  |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| OTHER NONCURRENT                        ASSETS                                                                                                                                            |   |                                                        |       |                                     |   |   |       |   |   |
| Marketable                        securities                                                                                                                                              |   |                                                        | 6,710,041  |                                     |   |   | 6,775,348  |   |   |
| Investments in                        unconsolidated affiliates at equity                                                                                                                 |   |                                                        | 7,873,321  |                                     |   |   | 7,562,375  |   |   |
| Other investments at                        cost                                                                                                                                          |   |                                                        | 608,746    |                                     |   |   | 622,554    |   |   |
| Goodwill                                                                                                                                                                                  |   |                                                        | 896,812    |                                     |   |   | 896,812    |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |   |                                                        | 16,088,920 |                                     |   |   | 15,857,089 |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| PROPERTY, PLANT AND                        EQUIPMENT                                                                                                                                      |   |                                                        | 4,419,647  |                                     |   |   | 4,509,149  |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| TOTAL ASSETS                                                                                                                                                                              |   | $                                                           | 24,477,508 |                                     |   | $      | 23,296,840 |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| LIABILITIES AND                        STOCKHOLDERS’ EQUITY                                                                                                                         |   |                                                        |       |                                     |   |   |       |   |   |
|                                                                                                                                                                                      |
| CURRENT                        LIABILITIES                                                                                                                                                |   |                                                        |       |                                     |   |   |       |   |   |
| Current portion of                        long-term debt                                                                                                                                  |   | $                                                           | 181,621    |                                     |   | $      | 175,729    |   |   |
| Accounts                        payable                                                                                                                                                   |   |                                                        | 617,391    |                                     |   |   | 178,331    |   |   |
| Accrued                        taxes                                                                                                                                                      |   |                                                        | 72,191     |                                     |   |   | 123,301    |   |   |
| Other                                                                                                                                                                                     |   |                                                        | 141,029    |                                     |   |   | 63,417     |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |   |                                                        | 1,012,232  |                                     |   |   | 540,778    |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| LONG-TERM DEBT, less                        current portion                                                                                                                               |   |                                                        | 1,046,898  |                                     |   |   | 1,139,205  |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| OTHER NONCURRENT                        LIABILITIES                                                                                                                                       |   |                                                        | 1,307,392  |                                     |   |   | 1,359,628  |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| STOCKHOLDERS’                        EQUITY                                                                                                                                         |   |                                                        |       |                                     |   |   |       |   |   |
| Common stock - no par                        value, 5,000,000 shares authorized, 31,016 shares issued and outstanding at                        $457 and $394 stated values, respectively |   |                                                        | 14,174,312 |                                     |   |   | 12,220,304 |   |   |
| Retained                        earnings                                                                                                                                                  |   |                                                        | 6,936,674  |                                     |   |   | 8,036,925  |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |   |                                                        | 21,110,986 |                                     |   |   | 20,257,229 |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |
|                                                                                                                                                                                      |
| TOTAL LIABILITIES AND                        STOCKHOLDERS’ EQUITY                                                                                                                   |   | $                                                           | 24,477,508 |                                     |   | $      | 23,296,840 |   |   |
|                                                                                                                                                                                      |   |                                                             |            |                                     |   |        |            |   |   |

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

2

----

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

**CONSOLIDATED            STATEMENTS OF INCOME (UNAUDITED)            For the Three and Six Months Ended June 30, 2007 and 2006**

|                                                         |   |                                              |      |                                            |                                   |   |      |   |   |    |                                   |   |   |   |      |   |   |
|--------------------------------------------------------------|--------|---------------------------------------------------|-----------|-------------------------------------------------|----------------------------------------|--------|-----------|--------|--------|---------|----------------------------------------|--------|--------|--------|-----------|--------|--------|
|                                                         |   | For                        the Three Months Ended |      | For                        the Six Months Ended |                                   |
|                                                         |   | 2007                                              |      |                                            | 2006                        (Restated) |   |      | 2007   |   |    | 2006                        (Restated) |   |   |
|                                                         |   |                                                   |      |                                            |                                        |   |      |        |   |    |                                        |   |   |
|                                                         |
| OPERATING                        REVENUES                    |   | $                                                 | 2,475,930 |                                            |                                   | $      | 2,007,848 |   |   | $       | 4,871,985                              |   |   | $      | 4,022,649 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| OPERATING                        EXPENSES                    |   |                                              |      |                                            |                                   |   |      |   |   |    |                                   |   |   |   |      |   |   |
| Cost of                        services                      |   |                                              | 1,458,814 |                                            |                                   |   | 940,610   |   |   |    | 2,609,605                              |   |   |   | 1,826,482 |   |   |
| Depreciation and                        amortization         |   |                                              | 251,984   |                                            |                                   |   | 245,928   |   |   |    | 486,410                                |   |   |   | 488,677   |   |   |
| Selling, general, and                        administrative  |   |                                              | 524,573   |                                            |                                   |   | 588,756   |   |   |    | 1,149,379                              |   |   |   | 1,101,523 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |   |                                              | 2,235,371 |                                            |                                   |   | 1,775,294 |   |   |    | 4,245,394                              |   |   |   | 3,416,682 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| OPERATING                        INCOME                      |   |                                              | 240,559   |                                            |                                   |   | 232,554   |   |   |    | 626,591                                |   |   |   | 605,967   |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| OTHER INCOME                        (EXPENSES)               |   |                                              |      |                                            |                                   |   |      |   |   |    |                                   |   |   |   |      |   |   |
| Interest and dividend                        income          |   |                                              | 139,525   |                                            |                                   |   | 75,736    |   |   |    | 283,697                                |   |   |   | 169,565   |   |   |
| Gain or (Loss) on sale                        of investments |   |                                              | (16,813   | )                                               |                                   |   | 1,163,437 |   |   |    | (21,608                                | )      |   |   | 1,163,436 |   |   |
| Gain or (Loss) on                        disposal of assets  |   |                                              | 8,163     |                                            |                                   |   | (21,714   | )      |   |    | 9,963                                  |   |   |   | (21,714   | )      |   |
| Interest                        expense                      |   |                                              | (23,375   | )                                               |                                   |   | (26,448   | )      |   |    | (47,536                                | )      |   |   | (53,633   | )      |   |
| Income from equity                        investments        |   |                                              | 397,297   |                                            |                                   |   | 361,154   |   |   |    | 813,812                                |   |   |   | 701,765   |   |   |
| Other, net                                                   |   |                                              | (3,093    | )                                               |                                   |   | 3,650     |   |   |    | (15,032                                | )      |   |   | 3,273     |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |   |                                              | 501,704   |                                            |                                   |   | 1,555,815 |   |   |    | 1,023,296                              |   |   |   | 1,962,692 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| INCOME BEFORE INCOME                        TAXES            |   |                                              | 742,263   |                                            |                                   |   | 1,788,369 |   |   |    | 1,649,887                              |   |   |   | 2,568,659 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| INCOME TAXES                                                 |   |                                              | 260,240   |                                            |                                   |   | 637,505   |   |   |    | 579,018                                |   |   |   | 887,206   |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| NET INCOME                                                   |   | $                                                 | 482,023   |                                            |                                   | $      | 1,150,864 |   |   | $  | 1,070,869                              |   |   | $      | 1,681,453 |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| NET INCOME PER COMMON                        SHARE           |   | $                                                 | 15.54     |                                            |                                   | $      | 37.10     |   |   | $       | 34.53                                  |   |   | $      | 54.20     |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |
|                                                         |
| DIVIDENDS PER COMMON                        SHARE            |   | $                                                 | 7.00      |                                            |                                   | $      | 7.00      |   |   | $       | 7.00                                   |   |   | $      | 7.00      |   |   |
|                                                         |   |                                                   |           |                                            |                                   |        |           |   |   |         |                                        |   |   |        |           |   |   |

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

3

----

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

**CONSOLIDATED            STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)**

|                                                 |   |         |   |                                     |   |       |   |   |       |   |   |       |   |
|------------------------------------------------------|--------|--------------|--------|------------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|
|                                                 |   | Common Stock |   |                                     |   |       |   |
|                                                 |   |              |   | Retained                        Earnings |   |       |   |
|                                                 |   | Shares       |   | Amount                                   |   |       | Total  |   |
|                                                 |   |              |   |                                          |   |            |   |        |       |
|                                                 |
| Balance at December 31,                        2005  |   |         | 31,023 |                                     | $      | 11,075,211 |   | $      | 6,583,060  |   | $      | 17,658,271 |   |
|                                                 |
| Comprehensive                        income:         |   |         |   |                                     |   |       |   |   |       |   |   |       |   |
| Net Income                                           |   |         |   |                                     |   |       |   |   | 2,818,877  |   |   | 2,818,877  |   |
|                                                 |
| Dividends                        paid                |   |         |   |                                     |   |       |   |   | (217,161   | )      |   | (217,161   | )      |
|                                                 |
| Common stock redeemed,                        net    |   |         | (7     | )                                        |   | (2,758     | )      |   |       |   |   | (2,758     | )      |
|                                                 |
| Stated value stock                        adjustment |   |         |   |                                     |   | 1,147,851  |   |   | (1,147,851 | )      |   |       |   |
|                                                 |   |              |        |                                     |        |            |   |        |            |   |        |            |   |
|                                                 |
| Balance at December 31,                        2006  |   |         | 31,016 |                                     |   | 12,220,304 |   |   | 8,036,925  |   |   | 20,257,229 |   |
|                                                 |
| Comprehensive                        income:         |   |         |   |                                     |   |       |   |   |       |   |   |       |   |
| Net Income                                           |   |         |   |                                     |   |       |   |   | 1,070,869  |   |   | 1,070,869  |   |
|                                                 |
| Dividends                        paid                |   |         |   |                                     |   |       |   |   | (217,112   | )      |   | (217,112   | )      |
|                                                 |
| Stated value stock                        adjustment |   |         |   |                                     |   | 1,954,008  |   |   | (1,954,008 | )      |   |       |   |
|                                                 |   |              |        |                                     |        |            |   |        |            |   |        |            |   |
|                                                 |
| Balance at June 30,                        2007      |   |         | 31,016 |                                     | $      | 14,174,312 |   | $      | 6,936,674  |   | $      | 21,110,986 |   |
|                                                 |   |              |        |                                     |        |            |   |        |            |   |        |            |   |

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

4

----

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

**CONSOLIDATED            STATEMENTS OF CASH FLOWS (UNAUDITED)            For the Three and Six Months Ended June 30, 2007 and 2006**

|                                                                                                                                                                            |   |   |      |                                   |   |       |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|----------------------------------------|--------|------------|--------|
|                                                                                                                                                                            |   | 2007   |      | 2006                        (Restated) |   |
|                                                                                                                                                                            |   |        |      |                                        |   |
|                                                                                                                                                                            |
| CASH FLOWS FROM                        OPERATING ACTIVITIES                                                                                                                     |   |   |      |                                   |   |       |   |
| Net income                                                                                                                                                                      |   | $      | 1,070,869 |                                   | $      | 1,681,453  |   |
| Adjustments to                        reconcile net income to cash provided by operating activities:                                                                            |   |   |      |                                   |   |       |   |
| Depreciation and                        amortization                                                                                                                            |   |   | 486,410   |                                   |   | 488,677    |   |
| Deferred income                        taxes                                                                                                                                    |   |   | (52,298   | )                                      |   | 129,807    |   |
| Amortization of                        investment premium/discount - net                                                                                                        |   |   | 19,501    |                                   |   | 20,870     |   |
| Equity income in                        unconsolidated affiliates, net of distributions received of $672,277 and                        $531,661 in 2007 and 2006, respectively |   |   | (141,534  | )                                      |   | (170,104   | )      |
| Realized (gain) or loss                        on sale of property                                                                                                              |   |   | (59,274   | )                                      |   | 21,714     |   |
| Note receivable                        discount                                                                                                                                 |   |   | —   |                                   |   | (814       | )      |
| (Gain) or loss on sale                        of marketable securities                                                                                                          |   |   | (17,322   | )                                      |   | 7,144      |   |
| Gain on sale of                        investments - at cost                                                                                                                    |   |   | —   |                                   |   | (1,170,211 | )      |
| Changes in assets and                        liabilities:                                                                                                                       |   |   |      |                                   |   |       |   |
| (Increase) Decrease in                        assets:                                                                                                                           |   |   | (152,075  | )                                      |   | 109,563    |   |
| Increase (Decrease) in                        liabilities:                                                                                                                      |   |   | 404,193   |                                   |   | (669,049   | )      |
|                                                                                                                                                                            |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
| Net cash provided by                        operating activities                                                                                                                |   |   | 1,558,470 |                                   |   | 449,050    |   |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
|                                                                                                                                                                            |
| CASH FLOWS FROM                        INVESTING ACTIVITIES                                                                                                                     |   |   |      |                                   |   |       |   |
| Capital                        expenditures                                                                                                                                     |   |   | (333,739  | )                                      |   | (20,550    | )      |
| Proceeds from the sale                        of assets                                                                                                                         |   |   | 57,474    |                                   |   | 66,257     |   |
| Purchase of marketable                        securities                                                                                                                        |   |   | (754,149  | )                                      |   | (1,307,553 | )      |
| Purchase of equity                        investments                                                                                                                           |   |   | (169,412  | )                                      |   | —    |   |
| Purchase of other                        investments - at cost                                                                                                                  |   |   | —   |                                   |   | (1,854     | )      |
| Proceeds from the sale                        of marketable securities                                                                                                          |   |   | 683,634   |                                   |   | 552,874    |   |
| Proceeds from the sale                        of other investments - at cost                                                                                                    |   |   | 13,808    |                                   |   | 1,343,701  |   |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
| Net cash used in                        investing activities                                                                                                                    |   |   | (502,384  | )                                      |   | 632,875    |   |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
|                                                                                                                                                                            |
| CASH FLOWS FROM                        FINANCING ACTIVITIES                                                                                                                     |   |   |      |                                   |   |       |   |
| Repayment of long term                        debt                                                                                                                              |   |   | (86,415   | )                                      |   | (80,900    | )      |
| Dividends                        paid                                                                                                                                           |   |   | (217,112  | )                                      |   | (217,161   | )      |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
| Net cash used in                        financing activites                                                                                                                     |   | $      | (303,527  | )                                      | $      | (298,061   | )      |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
|                                                                                                                                                                            |
| Net Increase in Cash                        and Cash Equivalents                                                                                                                |   | $      | 752,559   |                                   | $      | 783,864    |   |
|                                                                                                                                                                            |
| Cash and Cash                        Equivalents at Beginning of Period                                                                                                         |   |   | 777,708   |                                   |   | 739,741    |   |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
|                                                                                                                                                                            |
| Cash and Cash                        Equivalents at End of Period                                                                                                               |   | $      | 1,530,267 |                                   | $      | 1,523,605  |   |
|                                                                                                                                                                            |   |        |           |                                   |        |            |   |
|                                                                                                                                                                            |
| Supplemental                        Disclosures of Cash Flow Information                                                                                                        |   |   |      |                                   |   |       |   |
| Cash paid during the                        period for:                                                                                                                         |   |   |      |                                   |   |       |   |
| Interest                                                                                                                                                                        |   | $      | 47,536    |                                   | $      | 53,633     |   |
| Income taxes                                                                                                                                                                    |   | $      | 672,445   |                                   | $      | 1,148,298  |   |

