UNITED STATES SECURITIES AND EXCHANGE
COMMISSION 
Washington, D.C. 20549 FORM 10-Q(Mark One)x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934For the
 quarterly period ended June 30, 2008oro
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
 EXCHANGE ACT OF 1934For the
 transition period from ______________________ to _______________________ Commission File Number: 0-26525   BREDA TELEPHONE CORP.(Exact name of registrant
as specified in its charter)   Iowa(State or
 other jurisdiction of incorporation or organization)
42-0895882(I.R.S.
 Employer Identification No.)112 E. Main, P.O. Box 190, Breda, Iowa(Address of
 principal executive offices)
51436(Zip Code) 712-673-2311(Registrants
telephone number, including area code) N/A (Former name, former address and former fiscal year, if
changed since
last report)   Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x
Yes     o No Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer
  o

Accelerated filer oNon-accelerated filer
  o

Smaller reporting company x Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). o Yes     x No Indicate
the number of shares outstanding of each of the issuers classes of common
stock, as of the latest practicable date: 30,851 shares of common stock, no par
value, at August 1, 2008. 1    BREDA TELEPHONE CORP. 
FORM 10-Q 
For the Quarter Ended June 30, 2008

INDEX

PagePart
 I. Financial InformationItem
 1.
Unaudited
 Financial Statements
1a)
 Balance Sheets
2b)
 Statements of Income
3c)
 Statements of Stockholders Equity
4d)
 Statements of Cash Flows
5e)
 Notes to Unaudited Financial Statements
6-8Item
 2.
Managements
 Discussion and Analysis of Financial Condition and Results of Operations
9Item
 3.
Quantitative
 and Qualitative Disclosures About Market Risk
39Item
 4T.
Controls
 and Procedures
39Part
 II. Other InformationItem
 1.
Legal
 Proceedings
40Item
 1A.
Risk
 Factors
40Item
 2.
Unregistered
 Sales of Equity Securities and Use of Proceeds
40Item
 3.
Defaults
 Upon Senior Securities
41Item
 4.
Submission
 of Matters to a Vote of Security Holders
41Item
 5.
Other
 Information
43Item
 6.
Exhibits
43Signatures

45Exhibits
 Filed With This ReportRule 13a-14(a) Certification of Chief Executive
Officer
E-1Rule 13a-14(a) Certification of Chief Financial
Officer
E-3Section 1350 Certification of Chief Executive
Officer
E-5Section 1350 Certification of Chief Financial
Officer
E-6PART I - FINANCIAL INFORMATION

Item 1.
Unaudited Financial Statements.Breda Telephone Corp. 
And Subsidiaries 
Breda, IA

Condensed Consolidated Financial Statements 
For the Periods 
Ended June 30, 2008 and 2007 
And the Year Ended December 31, 2007

1

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
June 30, 2008 and December 31, 2007

June 30,
 2008

December 31,
 2007ASSETSCURRENT ASSETSCash and cash equivalents

$
614,920

$
1,104,327Marketable securities


491,070


480,311Accounts receivable, net of allowances of
 $1,992,895 and $676,422 in 2008 and 2007, respectively


3,751,303


1,740,266Interest receivable


108,486


98,013Notes receivable


734,383


734,383Inventory, at average cost


223