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

5

----

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

**NOTES TO            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **NOTE                        1.** | **CONDENSED                        CONSOLIDATED FINANCIAL STATEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | In                        the opinion of management, the accompanying condensed consolidated                        financial statements contain all adjustments (consisting of only normal                        recurring items) necessary to present fairly the financial position as of                        June 30, 2007 and December 31, 2006 and the results of operation and                        changes in cash flows for the three and six months ended June 30, 2007 and                        2006.                                                                                                                                                                                                                                                                |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | Certain information and                        footnote disclosures normally included in annual financial statements                        prepared in accordance with accounting principles generally accepted in the                        United States of America have been condensed or omitted. It is suggested                        that these financial statements be read in conjunction with the financial                        statements and notes thereto included in the Company’s December 31,                        2006 financial statements. The results of operations for the three and six                        month period ended June 30, 2007 are not necessarily indicative of the                        operating results of the entire year. |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | Certain                        reclassifications have been made to the 2006 financial statements to                        conform to the 2007 presentations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **NOTE                        2.** | **NONCASH INVESTING                        ACTIVITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | Noncash investing                        activities included $61,369 and $14,420 during the six months ended June                        30, 2007 and June 30, 2006, respectively, relating to plant and equipment                        additions under construction during the period, which are reflected in                        accounts payable at June 30, 2007 and June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                           |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **NOTE                        3.** | **OPERATING                        SEGMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | The                        Company organizes its business into three reportable segments: local                        exchange carrier (LEC) services, broadcast services and Internet service                        provider (ISP) services. The LEC services segment provides telephone, data                        services and other services to customers in local exchanges. The broadcast                        services segment provides cable television services to customers in Iowa                        and Nebraska. The ISP services segment provides Internet access to                        customers within the local exchanges and the surrounding areas.                                                                                                   |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | The                        Company’s reportable business segments are strategic business units                        that offer different products and services. Each reportable segment is                        managed separately primarily because of different products, services and                        regulatory environments. LEC segments have been aggregated because of their                        similar characteristics.                                                                                                                                                                                                                                                                                                                                  |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                               | The                        segment’s accounting policies are the same as those described in the                        summary of significant accounting policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

6

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

**NOTES TO            CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

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

|   |                                                                         |   |                                                                 |      |      |   |                                                                    |   |   |     |   |   |
|--------|------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|----------|--------|--------|
|   | Six                        Months Ended                        June 30, 2007 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |     |
|   |                                                                              |   |                                                                      |      |           |   |                                                                         |   |        |     |
|   | Revenues                                                                     |   | $                                                                    | 4,194,774 |      | $      | 356,986                                                                 |   | $      | 320,225  |   | $      | 4,871,985 |   |
|   | Segment profit                        (loss)                                 |   |                                                                 | 1,443,955 |      |   | (103,198                                                                | )      |   | (269,888 | )      |   | 1,070,869 |   |

|   |                                                                         |   |                                                                 |      |      |   |                                                                    |   |   |     |   |   |      |   |
|--------|------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|----------|--------|--------|-----------|--------|
|   | Six                        Months Ended                        June 30, 2006 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |     |
|   |                                                                              |   |                                                                      |      |           |   |                                                                         |   |        |     |
|   | Revenues                                                                     |   | $                                                                    | 3,336,358 |      | $      | 368,650                                                                 |   | $      | 317,641  |   | $      | 4,022,649 |   |
|   | Segment profit                        (loss)                                 |   |                                                                 | 2,044,709 |      |   | (109,720                                                                | )      |   | (253,536 | )      |   | 1,681,453 |   |

|   |                                                                           |   |                                                                 |      |      |   |                                                                    |   |   |    |   |   |      |   |
|--------|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|---------|--------|--------|-----------|--------|
|   | Three                        Months Ended                        June 30, 2007 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |    |
|   |                                                                                |   |                                                                      |      |           |   |                                                                         |   |        |    |
|   | Revenues                                                                       |   | $                                                                    | 2,132,827 |      | $      | 178,713                                                                 |   | $      | 164,390 |   | $      | 2,475,930 |   |
|   | Segment profit                        (loss)                                   |   |                                                                 | 629,253   |      |   | (50,077                                                                 | )      |   | (97,153 | )      |   | 482,023   |   |

|   |                                                                           |   |                                                                 |      |      |   |                                                                    |   |   |     |   |   |      |   |
|--------|--------------------------------------------------------------------------------|--------|----------------------------------------------------------------------|-----------|-----------|--------|-------------------------------------------------------------------------|--------|--------|----------|--------|--------|-----------|--------|
|   | Three                        Months Ended                        June 30, 2006 |   | Local                        Exchange                        Carrier |      | Broadcast |   | Internet                        Service                        Provider |   | Total  |     |
|   |                                                                                |   |                                                                      |      |           |   |                                                                         |   |        |     |
|   | Revenues                                                                       |   | $                                                                    | 1,667,556 |      | $      | 182,649                                                                 |   | $      | 157,643  |   | $      | 2,007,848 |   |
|   | Segment profit                        (loss)                                   |   |                                                                 | 1,344,020 |      |   | (67,896                                                                 | )      |   | (125,260 | )      |   | 1,150,864 |   |

|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **NOTE                        4.** | **NET INCOME PER                        COMMON SHARE**                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                               | Net                        income per common share for June 30, 2007 and 2006 was computed by dividing                        the weighted average number of shares of common stock outstanding into the                        net income. The weighted average number of shares of common stock                        outstanding for the three and six months ended June 30, 2007 and 2006 were                        31,016 and 31,023 and 31,016 and 31,023, respectively. |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **NOTE                        5.** | **STOCK VALUE                        ADJUSTMENT**                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                               | During April 2007, the                        board of directors authorized a $63 increase in the stated value of each                        share of common stock from $394 to $457. There were 31,016 shares                        outstanding at the time of the value adjustment, which reduced retained                        earnings by $1,954,008.                                                                                                                     |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                               | During July 2006, the                        board of directors authorized a $37 increase in the stated value of each                        share of common stock from $357 to $394. There were 31,023 shares                        outstanding at the time of the value adjustment, which reduced retained                        earnings by $1,147,851.                                                                                                                      |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| **NOTE                        6.** | **PRIOR PERIOD                        RESTATEMENTS**                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                               | The                        Company restated its income from equity investments for the three and six                        months ended June 30, 2006. The Company determined to restate its income                        from equity                                                                                                                                                                                                                                           |

7

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | investments from the                        accepted method of a twelve-month period ending September 30th to a better                        method of a twelve-month period ending December 31st, when calendar year or                        quarterly financial statements became available for each of the periods                        ending 2005 and 2006 for these investments. The Company determined to make                        the change in accounting method to have uniformity in its reporting period                        for all of the financial information presented in its financial                        statements.                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | The                        change in accounting method for the three and six months ended June 30,                        2006 resulted in a $32,065 decrease and a $25,695 increase in income from                        equity investments, respectively. After an adjustment to income taxes, net                        income for the three and six months ended June 30, 2006, decreased $18,918,                        or $0.61 per share, and increased $15,160, or $0.49 per share,                        respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Breda’s Form                        10-QSB for the period ended March 31, 2006 was amended to restate                        Breda’s income from equity investments derived from an investment in                        a cellular partnership, RSA #8. Two of Breda’s subsidiaries each own                        an approximate 5.84% interest in RSA #8. Twelve-months income figures for                        RSA #8, instead of three-month income figures, were used to compute                        Breda’s pro-rata share of the income generated by RSA #8 for the                        three-month period ended March 31, 2006, resulting in a $378,228                        overstatement of income from equity investments in Breda’s Form                        10-QSB for the period ended March 31, 2006. After adjustment for that                        overstatement, net of income taxes, Breda’s amended net income as of                        March 31, 2006 decreased $223,154, or $7.19/share. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Breda’s year to                        date income from equity investments for the six-months ended June 30, 2006                        consequently decreased by the same $378,228. After adjustment for that                        overstatement, net of income taxes, Breda’s amended year to date net                        income as of June 30, 2006 decreased $223,154 from $1,889,447 to                        $1,666,293, and net income per common share decreased $7.19 from                        $60.90/share to $53.71/share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |      [THE REST OF THIS PAGE IS INTENTIONALLY LEFT                        BLANK]                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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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, 2006 constitute cautionary                        statements identifying factors with respect to such forward-looking                        statements, including certain risks and uncertainties, that could cause                        actual results to vary materially from the future results indicated in such                        forward-looking statements. Other factors could also cause actual results                        to vary materially from the future results indicated in such                        forward-looking statements. |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Overview**                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *General*                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | Breda is a small                        provider of telecommunication services to residential and business                        customers in the west central region and the southwest region of rural                        Iowa. Breda and its subsidiaries, Prairie Telephone Co., Inc., Westside                        Independent Telephone Company, Tele-Services, Ltd. and BTC, Inc., all                        conduct business under the names “W.I.N.” or “Western                        Iowa Networks”.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | Breda and its                        subsidiaries operate seven telephone exchanges as the incumbent or                        “historical” local exchange carrier (ILEC). In October 2003,                        BTC, Inc. began 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                        Segments* |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | Breda organizes its                        business into three reportable segments. Those segments are local exchange                        carrier services, broadcast services, and Internet service provider                        services. Breda has organized its business into those segments because the                        segments are each strategic business units that are managed separately and                        that offer different products and services in different regulatory                        environments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | **Local Exchange                        Carrier Services.** This segment provides telephone, data services,                        and other services to customers in the local exchanges served by Breda and                        its telephone subsidiaries. Breda also provides long distance services to                        its customers in all of its ILEC and CLEC exchanges and surrounding                        areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | **Broadcast                        Services.** This segment provides cable television services to                        customers in a total of seventeen towns in Iowa and one town in                        Nebraska.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | **Internet                        Services.** This segment provides Internet access to customers in the                        local exchanges and the surrounding areas and in the Carroll, Iowa market                        area through BTC, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                        | The                        segments in which Breda and its subsidiaries operate are as                        follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

9

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|   |                                                 |                                                                  |
|--------|------------------------------------------------------|-----------------------------------------------------------------------|
|   | **Local Exchange                        Carrier**    |
|   |                                                 | Breda                                                                 |
|   |                                                 | Prairie Telephone Co.,                        Inc.                    |
|   |                                                 | Westside Independent                        Telephone Company         |
|   |                                                 | BTC,                        Inc. (competitive local exchange carrier) |
|   |                                                 |                                                                  |
|   | **Broadcast                        Services**        |
|   |                                                 | Tele-Services,                        Ltd.                            |
|   |                                                 |                                                                  |
|   | **Internet Service                        Provider** |
|   |                                                 | BTC,                        Inc.                                      |

*Factors            Affecting Breda’s Operating Performance*

|   |                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Breda believes that a                        number of industry and company-specific factors are affecting and will                        continue to affect Breda’s results of operations. These factors                        include the following: |
|   |                                                                                                                                                                                                                                                           |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|        | **•**                                                                                                                                                                                                                                                     |   | The                        effect on Breda’s revenues of declining numbers of access lines                        caused by 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 TV or satellite TV) for a                                                                                                                                                                                                                                                                                                     |

10

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|   |       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |   | competitive price.                        Breda now competes with the “triple play” bundled services                        offerings from both Qwest and Mediacom.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |       |   | Breda has implemented                        new 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 new switching                        capabilities 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 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, has                        both decreased the “minutes of use” on Breda’s networks,                        which results in less access revenue, and caused the industry access                        payment structure to be renegotiated by the new technology providers and                        wireless providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |       |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |       |   | Breda 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 since January 2006 has been able to receive payments for                        consolidating and switching its own traffic. Breda also finalized                        agreements in July 2006 to consolidate and switch the traffic of two                        surrounding telcos. During third quarter 2006, Breda partnered with vendors                        that allowed Breda to offer conference-bridging services over its networks.                        Breda expanded the conference-bridging services with a second bridge in                        March 2007. 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. |

11

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**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, June 30, 2006, and June 30, 2007: |

|   |                                                   |   |                                                                          |      |                                                                                                                                   |   |      |   |                                       |   |   |   |   |   |
|--------|--------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|--------------------------------------------|--------|--------|--------|--------|--------|
|   |                                                   |   | **Three Months                        Ended                        June 30,** |      | **%                        of Total Revenues                        for the Three Months Ended                        Ended June 30,** |   |
|   |                                                   |   |                                                                               |      |                                                                                                                                        |   |
|   |                                                   |   | **2007**                                                                      |      | **2006                        (Restated)**                                                                                             |   | **2007**  |   | **2006                        (Restated)** |   |
|   |                                                   |   |                                                                               |      |                                                                                                                                        |   |
|   |                                                   |   |                                                                          |      |                                                                                                                                   |   |      |   |                                       |   |
|   | OPERATING                        REVENUES              |   |                                                                          |      |                                                                                                                                   |   |      |   |                                       |   |   |   |   |   |
|   | Local exchange                        carrier services |   | $                                                                             | 2,132,827 |                                                                                                                                   | $      | 1,667,557 |   |                                       | 86.1   | %      |   | 83.1   | %      |
|   | Broadcast                        services              |   |                                                                          | 178,713   |                                                                                                                                   |   | 182,649   |   |                                       | 7.2    | %      |   | 9.1    | %      |
|   | Internet                        services               |   |                                                                          | 164,390   |                                                                                                                                   |   | 157,642   |   |                                       | 6.7    | %      |   | 7.8    | %      |
|   |                                                   |   |                                                                               |           |                                                                                                                                   |        |           |   |                                            |        |   |        |        |   |
|   |                                                   |   | $                                                                             | 2,475,930 |                                                                                                                                   | $      | 2,007,848 |   |                                       | 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 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

12

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|   |   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |   | 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.      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **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. |

13

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|   |                                                                                                                                                                                                                                                       |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | **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                        June 30,** |   | **Six Months Ended                        June 30,** |   |
|   |                                                       |   |                                                                               |   |                                                      |   |
|   |                                                       |   | **2007**                                                                      |   | **2006                        (Restated)**           |   | **2007** |   | **2006                        (Restated)** |   |
|   |                                                       |   |                                                                               |   |                                                      |   |          |   |                                            |   |
|   |
|   | Operating                        revenues                  |   |                                                                          | 100    | %                                                    |   | 100      | %      |                                       | 100    | %      |   | 100    | %      |
|   | Cost of                        services                    |   |                                                                          | 59     | %                                                    |   | 47       | %      |                                       | 54     | %      |   | 45     | %      |
|   | Depreciation and                        amortization       |   |                                                                          | 10     | %                                                    |   | 12       | %      |                                       | 10     | %      |   | 12     | %      |
|   | Selling, general and                        administrative |   |                                                                          | 21     | %                                                    |   | 29       | %      |                                       | 23     | %      |   | 28     | %      |
|   |                                                       |   |                                                                               |        |                                                 |        |          |   |                                            |        |   |        |        |   |
|   |
|   | Operating                        income                    |   |                                                                          | 10     | %                                                    |   | 12       | %      |                                       | 13     | %      |   | 15     | %      |
|   | Other income                        (expenses)             |   |                                                                          | 20     | %                                                    |   | 77       | %      |                                       | 21     | %      |   | 49     | %      |
|   | Income                        taxes                        |   |                                                                          | 11     | %                                                    |   | 32       | %      |                                       | 12     | %      |   | 22     | %      |
|   |                                                       |   |                                                                               |        |                                                 |        |          |   |                                            |        |   |        |        |   |
|   |
|   | Net                        income                          |   |                                                                          | 19     | %                                                    |   | 57       | %      |                                       | 22     | %      |   | 42     | %      |
|   |                                                       |   |                                                                               |        |                                                 |        |          |   |                                            |        |   |        |        |   |

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

|   |                                                   |   |                                                                          |      |               |   |       |   |        |    |   |   |   |   |
|--------|--------------------------------------------------------|--------|-------------------------------------------------------------------------------|-----------|--------------------|--------|------------|--------|-------------|---------|--------|--------|--------|--------|
|   |                                                   |   | **Three Months                        Ended                        June 30,** |      | **Change**         |   |
|   |                                                   |   |                                                                               |      |                    |   |
|   |                                                   |   | **2007**                                                                      |      | **2006(Restated)** |   | **Amount** |   | **Percent** |    |
|   |                                                   |   |                                                                               |      |                    |   |            |   |             |    |
|   | OPERATING                        REVENUES              |   |                                                                          |      |               |   |       |   |        |    |   |   |   |   |
|   | Local Exchange                        Carrier          |   |                                                                          |      |               |   |       |   |        |    |   |   |   |   |
|   | Local network                        services          |   | $                                                                             | 228,311   |               | $      | 222,930    |   | $           | 5,381   |   |   | 2.4    | %      |
|   | Network access                        services         |   |                                                                          | 1,414,652 |               |   | 1,001,832  |   |        | 412,820 |   |   | 41.2   | %      |
|   | Long distance                        services          |   |                                                                          | 61,567    |               |   | 73,204     |   |        | (11,637 | )      |   | -15.9  | %      |
|   | Cellular                        services               |   |                                                                          | 382,040   |               |   | 341,848    |   |        | 40,192  |   |   | 11.8   | %      |
|   | Billing and collection                        services |   |                                                                          | 3,198     |               |   | 4,614      |   |        | (1,416  | )      |   | -30.7  | %      |
|   | Miscellaneous                                          |   |                                                                          | 43,059    |               |   | 23,129     |   |        | 19,930  |   |   | 86.2   | %      |
|   |                                                   |   |                                                                               |           |               |        |            |   |             |         |   |        |        |   |
|   |                                                   |   | $                                                                             | 2,132,827 |               | $      | 1,667,557  |   | $           | 465,270 |   |   | 27.9   | %      |
|   |                                                   |   |                                                                               |           |               |        |            |   |             |         |   |        |        |   |
|   |
|   | Broadcast                        Services              |   | $                                                                             | 178,713   |               | $      | 182,649    |   | $           | (3,936  | )      |   | -2.2   | %      |
|   |
|   | Internet                        services               |   | $                                                                             | 164,390   |               | $      | 157,642    |   | $           | 6,748   |   |   | 4.3    | %      |
|   |
|   |                                                   |   |                                                                               |           |               |        |            |   |             |         |   |        |        |   |
|   |                                                   |   | $                                                                             | 2,475,930 |               | $      | 2,007,848  |   | $           | 468,082 |   |   | 23.3   | %      |
|   |                                                   |   |                                                                               |           |               |        |            |   |             |         |   |        |        |   |

|   |                                                                                                                                                                                                                                                       |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There was an increase                        in total operating revenues for the three-month period ended June 30, 2007,                        when compared to the three-month period ended June 30, 2006, of $468,082,                        or 23.3%. |

14

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Local Exchange                        Carrier Services - $465,270*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Local exchange carrier                        services revenues accounted for 86.1% of all operating revenues in the                        three-month period ended June 30, 2007. There was a $465,270, or 27.9%,                        increase in local exchange carrier services revenues for the three-month                        period ended June 30, 2007, when compared to the three-month period ended                        June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Local network services                        revenues increased $5,381, or 2.4%, for the three months ended June 30,                        2007, as compared to the same period in 2006, primarily because of the                        increased number of customers taking phone service from BTC, Inc. in                        Carroll, Iowa. Breda’s long distance services revenue decreased                        $11,637, or 15.9%, for the three months ended June 30, 2007, as compared to                        the three-month period ended June 30, 2006. Although Breda has seen an                        increase in its long distance customer base when comparing the two periods,                        the increase is offset by a decrease in the average minutes used by each                        customer on a monthly basis, as well as a decrease in the price that Breda                        is charging its customers for Breda’s long distance service                        offerings. The rate decreases for bundled service offerings began on July                        1, 2006. Breda has received a good response to its package offerings that                        include local and long distance service from both residential and business                        customers.                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Breda’s                        underlying long distance carrier experienced some billing problems in                        the recording and transmitting of call detail records which prohibited                        Breda’s billing of its end users for some of their long distance                        calls. Breda has been working with its carrier to resolve the problem                        and to recover information on unbilled calls since the inception of                        services from the carrier in the last quarter 2006 and the first                        quarter 2007. All available unbilled records were billed to the end users                        subsequent to June 30, 2007, when billing was processed for August 1, 2007.                        Breda also experienced billing software problems with its calling plans,                        which caused minutes to not be billed to customers in some of its package                        LD plans. Breda is also working with its billing software vendor to                        recapture and bill these minutes after March 2007.  Breda does not                        believe that these adjustments will be material to its financial                        statements.                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Network access services                        increased $412,820, or 41.2%, for the three-month period ended June 30,                        2007, when compared to the three-month period ended June 30, 2006. This                        increase mainly resulted from increased terminating access revenues                        generated from traffic delivered to Breda’s conference bridges in                        Carroll, Iowa. Breda has contracted with conference bridge vendors for the                        transport of long distance calls over Breda’s networks. Breda began                        billing for these services in September 2006, and began billing for                        additional conference bridge services in March 2007. Breda’s access                        revenue has also increased because, as noted previously, BTC, Inc.                        installed a new switch in its Carroll, Iowa location, and is now able to                        receive some tandem switching payments for consolidating and switching its                        traffic from six of Breda’s own seven telephone exchanges. There is                        no corresponding tandem switching revenue for the three-month period ended                        June 30, 2006. There was also some increase in Breda’s access revenue                        because of an increased customer base taking Breda’s long distance                        services. These customers generate access revenue when they use                        Breda’s networks to make long distance calls. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Cellular services                        increased $40,192, or 11.8%, for the three-month period ended June 30,                        2007, when compared to the three-month period ended June 30, 2006. While                        Breda’s cellular customer count was nearly identical during the                        three-month periods ended June 30, 2007, and June 30, 2006, its customer                        equipment sales did increase during the three-month period ended June 30,                        2007, when compared to the three-month period ended June 30, 2006. This                        increase was the cause of the increased cellular revenue during the                        three-month period ended June 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

15

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Combined miscellaneous                        and billing/collection revenues increased $18,514, or 66.7%, for the                        three-month period ended June 30, 2007, when compared to the three-month                        period ended June 30, 2006. The main components of miscellaneous revenue                        were the receipt of rent from other telephone companies or industry                        carriers for the lease of capacity over fiber optic rings owned by Breda,                        or owned jointly with neighboring telephone companies, and the receipt of                        switching services revenue, for which there was no corresponding revenue                        during the three month period ended June 30, 2006. This increase mainly                        represents changes in fiber optic rental contracts between the two                        three-month periods and the revenue generated from the provision of tandem                        switching services to neighboring telephone companies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Broadcast                        Services – ($3,936)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Broadcast services                        decreased $3,936, or 2.2%, for the three-month period ended June 30, 2007,                        when compared to the three-month period ended June 30, 2006. Tele-Services                        continues to lose customers and to face stiff competition from satellite                        providers who are able to provide extensive channel line-up packages, and                        who are 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.                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Internet Services                        – $6,748*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Internet services                        revenue increased $6,748, or 24.3%, for the three-month period ended June                        30, 2007, when compared to the three-month period ended June 30, 2006.                        Breda has seen an increase in its high-speed Internet customer base when                        comparing the two periods, which has offset the decrease in Breda’s                        dialup Internet customer base. The decrease in dialup Internet customers is                        the result of the intense competition by multiple suppliers in the Carroll,                        Iowa market area, and the migration of customers to high-speed Internet                        because of an overall decrease in the price for high-speed Internet. Breda                        is gaining high-speed Internet customers in the Carroll, Iowa area because                        BTC, Inc. is offering bundled services packages that include Internet                        services, as well as local telephone and other communication services.                        Effective May 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 June 30, 2007. Also, with the advent of newer technologies                        that expand the range for high-speed Internet services from Breda’s                        central office, Breda began offering new longer-reach, high-speed Internet                        services in its remaining five outlying ILEC communities that previously                        were not able to receive those services from Breda. These service offerings                        were begun during the fourth quarter 2006, and Breda has had a very                        favorable response to these new technology Internet offerings. This                        increase in customer base is, however, offset by a decrease in the price                        that customers are charged for Breda’s high-speed Internet                        offerings. |

16

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

|   |                                                             |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |    |   |   |   |   |   |
|--------|------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------|--------|------------|--------|-------------|-----------|--------|--------|--------|--------|---------|--------|--------|--------|--------|--------|
|   |                                                             |   | **Three Months                        Ended                        June 30,** |   | **Change**                                 |   |
|   |                                                             |   |                                                                               |   |                                            |   |
|   |                                                             |   | **2007**                                                                      |   | **2006                        (Restated)** |   | **Amount** |   | **Percent** |      |
|   |                                                             |   |                                                                               |   |                                            |   |            |   |             |      |
|   | OPERATING                        EXPENSES                        |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |
|   | Cost of                        services                          |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |
|   | Plant specific                        operations                 |   |                                                                          | $      | 780,363                                    |   |       |   | $           | 250,799   |   |   |   | $      | 529,564 |   |   |   | 211.2  | %      |
|   | Plant nonspecific                        operations              |   |                                                                          |   | 88,982                                     |   |       |   |        | 79,321    |   |   |   |   | 9,661   |   |   |   | 12.2   | %      |
|   | Cost of long                        distance                     |   |                                                                          |   | 42,011                                     |   |       |   |        | 48,252    |   |   |   |   | (6,241  | )      |   |   | -12.9  | %      |
|   | Cost of                        cellular                          |   |                                                                          |   | 298,975                                    |   |       |   |        | 309,856   |   |   |   |   | (10,881 | )      |   |   | -3.5   | %      |
|   | Cost of                        internet                          |   |                                                                          |   | 139,359                                    |   |       |   |        | 162,437   |   |   |   |   | (23,078 | )      |   |   | -14.2  | %      |
|   | Cost of                        programming                       |   |                                                                          |   | 109,124                                    |   |       |   |        | 89,945    |   |   |   |   | 19,179  |   |   |   | 21.3   | %      |
|   |                                                             |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |         |   |   |        |        |   |
|   | Total cost of                        services                    |   |                                                                          | $      | 1,458,814                                  |   |       |   | $           | 940,610   |   |   |   | $      | 518,204 |   |   |   | 55.1   | %      |
|   |                                                             |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |         |   |   |        |        |   |
|   |
|   | Depreciation and                        amortization             |   |                                                                          | $      | 251,984                                    |   |       |   | $           | 245,928   |   |   |   | $      | 6,056   |   |   |   | 2.5    | %      |
|   |                                                             |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |    |   |   |   |   |   |
|   | Selling, general and                        administration       |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |    |   |   |   |   |   |
|   | Customer                        operations                       |   |                                                                          | $      | 199,750                                    |   |       |   | $           | 179,730   |   |   |   | $      | 20,020  |   |   |   | 11.1   | %      |
|   | Corporate                        operations                      |   |                                                                          |   | 279,705                                    |   |       |   |        | 357,813   |   |   |   |   | (78,108 | )      |   |   | -21.8  | %      |
|   | General                        taxes                             |   |                                                                          |   | 45,118                                     |   |       |   |        | 51,213    |   |   |   |   | (6,095  | )      |   |   | -11.9  | %      |
|   |                                                             |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |         |   |   |        |        |   |
|   | Total selling, general                        and administration |   |                                                                          | $      | 524,573                                    |   |       |   | $           | 588,756   |   |   |   | $      | (64,183 | )      |   |   | -10.9  | %      |
|   |                                                             |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |         |   |   |        |        |   |
|   |
|   |                                                             |   |                                                                          | $      | 2,235,371                                  |   |       |   | $           | 1,775,294 |   |   |   | $      | 460,077 |   |   |   | 25.9   | %      |
|   |                                                             |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |         |   |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Cost of Services                        - $518,204*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Cost                        of services increased $518,204, or 55.1%, for the three-month period ended                        June 30, 2007, when compared to the three-month period ended June 30, 2006.                        $526,080 of the increased costs was incurred for the provisioning of the                        conference bridge services, which began in July 2006, and for which there                        is no corresponding cost during the three-month period ended June 30, 2006.                        Some additional increased costs arose from labor rate increases implemented                        in 2007 when comparing the two three-month periods. There was a $6,241, or                        12.9%, decrease in long distance provision costs, a $10,881, or 3.5%,                        decrease in cellular service provisioning costs and a $23,078, 14.2%,                        decrease in Internet provisioning costs when comparing the three-month                        period ended June 30, 2007 to the three-month period ended June 30, 2006.                        Breda also incurred additional costs for repair and maintenance                        expenditures for its central offices, equipment and buildings and grounds                        during the three-month period ended June 30, 2007, when compared to the                        three-month period ended June 30, 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Although a greater                        number of customers continued to use Breda’s long distance services,                        their average minutes of use per month are decreasing. The decreased                        minutes of use, along with Breda’s switch to a new underlying carrier                        on August 20, 2006, have contributed to a decrease in Breda’s overall                        cost to provide long distance service. Breda had a 12.3% increase in                        customers subscribing to Breda’s long distance services for the                        three-month period ended June 30, 2007, when compared to the three-month                        period ended June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | While Tele-Services                        overall customer growth for cable TV services continued to decline, its                        programming costs increased $19,179, or 21.3%, for the three-month period                        ended June 30, 2007, when compared to the three-month period ended June 30,                        2006. Even though Tele-                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

17

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 – $6,056*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Depreciation and                        amortization expense increased $6,056, or 2.5%, for the three-month period                        ended June 30, 2007, when compared to the three-month period ended June 30,                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Selling, General                        and Administration –($64,183)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Selling, general and                        administration expenses decreased $64,183, or 10.9%, for the three-month                        period ended June 30, 2007, when compared to the three-month period ended                        June 30, 2006. This decrease is mainly attributable to a decrease in                        management and consultant fees which were no longer needed after the hiring                        of a CEO and a COO on July 1, 2006. There was also a decrease in consulting                        and legal fees for the three-month period ended June 30, 2007. There were                        increased outside consulting services to analyze and pursue new business                        opportunities in the industry during the three-month period ended June 30,                        2007, when compared to the three-month period ended June 30,                        2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | OTHER INCOME                        (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The                        table below sets forth the components of other income (expense) for the                        three-month period ended June 30, 2007, compared to the same period in                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

|   |                                                         |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |       |   |   |   |   |   |
|--------|--------------------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|--------------------------------------------|--------|------------|--------|-------------|-----------|--------|--------|--------|--------|------------|--------|--------|--------|--------|--------|
|   |                                                         |   | **Three Months                        Ended                        June 30,** |   | **Change**                                 |   |
|   |                                                         |   |                                                                               |   |                                            |   |
|   |                                                         |   | **2007**                                                                      |   | **2006                        (Restated)** |   | **Amount** |   | **Percent** |      |
|   |                                                         |   |                                                                               |   |                                            |   |            |   |             |      |
|   | OTHER INCOME                        (EXPENSE)                |   |                                                                          |   |                                       |   |       |   |        |      |   |   |   |   |
|   | Interest and dividend                        income          |   |                                                                          | $      | 139,525                                    |   |       |   | $           | 75,736    |   |   |   | $      | 63,789     |   |   |   | 84.2   | %      |
|   | Gain or (Loss) on sale                        of investments |   |                                                                          |   | (16,813                                    | )      |       |   |        | 1,163,437 |   |   |   |   | (1,180,250 | )      |   |   | -101.4 | %      |
|   | Gain or (Loss) on                        disposal of assets  |   |                                                                          |   | 8,163                                      |   |       |   |        | (21,714   | )      |   |   |   | 29,877     |   |   |   | -137.6 | %      |
|   | Interest                        expense                      |   |                                                                          |   | (23,375                                    | )      |       |   |        | (26,448   | )      |   |   |   | 3,073      |   |   |   | -11.6  | %      |
|   | Income from equity                        investments        |   |                                                                          |   | 397,297                                    |   |       |   |        | 361,154   |   |   |   |   | 36,143     |   |   |   | 10.0   | %      |
|   | Other, net                                                   |   |                                                                          |   | (3,093                                     | )      |       |   |        | 3,650     |   |   |   |   | (6,743     | )      |   |   | -184.7 | %      |
|   |                                                         |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |            |   |   |        |        |   |
|   |                                                         |   |                                                                          | $      | 501,704                                    |   |       |   | $           | 1,555,815 |   |   |   | $      | (1,054,111 | )      |   |   | -67.8  | %      |
|   |                                                         |   |                                                                          |        |                                            |   |       |   |             |           |   |   |   |        |            |   |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest and                        Dividend Income*. Interest and dividend income increased $63,789, or                        84.2%, for the three-month period ended June 30, 2007, when compared to the                        three-month period ended June 30, 2006. This increase is attributable to                        increased investments and rates earned on investments in both temporary                        investments and marketable securities on which Breda generates interest                        income for the three-month period ended June 30, 2007, when compared to the                        three-month period ended June 30, 2006. .                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Loss on sale of                        investments*. The $16,813 loss on sale of investments for the                        three-month period ended June 30, 2007, represents the loss on the                        redemption of temporary investments, for which there is no corresponding                        entry in the same three-month period in 2006. During the three-month period                        ended June 30, 2006, Breda had over a million dollar gain from the                        redemption of its Rural Telephone Bank stock in April 2006, and for which                        there is no corresponding entry for the three-month period ended June 30,                        2007. |

18

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Gain on disposal                        of assets.* The $8,163 gain on disposal of assets for the three-month                        period ended June 30, 2007, represents the gain from the sale or trade-in                        of service vehicles, for which there is no corresponding entry in the same                        three-month period in 2006. The $21,714 loss on disposal of assets for the                        three-month period ended June 30, 2006 represents the loss from the sale of                        a building at 526 N. Carroll Street, in Carroll, Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Interest                        Expense.* The $3,073, or 11.6%, decrease in interest expense for the                        three-month period ended June 30, 2007, when compared to the three-month                        period ended June 30, 2006, is the result of the reduction of the Rural                        Telephone Finance Cooperative loan balance on which interest is calculated                        because of the payment of the scheduled principal payments on the loan.                        There has been no change in interest rate and no additional loan amounts                        have been borrowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Income from Equity                        Investments.* Income from equity investments increased $36,143, or                        10.0%, for the three-month period ended June 30, 2007, when compared to the                        three-month period ended June 30, 2006. The equity investments income shown                        on Breda’s financial statements is Breda’s pro-rata share of                        the net income or net loss of each equity investment, based on                        Breda’s percentage of ownership in each equity investment. The                        increase in equity investments income reported on Breda’s income                        statement for the three-month period ended June 30, 2007 is a reflection of                        the net increases and decreases in the net income of Breda’s equity                        investments. Most of Breda’s equity investments are in cellular                        partnerships. Some of these cellular investments now receive universal                        service funding which has increased their overall operating revenue. An                        additional source of income from equity investments arises from                        Breda’s ownership interest in Alpine Communications, L.C., an                        operating telephone company in northeastern Iowa. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Other, Net.* The                        $6,743 decrease in other net income for the three-month period ended June                        30, 2007, when compared to the three-month period ended June 30, 2006, is                        mainly attributable to increased partnership-related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Income Tax                        Expense.* Income taxes decreased $377,265, or 59.2%, for the three-month                        period ended June 30, 2007, when compared to the same period in 2006. The                        decrease is attributable to there being no comparable sales or redemptions                        of investments during the three-month period ended June 30, 2007, to match                        the redemption of the Rural Telephone Bank stock that occurred during the                        three-month period ended June 30, 2006. The effective tax rate for the                        three-month period ended June 30, 2007 is 35.1%, compared to a 35.6% tax                        rate for the same three-month period in 2006. The effective tax rate                        differs from the U.S. statutory rate due to state income taxes and the                        proportion of income from investments which are exempt from income                        tax.                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Net Income.* Net                        income decreased $668,841, or 58.1%, for the three-month period ended June                        30, 2007, when compared to the same period in 2006. While operating income                        was almost identical during the two three-month periods, there was no                        material gain on the sale of investments during the three-month period                        ended June 30, 2007, to correspond to the $1,170,211 gain on the redemption                        of Rural Telephone Bank stock during the three-month period ended June 30,                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

19

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

|                                                   |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
|--------------------------------------------------------|--------|------------------------------------------------------|-----------|--------------------------------------------|---------|------------|--------|-------------|---------|--------|--------|--------|--------|
|                                                   |   | **Six Months Ended                        June 30,** |      | **Change**                                 |    |
|                                                   |   |                                                      |      |                                            |    |
|                                                   |   | **2007**                                             |      | **2006                        (Restated)** |    | **Amount** |   | **Percent** |    |
|                                                   |   |                                                      |      |                                            |    |            |   |             |    |
| OPERATING                        REVENUES              |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Local Exchange                        Carrier          |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Local network                        services          |   | $                                                    | 457,350   |                                       | $       | 441,762    |   | $           | 15,588  |   |   | 3.5    | %      |
| Network access                        services         |   |                                                 | 2,747,369 |                                       |    | 1,993,877  |   |        | 753,492 |   |   | 37.8   | %      |
| Long distance                        services          |   |                                                 | 129,734   |                                       |    | 181,642    |   |        | (51,908 | )      |   | -28.6  | %      |
| Cellular                        services               |   |                                                 | 754,498   |                                       |    | 674,626    |   |        | 79,872  |   |   | 11.8   | %      |
| Billing and collection                        services |   |                                                 | 6,444     |                                       |    | 7,758      |   |        | (1,314  | )      |   | -16.9  | %      |
| Miscellaneous                                          |   |                                                 | 99,379    |                                       |    | 36,693     |   |        | 62,686  |   |   | 170.8  | %      |
|                                                   |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
|                                                   |   | $                                               | 4,194,774 |                                       | $  | 3,336,358  |   | $      | 858,416 |   |   | 25.7   | %      |
|                                                   |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
|                                                   |
| Broadcast                        Services              |   | $                                                    | 356,986   |                                       | $       | 368,650    |   | $           | (11,664 | )      |   | -3.2   | %      |
|                                                   |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Internet                        services               |   | $                                                    | 320,225   |                                       | $       | 317,641    |   | $           | 2,584   |   |   | 0.8    | %      |
|                                                   |
|                                                   |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
|                                                   |   | $                                                    | 4,871,985 |                                       | $       | 4,022,649  |   | $           | 849,336 |   |   | 21.1   | %      |
|                                                   |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | There was an increase                        in total operating revenues for the six-month period ended June 30, 2007,                        when compared to the six-month period ended June 30, 2006, of $849,336, or                        21.1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | *Local Exchange                        Carrier Services - $858,416*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Local exchange carrier                        services revenues accounted for 86.1% of all operating revenues in the                        six-month period ended June 30, 2007. There was a $858,416, or 25.7%,                        increase in local exchange carrier services revenues for the six-month                        period ended June 30, 2007, when compared to the six-month period ended                        June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Local network services                        revenues increased $15,588, or 3.5%, for the six months ended June 30,                        2007, as compared to the same period in 2006, primarily because of the                        increased number of customers taking phone service from BTC, Inc. in                        Carroll, Iowa. Breda’s long distance services revenue decreased                        $51,908, or 28.6%, for the six months ended June 30, 2007, as compared to                        the six-month period ended June 30, 2006. Although Breda has seen an                        increase in its long distance customer base when comparing the two periods,                        the increase is offset by a decrease in the average minutes used by each                        customer on a monthly basis, as well as a decrease in the price that Breda                        is charging its customers for Breda’s long distance service                        offerings. The rate decreases for bundled service offerings began on July                        1, 2006. Breda has received a good response to its package offerings that                        include local and long distance service from both residential and business                        customers. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | Breda’s                        underlying long distance carrier experienced some billing problems in                        the recording and transmitting of call detail records which prohibited                        Breda’s billing of its end users for some of their long distance                        calls. Breda has been working with its carrier to resolve the problem                        and to recover information on unbilled calls since the inception of                        services from the carrier in the last quarter 2006 and the first                        quarter 2007. All available unbilled records were billed to the end users                        subsequent to June 30, 2007, when billing was processed for August 1,                        2007.  Breda does not believe that these adjustments will be material                        to its financial statements.                                                                                                                                                                                                                                                                                                                                                                                    |

20

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | also                        experienced billing software problems with its calling plans which caused                        minutes to not be billed to customers in some of its package LD plans.                        Breda is also working with its billing software vendor to recapture and                        bill these minutes after March 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Network access services                        increased $753,492, or 37.8%, for the six-month period ended June 30, 2007,                        when compared to the six-month period ended June 30, 2006. This increase                        mainly resulted from increased terminating access revenues received from                        traffic delivered to Breda’s conference bridges in Carroll, Iowa.                        Breda has contracted with conference bridge vendors for the transport of                        long distance calls over Breda’s networks. Breda began billing for                        these services in September 2006, and began billing for additional                        conference bridge services in March 2007. Breda’s access revenue has                        also increased because, as noted previously, BTC, Inc. installed a new                        switch in its Carroll, Iowa location, and is now able to receive some                        tandem switching payments for consolidating and switching its traffic from                        six of Breda’s own seven telephone exchanges. There is no                        corresponding tandem switching revenue for the six-month period ended June                        30, 2006. There was also some increase in Breda’s access revenue                        because of an increased customer base taking Breda’s long distance                        services. These customers generate access revenue when they use                        Breda’s networks to make long distance calls.                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Cellular services                        increased $79,872, or 11.8%, for the six-month period ended June 30, 2007,                        when compared to the six-month period ended June 30, 2006. Breda’s                        cellular customer count increased 3% during the six-month period ended June                        30, 2007, when compared to the six-month period ended June 30, 2006. This                        increased customer count caused a corresponding increase in equipment sales                        and commissions during the six-month period ended June 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Combined miscellaneous                        and billing/collection revenues increased $61,372, or 167.3%, for the                        six-month period ended June 30, 2007, when compared to the six-month period                        ended June 30, 2006. The main components of miscellaneous revenue were the                        receipt of rent from other telephone companies or industry carriers for the                        lease of capacity over fiber optic rings owned by Breda, or owned jointly                        with neighboring telephone companies, and the receipt of switching services                        revenue, for which there was no corresponding revenue during the six-month                        period ended June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Broadcast                        Services – ($11,664)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | Broadcast services                        decreased $11,664, or 3.2%, for the six-month period ended June 30, 2007,                        when compared to the six-month period ended June 30, 2006. Tele-Services                        continues to lose customers and to face stiff competition from satellite                        providers, who are able to provide extensive channel line-up packages, and                        who are 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. |

21

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Internet Services                        – $2,584*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | Internet services                        revenue increased $2,584, or .8%, for the six-month period ended June 30,                        2007, when compared to the six-month period ended June 30, 2006. Breda has                        seen an increase in its high-speed Internet customer base when comparing                        the two periods, which has offset the decrease in Breda’s dialup                        Internet customer base. The decrease in dialup Internet customers is the                        result of the intense competition by multiple suppliers in the Carroll,                        Iowa market area, and the migration of customers to high-speed Internet                        because of an overall decrease in the price for high-speed Internet. Breda                        is gaining high-speed Internet customers in the Carroll, Iowa area because                        BTC, Inc. is offering bundled services packages that include Internet                        services, as well as local telephone and other communication services.                        Effective May 1, 2007, Breda consolidated its high-speed Internet offering                        into two price and bandwidth options which has met with great customer                        acceptance and increased Breda’s customer base for the six-month                        period ended June 30, 2007. Also, with the advent of newer technologies                        that expand the range for high-speed Internet services from Breda’s                        central office, Breda began offering new longer-reach, high-speed Internet                        services in its remaining five outlying ILEC communities that previously                        were not able to receive those services from Breda. These service offerings                        were begun during the fourth quarter 2006, and Breda has had a very                        favorable response to these new technology Internet offerings. This                        increase in customer base is, however, offset by a decrease in the price                        that customers are charged for Breda’s high-speed Internet                        offerings. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | OPERATING                        EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | The                        table below sets forth the components of Breda’s operating costs for                        the six months ended June 30, 2007, compared to the same period in                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

|                                                             |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
|------------------------------------------------------------------|--------|------------------------------------------------------|-----------|--------------------------------------------|---------|------------|--------|-------------|---------|--------|--------|--------|--------|
|                                                             |   | **Six Months Ended                        June 30,** |      | **Change**                                 |    |
|                                                             |   |                                                      |      |                                            |    |
|                                                             |   | **2007**                                             |      | **2006                        (Restated)** |    | **Amount** |   | **Percent** |    |
|                                                             |   |                                                      |      |                                            |    |            |   |             |    |
| OPERATING                        EXPENSES                        |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Cost of                        services                          |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Plant specific                        operations                 |   | $                                                    | 1,213,181 |                                       | $       | 463,905    |   | $           | 749,276 |   |   | 161.5  | %      |
| Plant nonspecific                        operations              |   |                                                 | 177,078   |                                       |    | 145,198    |   |        | 31,880  |   |   | 22.0   | %      |
| Cost of long                        distance                     |   |                                                 | 97,806    |                                       |    | 102,443    |   |        | (4,637  | )      |   | -4.5   | %      |
| Cost of                        cellular                          |   |                                                 | 588,556   |                                       |    | 571,228    |   |        | 17,328  |   |   | 3.0    | %      |
| Cost of                        internet                          |   |                                                 | 317,282   |                                       |    | 361,528    |   |        | (44,246 | )      |   | -12.2  | %      |
| Cost of                        programming                       |   |                                                 | 215,702   |                                       |    | 182,180    |   |        | 33,522  |   |   | 18.4   | %      |
|                                                             |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
| Total cost of                        services                    |   | $                                               | 2,609,605 |                                       | $  | 1,826,482  |   | $      | 783,123 |   |   | 42.9   | %      |
|                                                             |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
|                                                             |
| Depreciation and                        amortization             |   | $                                                    | 486,410   |                                       | $       | 488,677    |   | $           | (2,267  | )      |   | -0.5   | %      |
|                                                             |
| Selling, general and                        administration       |   |                                                 |      |                                       |    |       |   |        |    |   |   |   |   |
| Customer                        operations                       |   | $                                                    | 414,089   |                                       | $       | 365,569    |   | $           | 48,520  |   |   | 13.3   | %      |
| Corporate                        operations                      |   |                                                 | 642,940   |                                       |    | 637,873    |   |        | 5,067   |   |   | 0.8    | %      |
| General                        taxes                             |   |                                                 | 92,350    |                                       |    | 98,081     |   |        | (5,731  | )      |   | -5.8   | %      |
|                                                             |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
| Total selling, general                        and administration |   | $                                                    | 1,149,379 |                                       | $       | 1,101,523  |   | $           | 47,856  |   |   | 4.3    | %      |
|                                                             |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |
|                                                             |
|                                                             |   | $                                                    | 4,245,394 |                                       | $       | 3,416,682  |   | $           | 828,712 |   |   | 24.3   | %      |
|                                                             |   |                                                      |           |                                       |         |            |   |             |         |   |        |        |   |

 

|   |                                                                                                                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Cost of Services -                        $783,123*                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                        |
|   | Cost                        of services increased $783,123, or 42.9%, for the six-month period ended                        June 30, 2007, when compared to the six-month period ended June 30, 2006.                        Over $500,000 of the increased |

22

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | costs were incurred for                        the provisioning of the conference bridge services which began in July                        2006, and for which there is no corresponding cost during the six-month                        period ended June 30, 2006. Some additional increased costs arose from                        labor rate increases implemented in 2007 when comparing the two six-month                        periods. There was a $4,637, or 4.5%, decrease in long distance provision                        costs, a $17,328, or 3.0%, increase in cellular service provisioning costs                        and a $44,246, or 12.2%, decrease in Internet provisioning costs when                        comparing the six-month period ended June 30, 2007 to the six-month period                        ended June 30, 2006. Breda also incurred additional costs for repair and                        maintenance expenditures for its central offices, equipment and buildings                        and grounds during the six-month period ended June 30, 2007, when compared                        to the six-month period ended June 30, 2006. Breda’s cellular                        provisioning cost increase was directly related to the 3% increase in                        cellular customers served in the six-month period ended June 30, 2007.                        Breda’s decrease in Internet provisioning costs resulted mainly from                        the migration of many of its dial-up customers in its southern Iowa                        exchanges to high speed Internet services where provisioning could be                        consolidated for both new and present high speed Internet                        customers. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Although a greater                        number of customers continued to use Breda’s long distance services,                        their average minutes of use per month are decreasing. The decreased                        minutes of use, along with Breda’s switch to a new underlying carrier                        on August 20, 2006, have contributed to a decrease in Breda’s overall                        cost to provide long distance service. Breda had a 12.2% increase in                        customers subscribing to Breda’s long distance services for the                        six-month period ended June 30, 2007, when compared to the six-month period                        ended June 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | While                        Tele-Services’ overall customer growth for cable TV services                        continued to decline, its programming costs increased $33,522, or 18.4%,                        for the six-month period ended June 30, 2007, when compared to the                        six-month period ended June 30, 2006. Even though Tele-Services is a member                        of an industry programming purchasing group, it continues to see                        significant increases in the programming rates paid by Tele-Services in                        order to offer its cable TV offerings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Depreciation and                        Amortization – ($2,267)*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Depreciation and                        amortization expense decreased $2,267, or .5%, for the six-month period                        ended June 30, 2007, when compared to the six-month period ended June 30,                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | *Selling, General                        and Administration – $47,856*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Selling, general and                        administration expenses increased $47,856, or 4.3%, for the six-month                        period ended June 30, 2007, when compared to the six-month period ended                        June 30, 2006. This decrease is mainly attributable to a decrease in                        management and consultant fees which were no longer needed after the hiring                        of a CEO and a COO on July 1, 2006. There was also a decrease in consulting                        and legal fees for the six-month period ended June 30, 2007. There were                        also increased outside consulting services to analyze and pursue new                        business opportunities in the industry during the six-month period ended                        June 30, 2007, when compared to the six-month period ended June 30,                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | OTHER INCOME                        (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The                        table below sets forth the components of other income (expense) for the                        six-month period ended June 30, 2007, compared to the same period in                        2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

23

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|   |                                                         |   |                                                 |      |                                       |   |       |   |        |       |   |   |   |   |
|--------|--------------------------------------------------------------|--------|------------------------------------------------------|-----------|--------------------------------------------|--------|------------|--------|-------------|------------|--------|--------|--------|--------|
|   |                                                         |   | **Six Months Ended                        June 30,** |      | **Change**                                 |   |
|   |                                                         |   |                                                      |      |                                            |   |
|   |                                                         |   | **2007**                                             |      | **2006                        (Restated)** |   | **Amount** |   | **Percent** |       |
|   |                                                         |   |                                                      |      |                                            |   |            |   |             |       |
|   | OTHER INCOME                        (EXPENSE)                |   |                                                 |      |                                       |   |       |   |        |       |   |   |   |   |
|   | Interest and                        dividend income          |   | $                                                    | 283,697   |                                       | $      | 169,565    |   | $           | 114,132    |   |   | 67.3   | %      |
|   | Gain or (Loss on                        sale of investments) |   |                                                 | (21,608   | )                                          |   | 1,163,436  |   |        | (1,185,044 | )      |   | -101.9 | %      |
|   | Gain or (Loss on                        disposal of assets)  |   |                                                 | 9,963     |                                       |   | (21,714    | )      |        | 31,677     |   |   | -145.9 | %      |
|   | Interest                        expense                      |   |                                                 | (47,536   | )                                          |   | (53,633    | )      |        | 6,097      |   |   | -11.4  | %      |
|   | Income from equity                        investments        |   |                                                 | 813,812   |                                       |   | 701,765    |   |        | 112,047    |   |   | 16.0   | %      |
|   | Other,                        net                            |   |                                                 | (15,032   | )                                          |   | 3,273      |   |        | (18,305    | )      |   | -559.3 | %      |
|   |                                                         |   |                                                      |           |                                       |        |            |   |             |            |   |        |        |   |
|   |                                                         |   | $                                                    | 1,023,296 |                                       | $      | 1,962,692  |   | $           | (939,396   | )      |   | -47.9  | %      |
|   |                                                         |   |                                                      |           |                                       |        |            |   |             |            |   |        |        |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Interest and                        Dividend Income.* Interest and dividend income increased $114,132, or                        67.3%, for the six-month period ended June 30, 2007, when compared to the                        six-month period ended June 30, 2006. This increase is attributable to                        increased investments and rates earned on investments in both temporary                        investments and marketable securities on which Breda generates interest                        income for the six-month period ended June 30, 2007, when compared to the                        six-month period ended June 30, 2006. .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Loss on sale of                        investments.* The $21,608 loss on sale of investments for the six-month                        period ended June 30, 2007, represents the loss on the redemption of                        temporary investments, for which there is no corresponding entry in the                        same six-month period in 2006. During the six-month period ended June 30,                        2006, Breda had over a million dollar gain from the redemption of its Rural                        Telephone Bank stock in April 2006, and for which there is no corresponding                        entry for the six-month period ended June 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Gain on disposal of                        assets.* The $9,963 gain on disposal of assets for the six-month period                        ended June 30, 2007, represents the gain from the sale or trade-in of                        service vehicles, for which there is no corresponding entry in the same                        six-month period in 2006. The $21,714 loss on disposal of assets for the                        six-month period ended June 30, 2006 represents the loss from the sale of a                        building at 526 N. Carroll Street, in Carroll, Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Interest                        Expense.* The $6,097, or 11.4%, decrease in interest expense for the                        six-month period ended June 30, 2007, when compared to the six-month period                        ended June 30, 2006, is the result of the reduction of the Rural Telephone                        Finance Cooperative loan balance on which interest is calculated because of                        the payment of the scheduled principal payments on the loan. There has been                        no change in interest rate and no additional loan amounts have been                        borrowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   | *Income from Equity                        Investments.* Income from equity investments increased $112,047, or                        16.0%, for the six-month period ended June 30, 2007, when compared to the                        six-month period ended June 30, 2006. The equity investments income shown                        on Breda’s financial statements is Breda’s pro-rata share of                        the net income or net loss of each equity investment, based on                        Breda’s percentage of ownership in each equity investment. The                        increase in equity investments income reported on Breda’s income                        statement for the six-month period ended June 30, 2007 is a reflection of                        the net increases and decreases in the net income of Breda’s equity                        investments. Most of Breda’s equity investments are in cellular                        partnerships. Some of these cellular investments now receive universal                        service funding which has increased their overall operating revenue. An                        additional source of income from equity investments arises from                        Breda’s ownership interest in Alpine Communications, L.C., an                        operating telephone company in northeastern Iowa. |

24

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | *Other, Net.* The                        $18,305 decrease in other net income for the six-month period ended June                        30, 2007, when compared to the six-month period ended June 30, 2006, is                        mainly attributable to increased partnership-related expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *Income Tax                        Expense.* Income taxes decreased $308,188, or 34.7%, for the six-month                        period ended June 30, 2007, when compared to the same period in 2006. The                        decrease in income tax expense is a direct correlation to the $1,185,044                        decrease in the sale of investments because there was no corresponding sale                        of investments during the six month period ended June 30, 2007 to compare                        with the redemption of the Rural Telephone Bank stock that occurred during                        the six-month period ended June 30, 2006. The effective tax rate for the                        six-month period ended June 30, 2007 is 35.1%, compared to a 34.5% tax rate                        for the same six-month period in 2006. The effective tax rate differs from                        the U.S. statutory rate due to state income taxes and the proportion of                        income from investments which are exempt from income tax.                                                                                                           |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | *Net Income.* Net                        income increased $610,584, or 36.3%, for the six-month period ended June                        30, 2007, when compared to the same period in 2006, and is mainly                        attributable to revenue generated from conference bridge                        services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | **Liquidity and                        Capital Resources**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Breda’s                        short-term and long-term liquidity requirements arise primarily from the                        following: operations and working capital requirements; capital                        expenditures; interest payments on the long term financing from the Rural                        Telephone Finance Cooperative; dividend payments on Breda’s common                        stock; redemption of Breda’s common stock; and potential                        industry-related acquisitions or investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | Breda intends to fund                        the operations, working capital requirements, capital expenditures,                        interest payments, dividend payments, and stock redemptions from cash from                        operations. Breda also intends to fund smaller industry-related                        acquisitions or investments from cash from operations. For the six months                        ended June 30, 2007 and June 30, 2006, cash provided by operating                        activities was $1,558,470 and $449,050, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   | To                        fund any significant future acquisitions or investments, Breda would                        consider the redemption of its short-term and long-term marketable                        securities investments; the use of its revolving lines of credit with the                        Rural Telephone Finance Cooperative; or the addition of long-term debt from                        industry lenders. Breda presently has an unused line of credit with the                        Rural Telephone Finance Cooperative of $1,500,000, and Prairie Telephone                        has an unused line of credit with the Rural Telephone Finance Cooperative                        of $500,000. Breda’s present revenues would be able to sustain the                        costs of additional debt if the need arose. However, all potential                        acquisitions or investments will 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. |

25

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|   |                                                                                                                                                                                                                                                                                                      |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 June 30, 2007, and December 31, 2006. |

|   |                                                    |   |                                     |      |                                         |   |      |   |
|--------|---------------------------------------------------------|--------|------------------------------------------|-----------|----------------------------------------------|--------|-----------|--------|
|   |                                                    |   | **As                        of**         |      |
|   |                                                    |   |                                          |      |
|   |                                                    |   | **June 30,                        2007** |      | **December 31,                        2006** |   |
|   |                                                    |   |                                          |      |                                              |   |
|   | **Short-Term                        Liquidity**         |   |                                     |      |                                         |   |      |   |
|   | Current                        Assets                   |   | $                                        | 3,968,941 |                                         | $      | 2,930,602 |   |
|   | Current                        Liabilities              |   |                                     | 1,012,232 |                                         |   | 540,778   |   |
|   |                                                    |   |                                          |           |                                         |        |           |   |
|   | Net Working                        Capital              |   | $                                        | 2,956,709 |                                         | $      | 2,389,824 |   |
|   |                                                    |   |                                          |           |                                         |        |           |   |
|   |                                                    |   |                                     |      |                                         |   |      |   |
|   | Cash and Cash                        Equivalents        |   | $                                        | 1,530,267 |                                         | $      | 777,708   |   |
|   | Short Term Marketable                        Securities |   | $                                        | 776,762   |                                         | $      | 643,119   |   |
|   | Available on Line of                        Credit      |   | $                                        | 2,000,000 |                                         | $      | 2,000,000 |   |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Current assets                        increased $1,038,339, or 35.4%, for the six-month period ended June 30,                        2007, when compared to the year ended December 31, 2006, and was due mainly                        to the buildup of a liquid cash position for the payment of budgeted                        capital expenditures before year-end 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Current liabilities                        increased $471,454, or 87.2%, for the six-month period ended June 30, 2007,                        when compared to the year ended December 31, 2006. Accounts payable                        increased $439,060, or 246.2%, when comparing the two periods, which is                        mainly attributable to an increase in the amount incurred as of June 30,                        2007 for the provisioning of its conference bridge services as compared to                        the amounts incurred for those purchases as of December 31, 2006. Accrued                        taxes decreased $51,110, or 41.5%, for the six-month period ended June 30,                        2007, when compared to the year ended December 31, 2006. The decrease is                        attributable to a decrease in the provision for income taxes for the second                        quarter of 2007. There was also an increase in other accrued liabilities of                        $77,612. The increase in other accrued liabilities is mainly attributable                        to an increase in accrued payroll and accrued leave benefits for the                        six-month period ended June 30, 2007, when compared with the year ended                        December 31, 2006. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | The                        following table summarizes Breda’s sources and uses of cash for the                        six months ended June 30, 2007 and 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|   |                                                |   |                                                                                |      |                   |   |     |   |
|--------|-----------------------------------------------------|--------|-------------------------------------------------------------------------------------|-----------|------------------------|--------|----------|--------|
|   |                                                |   | **For the Six Months                        Ended                        June 30,** |      |
|   |                                                |   |                                                                                     |      |
|   |                                                |   | **2007**                                                                            |      | **2006****(Restated)** |   |
|   |                                                |   |                                                                                     |      |                        |   |
|   | **Net Cash Provided                        (Used)** |   |                                                                                |      |                   |   |     |   |
|   | Operating                        Activities         |   | $                                                                                   | 1,558,470 |                   | $      | 449,050  |   |
|   | Investing                        Activities         |   |                                                                                | (502,384  | )                      |   | 632,875  |   |
|   | Financing                        Activities         |   |                                                                                | (303,527  | )                      |   | (298,061 | )      |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | For                        the six months ended June 30, 2007 and June 30, 2006, cash provided by                        operating activities was $1,558,470 and $449,050, respectively.                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Cash                        used in investing activities for the six-month period ended June 30, 2007                        was $502,384, and cash generated by investing activities was $632,875 for                        the six-month period ended June 30, 2006. During the six-month period ended                        June 30, 2007, $333,739 was used to purchase assets such as battery                        backups, service vehicles, bucket truck, central office equipment,                        cable |

26

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | and                        wire facilities and Internet equipment. The capital expenditures were a                        $284,913 increase in cash used when compared to the six-month period ended                        June 30, 2006. Marketable securities were sold for $683,634 during the                        six-month period ended June 30, 2007, but $754,149 of marketable securities                        were purchased for a net purchase of $70,515. During the six-month period                        ended June 30, 2006, the net purchase of marketable securities was                        $754,679.                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | During the six-month                        period ended June 30, 2007, Breda also contributed additional capital in                        the amount of $169,412 to its Spiralight Networks, LLC investment, which                        retained Breda’s 35.2941% interest.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Cash                        used in financing activities was $303,527 for the six-month period ended                        June 30, 2007, and $298,061 for the six-month period ended June 30, 2006.                        These amounts represent the cash used to repay Rural Telephone Finance                        Cooperative long-term debt and the cash used to pay dividends to                        shareholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | **Long Term                        Debt**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | As                        of June 30, 2007, Breda had $1,228,519 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 six months ended June 30, 2007, capital expenditures                        were $333,739.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   | Breda’s                        contractual obligations as of June 30, 2007 are:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|                                  |   |   |    |                    |   |         |
|---------------------------------------|--------|--------|---------|--------------------|--------|---------|
| 2007                                  |   | $      | 89,313  |     | $      | 181,621 |
| 2008                                  |   |   | 187,710 |                    |   | 194,003 |
| 2009                                  |   |   | 200,507 |                    |   | 207,230 |
| 2010                                  |   |   | 214,177 |                    |   | 221,358 |
| 2011                                  |   |   | 228,779 |                    |   | 236,449 |
| 2012 and                        After |   |   | 308,033 |                    |   | 187,858 |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 |

27

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|   |                                                                                                                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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                        Pronouncement**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | In                        July 2006, the Financial Accounting Standards Board (FASB) issued FASB                        Interpretation No. 48, “Accounting for Uncertainty in Income                        Taxes—an interpretation of FASB Statement No. 109”. FIN 48                        clarifies the accounting for uncertainty in income taxes recognized in                        accordance with Statement of Financial Accounting Standards No. 109,                        “Accounting for Income Taxes”. Guidance is provided on                        derecognition, classification, interest and penalties accounting in interim                        periods, disclosure and transition. FIN 48 requires that Breda recognize in                        its financial statements the impact of a tax position, if that position is                        more likely than not of being sustained on audit, based on the technical                        merits of the position. The provisions of FIN 48 were effective as of the                        beginning of Breda’s 2007 fiscal year, with the cumulative effect of                        the change in accounting principle recorded as an adjustment to opening                        retained earnings. Adoption of FIN 48 on January 1, 2007, had no effect on                        Breda’s financial position, results of operations or cash                        flows. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | **Other Activities                        and Issues**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Access charge revenues                        constitute a substantial part of Breda’s consolidated revenues, and                        the regulation of access charge rates by the Federal Communications                        Commission (FCC) and the Iowa Utilities Board (IUB) creates a material risk                        to Breda and its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The                        FCC currently has an open docket on inter-carrier compensation, which was                        initiated to identify a unified approach to intercarrier compensation. The                        current intercarrier compensation system distinguishes between different                        types of carriers and services, such as local and long-distance or wireless                        and wireline, and the FCC has indicated that the FCC plans to replace the                        current system with a unified intercarrier compensation system. The FCC                        initiated a rule making proceeding to consider this matter and the                        questions that the FCC are examining include the effect that any change in                        the compensation system will have on consumers and the universal service                        fund.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Breda continues to work                        with two Iowa industry associations in reviewing and submitting comments on                        the Missoula Plan, which is now before the FCC. The Missoula Plan is a set                        of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

28

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | The                        FCC had sought initial comments on the Missoula Plan by October 25, 2006.                        In January 2007, the supporters of the Missoula Plan filed an amendment                        intended to target new federal support to states that have already reduced                        intrastate access rates and the highest end-user rates. The “Federal                        Benchmark” mechanism would provide supplemental funding to ensure                        end-user rates remain within a national benchmark range when the Missoula                        Plan is implemented. The FCC 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 constitute a                        substantial portion of Breda’s total consolidated revenues, this is                        an area of material risk to Breda and its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | Breda and its                        subsidiaries are also subject to risk regarding changes in intrastate                        access charge rates because concerns have been raised by the Iowa                        legislature and the IUB regarding intrastate rates, and whether alternative                        intrastate intercarrier compensation mechanisms should be investigated.                        Breda does not believe, however, that it is possible to predict at this                        time whether intrastate access rates will be lowered, or if intrastate                        access rates are lowered, the amount of the decrease in those rates. It is                        therefore uncertain at this time whether this issue will result in an                        adverse effect on Breda’s operating income. Breda does, however,                        anticipate continuing pressure for the lowering of intrastate access charge                        rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | Universal service                        funding is also an important part of Breda’s consolidated revenues,                        and the regulation of universal service funding by the FCC is another area                        of material risk to Breda and its subsidiaries. The universal service funds                        are also now being paid to more telecommunications providers than in the                        past. Breda anticipates that there may be changes in the future on how                        universal service funds are disbursed among the numerous eligible                        telecommunications providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | In                        August 2005, the FCC opened an extremely broad comment proceeding on                        Universal Service Funding (USF), in which it sought input on a variety of                        specific USF proposals offered by members of the Federal-State Joint Board                        on Universal Service. State industry associations have been meeting with                        FCC staff members and with various Washington legislative staff members to                        discuss proposed legislation preserving and improving USF, including how                        funds are expended and assessing levels of broadband deployment in Iowa.                        The issues at stake are both on how the revenue is assessed and generated                        for the universal service fund, and the criteria for the disbursement of                        funds from the universal service pool. Some of the suggested changes on the                        revenue side of the debate would be to have all current entities paying                        into the USF continue to pay into the fund; have any service provider that                        uses telephone numbers, IP (Internet Protocol) addresses or their                        functional equivalents to provide real-time voice communications pay into                        the fund; and any provider that offers a network connection for a fee to                        the public, including DSL, cable modem connections, WiMax and broadband                        over power |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
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|   | lines, pay into the                        fund. This would increase the revenue base to more than just carriers                        providing telephone line services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | On                        the disbursement side, some proposals would limit the number of eligible                        telecommunication carriers by specifying the criteria that must be met by                        recipients, including that the provider must provide service throughout                        their service area; remain functional in emergency situations; and satisfy                        both consumer protection and service quality standards. Unlike present USF                        payments, the proposals include that USF payments would allow recovery                        based on actual costs, rather than the incumbent carrier’s costs.                        State industry organizations have filed reply comments in the FCC docket                        relating to capping the funding received by competitive carriers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | Breda believes that                        federal universal service fund changes will occur but is unable to                        determine an estimated time frame or estimated financial ramifications as                        of the date of this filing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The                        National Exchange Carrier Association (NECA) has been delegated some                        authority by the FCC regarding the regulation of interstate access charge                        rates. In a letter dated January 15, 2007, NECA notified Breda that                        beginning July 1, 2007 most carriers could expect an overall average cost                        settlement decrease of 7.27% as a result of the new settlement formulas                        filed by NECA with the FCC in December 2006. Overall, NECA projected that                        the majority of companies’ settlements will decrease between 5% and                        15%. The decrease generally reflects new overall reduced cost levels and                        decreases due to Line Haul Distance Sensitive formula structure changes.                        NECA’s 2007 Modification of Average Schedules filing included a                        proposed transition plan to help companies adjust to reduced settlements.                        The FCC has approved both the proposed formulas and the proposed transition                        plan. Breda estimates, based on the information provided by NECA, that                        Breda could receive $322,860 (17.8%) less per year in average schedule                        payments after the 24-month transition period is completed. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The                        Communications Assistance For Law Enforcement Act (CALEA) was passed in                        1994 and sets forth the assistance capabilities that telecommunications                        carriers need to maintain so that they can support law enforcement in the                        conduct of lawfully authorized electronic surveillance. Breda, Prairie                        Telephone and Westside Independent had been granted various extensions from                        time to time for compliance with the various requirements of the Act, with                        the most recent extension ending on June 30, 2006. Breda installed a soft                        switch in its CLEC exchange in the last quarter of 2005, and the technology                        in this switch allows for CALEA compliance in both its CLEC exchange of                        Carroll, Iowa, and its ILEC exchange in Breda, Iowa. Breda currently is                        working through an upgrade plan for its remaining, stand-alone switches in                        five small exchange locations throughout its service territory. Breda                        estimates that its final cost to upgrade the remaining switches could be                        close to $2,000,000.                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | On                        May 12, 2006, the 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, 2007. The FCC declined to exclude any facilities-based broadband                        Internet access providers from CALEA, noting that “Trusted Third                        Parties” and service bureaus can assist small entities in processing                        surveillance orders in accordance with the system security requirements,                        thereby ameliorating burdens for these providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   | The                        Federal Communications Commission’s May 12, 2006 order also                        restricted the availability of compliance extensions to equipment,                        facilities and services deployed prior to October 25, 1998; required any                        provider with a pending compliance extension petition currently on file                        to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

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|   | file                        another letter by February 12, 2007 attesting that the petition exclusively                        concerns equipment, facilities or services installed or deployed prior to                        October 25, 1998; concluded that providers are responsible for the costs of                        complying with CALEA in most situations; permitted telecommunications                        carriers and broadband Internet access and interconnected VoIP providers                        the option of using Trusted Third Parties to assist in meeting the CALEA                        obligations to provide law enforcement agencies the electronic surveillance                        information they require in an acceptable format; required providers to                        file their security and integrity plans with the FCC by March 12, 2007; and                        required all providers to submit interim reports to the FCC on CALEA                        compliance by February 12, 2007.                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | For                        telephone companies with separate broadband and VoIP entities, these                        requirements are in addition to those for their carrier operations, and                        require separate reports to be filed for each operation. Breda has enlisted                        Iowa Network Services to be its Trusted Third Party resource in meeting the                        CALEA requirements. As of the date of this filing, Breda has filed all                        required CALEA reports.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Telephone services                        providers like Breda, Prairie Telephone, Westside Independent and BTC, Inc.                        are subject to competition from other providers. As a result of the                        Telecommunications Act of 1996, telephone companies are no longer afforded                        exclusive franchise service areas. Under that Act, competitors can now                        offer telephone services to Breda’s, Prairie Telephone’s,                        Westside Independent’s and BTC, Inc.’s subscribers, and also                        request access to their lines and network facilities in order to offer any                        type of service that can be provided through those lines and facilities.                        The Act and the regulations promulgated by the FCC and state regulatory                        agencies to implement various parts of the Act could have a material                        adverse effect on Breda, Prairie Telephone, Westside Independent and BTC,                        Inc. because they open up Breda, Prairie Telephone, Westside Independent                        and BTC, Inc. to competition that they were not subject to in the                        past. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | There are numerous                        telephone companies which have filed to provide telephone services                        throughout all of Iowa, and Breda anticipates that more of those types of                        filings will be made by other telephone companies. To date, however, no                        company has chosen to compete in any of Breda’s, Prairie                        Telephone’s or Westside Independent’s service areas. Breda does                        not know the plans of any companies, but Breda currently believes the                        possibility of any company entering any of those service areas in 2007 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 2007. For example,                        Mediacom, which is the 9th largest cable television operator in the United                        States and the local cable provider in the Carroll, Iowa market, is now                        providing a phone service offering through Mediacom’s partnership                        with Sprint. The IUB also granted Mediacom a certificate of public                        convenience to offer service in numerous areas throughout Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Breda also anticipates                        that it will face new competition from other providers of newer VoIP (voice                        over Internet protocol) technologies, such as Vonage and Skype, in all of                        its exchanges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | Breda anticipates that                        Mediacom’s and any such other offerings will result in a reduction of                        revenue. A reduction in revenue will also likely occur if any other                        telephone companies at some point determine to provide services in any of                        Breda’s, Prairie Telephone’s, Westside Independent’s or                        BTC, Inc.’s service areas.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

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|   | Breda continues to                        investigate new technology and product offerings in the Internet field that                        it can provide to its customers, or that could be considered value-added                        features to its already existing product. As of May 1, 2007, Breda began                        offering a 256 Mbps high speed Internet service option with a reduced price                        to its customers. This service has been extremely well received by                        Breda’s customers and many of its dial-up customers are converting to                        this high speed Internet offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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|   | During the third                        quarter of 2006, Breda completed the launch of high-speed Internet service                        offerings in all of its telephone exchanges that did not have the                        capability to offer that type of service. These offerings utilize the                        Internet product technologies currently used by Breda, as well as new                        technologies that allow customers outside the normal high-speed service                        area to still receive a high bandwidth connection. These customers in the                        past were not able to receive high-speed Internet services using standard                        provisioning equipment because of distance restrictions in most high-speed                        Internet technologies. Breda has had an excellent response to these                        longer-range, high-speed Internet service offerings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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|   | Breda entered into a                        marketing and distribution agreement with the National Rural                        Telecommunications Cooperative (NRTC) on May 13, 2004, for the distribution                        of high-speed Internet service via satellite. One reason Breda entered into                        this agreement was so that Breda would have a means to provide high-speed                        Internet service to its rural customers who may otherwise lack the                        opportunity to obtain high-speed Internet service through existing                        broadband options, such as cable modem, DSL, and wireless, because of                        distance and location factors. NRTC has a master distribution agreement                        with WildBlue Communications, Inc., through which NRTC has obtained rights                        to market, promote, sell and distribute satellite-based Internet access                        services and related products to end users in the continental United                        States, including through NRTC’s eligible members, such as Breda.                        Breda’s marketing campaign originated on September 1, 2005, and Breda                        received good response to this service. Breda and the other satellite                        Internet providers in WildBlue’s satellite Beam 26 were notified in                        January 2006 that because of the huge success of this product, the capacity                        in Beam 26 was filling up, and no additional customers could be added once                        capacity reached a designated limit in order to not degrade the service for                        the customers already using the service. Breda stopped taking applications                        for this service on March 13, 2006. NRTC and WildBlue were able to                        implement additional satellite capacity in the first quarter of 2007, but                        Breda does not plan to again offer this service to its customers because                        Breda is now able to provide high speed Internet services to almost all of                        its customers given Breda’s rollout of its longer range, high-speed                        Internet technologies in all of Breda’s ILEC exchanges. |
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|   | Breda believes,                        however, that it will need to continue to pursue new marketing approaches                        in order to attempt to retain and increase its Internet customer base, and                        that there will be continuing competitive pressures to lower dial-up and                        high-speed Internet rates and to provide higher speed Internet                        access.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
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|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

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|   | Breda is not a party to                        any of these lawsuits or collection actions, and is presently being paid                        for conference bridging services by most carriers. However, beginning in                        May 2007, Verizon Business, who is now the payer of access charges for                        carriers previously identified as MCI and Wiltel, stopped payment of access                        charges for conference bridge traffic traversing MCI and Wiltel networks.                        On July 27, 2007, BTC, Inc. received an e-mailed Dispute Notification from                        Verizon Business disputing interstate and intrastate switched access                        charges billed by BTC, Inc. to Verizon Business between October 1, 2006,                        and July 2007. BTC, Inc. is working with legal counsel to determine what                        collection actions should be taken against Verizon Business for the                        $203,010 in unpaid access charges. In addition to determining what legal                        course of action should be taken against Verizon Business, BTC, Inc. is                        also monitoring the outcome of the various court proceedings in Iowa,                        Minnesota, and New York as well as oral arguments and proceedings before                        the FCC and the Iowa Utilities Board. While BTC, Inc.’s situation is                        not identical to these proceedings, some of the rulings will be applicable                        to BTC, Inc.’s situation. The FCC has ruled in prior cases involving                        carrier non-payment of access charges that carriers could not take these                        kinds of “self-help” actions and could not block traffic                        traversing their networks. BTC, Inc. anticipates rulings and decisions on                        many of these outstanding cases and proceedings within six weeks to two                        months.         |
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|   | Prairie Telephone                        became a 10% owner of Desktop Media, L.L.C. on May 2, 2001. Prairie                        Telephone also loaned $500,000 to Desktop Media, L.L.C. on May 2, 2001, and                        advanced an additional $45,307 on June 9, 2004 to fund operational expenses                        until service revenues were collected. Prairie Telephone signed a principal                        deferral agreement with Desktop Media, L.L.C. on September 17, 2003, which                        deferred the principal payments due in the months of September through                        December 2003, and which also provided that Prairie Telephone’s                        ownership in Desktop Media, L.L.C. would be increased from 10% to 17% if at                        any time in the year 2004 Desktop Media, L.L.C. was not able to generate a                        minimum sustainable monthly profit of $36,000, or was unable to make a                        regularly scheduled principal payment. Both of these stipulations were not                        met in the first quarter of 2004, and Prairie Telephone accordingly                        acquired an additional 7% ownership of Desktop Media, L.L.C. Prairie                        Telephone and the other owners of Desktop Media, L.L.C. signed a purchase                        agreement on June 26, 2007 to sell their interests in Desktop Media, L.L.C.                        The proposed sale must receive the approval of the Minnesota Public                        Utilities Commission and Breda anticipates that it should know by September                        30, 2007 if this sale can proceed. Breda anticipates that this sale would                        result in an $117,500 gain and that cash generated from the down payment                        and installment payments from purchaser financing arrangements would be                        approximately $337,800. Breda anticipates that a sale may be finalized by                        year-end 2007. |
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|   | Prairie Telephone                        purchased 5,000 units of Bug Tussel Wireless, L.L.C. for $200,000 in March                        2005, which gave Prairie Telephone a 7.87% ownership interest. Prairie                        Telephone purchased an additional 2,462.264 units of Bug Tussel Wireless,                        L.L.C. in July 2005 for $113,264.15, which gave Prairie Telephone a 9.75%                        interest in Bug Tussel Wireless, L.L.C. Bug Tussel Wireless, L.L.C. is                        located in Green Bay, Wisconsin, and its operating plan involves erecting                        tower sites for wireless services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
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|   | At                        its quarterly meeting on August 4, 2005, the Board of Directors of the                        Rural Telephone Bank approved the liquidation and dissolution of the Bank.                        On November 10, 2005, the liquidation and dissolution process was initiated                        with the signing of the 2006 Agriculture Appropriations bill by President                        Bush, which paved the way for all Bank stock to be redeemed. Breda received                        liquidation funds on April 13, 2006, of $1,336,000, which was the par value                        of Breda’s investment in the Bank stock. Breda’s net of tax                        gain on the liquidation of this investment was approximately                        $698,946.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

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|                                                   | Prairie Telephone                        purchased a 35.29% interest in Spiralight Network, L.L.C. on December 28,                        2006 for $960,000. On May 24, 2007, Prairie Telephone contributed its                        prorata share of a capital call by Spiralight Network, L.L.C. in the amount                        of $169,411.72. Spiralight Network, L.L.C. provides fiber transport                        services in Wisconsin, Illinois and Minnesota. The investment is accounted                        for on the equity method of accounting.                                                                                                                                                                                                                                                                                                         |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Item                        3.**                     | **Controls and                        Procedures.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | The                        principal executive officer and the principal financial officer of Breda                        have evaluated the effectiveness of Breda’s disclosure controls and                        procedures as of the end of the period covered by this quarterly report,                        and they have concluded that the disclosure controls and procedures have                        been effective for the purposes for which they are intended.                                                                                                                                                                                                                                                                                                                                                                                               |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | No                        change in Breda’s internal control over financial reporting occurred                        during the period covered by this quarterly report that has materially                        affected, or is reasonably likely to materially affect, Breda’s                        internal control over financial reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **PART II - OTHER                        INFORMATION** |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Item                        1.**                     | **Legal                        Proceedings.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | As                        of the date of this quarterly report, Breda was not aware of any pending                        legal proceeding to which Breda was a party or to which any of                        Breda’s property was subject, other than for any routine litigation,                        if any, that was incidental to Breda’s business. As of the date of                        this quarterly report, Breda was not aware that any governmental authority                        was contemplating any proceeding against Breda or any of Breda’s                        property.                                                                                                                                                                                                                                                            |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **Item                        2.**                     | **Unregistered                        Sales of Equity Securities and Use of Proceeds.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | Breda did not sell any                        shares of its common stock during the period of April 1, 2007 through June                        30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | Breda did not purchase                        any shares of its common stock from shareholders during the period of April                        1, 2007 through June 30, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                   | There were 19 transfers                        of shares of Breda’s common stock during the period of April 1, 2007                        through June 30, 2007 with respect to which Breda did not exercise                        Breda’s right of first refusal to purchase the shares. One                        transaction involved 2 shares which were sold for $400 per share. Another                        transaction involved 2 shares which were sold for $457 per share. A third                        transaction involved 11 shares which were sold for $457 per share. A fourth                        transaction involved 10 shares which were sold for $460 per share. There                        were 15 transfers that did not involve the payment of any consideration. A                        summary of those transactions is as follows: |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                     |
|                                                   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 348                        shares were transferred out of an estate to four individuals; |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                     |
|                                                   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 212                        shares were transferred out of an estate to nine individuals; |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                     |
|                                                   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 2                        shares were transferred to two individuals;                     |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                     |
|                                                   | d)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 2                        shares were transferred to one individual;                      |
|                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                     |
|                                                   | e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 15                        shares were transferred to one individual;                     |

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|   |   |                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------|
|   | f)     | 30                        shares were transferred to two individuals;                     |
|   |   |                                                                                      |
|   | g)     | 212                        shares were transferred to a trust;                            |
|   |   |                                                                                      |
|   | h)     | 2                        shares were transferred to a trust;                              |
|   |   |                                                                                      |
|   | i)     | 306                        shares were transferred to a trust;                            |
|   |   |                                                                                      |
|   | j)     | 92                        shares were transferred to four individuals;                    |
|   |   |                                                                                      |
|   | k)     | 212                        shares were transferred to two individuals;                    |
|   |   |                                                                                      |
|   | l)     | 2                        shares were transferred to one individual;                       |
|   |   |                                                                                      |
|   | m)     | 152                        shares were transferred out of an estate to three individuals; |
|   |   |                                                                                      |
|   | n)     | 150                        shares were transferred to a trust; and                        |
|   |   |                                                                                      |
|   | o)     | 81                        shares were transferred to one individual.                      |

|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **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 April 1, 2007                        through June 30, 2007.                                                                                                                                                                                                   |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **Item                        4.** | **Submission of                        Matters to a Vote of Security Holders.**                                                                                                                                                                                                                                                                                                                                                                                      |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               | The                        annual meeting of the shareholders of Breda was held on June 25, 2007. The                        only matters voted upon by the shareholders at the annual meeting were the                        election of two directors for Breda and the ratification of the appointment                        of Breda’s auditors for the year 2007.                                                                                       |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               | The                        two directors whose term expired at the annual meeting were Charles                        Thatcher and Neil Kanne. Mr. Thatcher and Mr. Kanne were also the only                        nominees for the two director positions, and they were both elected at the                        annual meeting to serve as directors of Breda until the annual meeting of                        the shareholders of Breda to be held in 2010. |
|                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                               | The                        number of votes cast for, against or withheld, and the number of                        abstentions and broker non-votes with respect to the two nominees for                        election as a director of Breda was as follows:                                                                                                                                                                                                      |

|   |                                    |   |   |   |                                       |   |        |   |                                    |   |
|--------|-----------------------------------------|--------|--------|--------|--------------------------------------------|--------|-------------|--------|-----------------------------------------|--------|
|   | Nominee                                 |   | For    |   | Against                        or Withheld |   | Abstentions |   | Broker                        Non-Votes |   |
|   |                                         |   |        |   |                                            |   |             |   |                                         |   |
|   |
|   | Charles                        Thatcher |   | 190    |   | —                                    |   | —     |   | —                                 |   |
|   |
|   | Neil                        Kanne       |   | 178    |   | —                                    |   | —     |   | —                                 |   |

|   |                                                                                                                                                                          |   |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | The                        other directors whose term of office continued after the annual meeting of                        the shareholders were the following individuals: |

|   |                                 |                                     |
|--------|--------------------------------------|------------------------------------------|
|   | David                        Grabner | Daniel                        Nieland    |
|   | Rick                        Anthofer | Clifford                        Neumayer |
|   | Robert                        Buelt  |                                     |

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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The                        only other matter voted upon by the shareholders at the annual meeting was                        the ratification of Keisling Associates, LLP as Breda’s auditors for                        the year 2007. The number of votes cast for, against or withheld, and the                        number of abstentions and broker non-votes regarding this matter was as                        follows: |

|   |   |   |                                       |   |        |   |                                    |   |
|--------|--------|--------|--------------------------------------------|--------|-------------|--------|-----------------------------------------|--------|
|   | For    |   | Against                        or Withheld |   | Abstentions |   | Broker                        Non-Votes |   |
|   |        |   |                                            |   |             |   |                                         |   |
|   |
|   | 178    |   | 14                                         |   | 30          |   | —                                 |   |

|                                                                           |                                                                                                                                                                                                                                                                          |
|--------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Item                        5.**                                             | **Other                        Information.**                                                                                                                                                                                                                                 |
|                                                                           |                                                                                                                                                                                                                                                                          |
|                                                                           | There was no                        information required to be disclosed in a report on Form 8-K during the                        period of April 1, 2007 through June 30, 2007 which was not reported on a                        Form 8-K.                                 |
|                                                                           |                                                                                                                                                                                                                                                                          |
|                                                                           | There were no material                        changes during the period of April 1, 2007 through June 30, 2007 to the                        procedures by which the shareholders of Breda may recommend nominees to                        Breda’s board of directors. |
|                                                                           |                                                                                                                                                                                                                                                                          |
| **Item                        6.**                                             | **Exhibits.**                                                                                                                                                                                                                                                                 |
|                                                                           |                                                                                                                                                                                                                                                                          |
|                                                                           | A                        list of the exhibits included as part of this quarterly report is set forth                        in the Exhibit Index which immediately precedes such exhibits and is                        incorporated herein by this reference.                |
|                                                                           |                                                                                                                                                                                                                                                                          |
| **[THE REST OF THIS                        PAGE IS INTENTIONALLY LEFT BLANK]** |

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**SIGNATURES**

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

|   |                                    |                                         |                                                               |
|--------|-----------------------------------------|----------------------------------------------|--------------------------------------------------------------------|
|   |                                    | BREDA TELEPHONE                        CORP. |
|   |                                    |                                         |
| Date:  | August 14,                        2007. | By:                                          | /s/ Steve                        Frickenstein                      |
|   |                                    |                                         |                                                                    |
|   |                                    |                                         | Steve Frickenstein,                        Chief Executive Officer |
|   |                                    |                                         |                                                               |
| Date:  | August 14,                        2007. | By:                                          | /s/ Jane                        Morlok                             |
|   |                                    |                                         |                                                                    |
|   |                                    |                                         | Jane Morlok, Chief                        Financial Officer        |

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

|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|-----------------------------------------------|--------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
| Description of                        Exhibit |                                                               | Page   |
|                                               |                                                               |        |
|                                          |                                                               |   |
| 3.                                            | **Articles of                        Incorporation and Bylaws**    |   |                                                                                                                                                                                                                                                                                                                                                   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | 3.1                                                                |   | Articles of Restatement                        of Breda Telephone Corp. (Filed as Exhibit 3.1 to Breda’s Form 10-QSB                        for the quarterly period ended March 31, 2007 and filed May 14, 2007, and                        incorporated herein by this reference.)                                                             |   |   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | 3.2                                                                |   | Second Amended and                        Restated Bylaws of Breda Telephone Corp. (Filed as Exhibit 3.2 to                        Breda’s Form 8-K filed April 4, 2007, and incorporated herein by this                        reference.)                                                                                                      |   |   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |
| 10.                                           | **Material                        Contracts**                      |   |                                                                                                                                                                                                                                                                                                                                                   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | 10.1                                                               |   | Employment Agreement                        dated November 13, 2006 between Breda and Jane Morlok. (Filed as Exhibit                        10.1 to Breda’s Form 10-QSB for the quarterly period ended September                        30, 2006 and filed November 14, 2006, and incorporated herein by this                        reference.) |   |   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | 10.2                                                               |   | Employment Agreement                        dated June 14, 2006 between Breda and Steve Frickenstein. (Filed as Exhibit                        10.2 to Breda’s Form 10-QSB for the quarterly period ended June 30,                        2006 and filed August 11, 2006, and incorporated herein by this                        reference.)     |   |   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | 10.3                                                               |   | Employment Agreement                        dated June 14, 2006 between Breda and Charles Deisbeck. (Filed as Exhibit                        10.3 to Breda’s Form 10-QSB for the quarterly period ended June 30,                        2006 and filed August 11, 2006, and incorporated herein by this                        reference.)       |   |   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |
| 31.                                           | **Rule                        13a-14(a)/15d-14(a) Certifications** |   |                                                                                                                                                                                                                                                                                                                                                   |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | *31.1                                                              |   | Rule 13a-14(a) Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                |   | E-1    |
|                                          |                                                               |   |                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                          | *31.2                                                              |   | Rule 13a-14(a) Certification of Chief Financial Officer                                                                                                                                                                                                                                                                                                |   | E-2    |
|                                          |

38

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

*Included with this            filing.

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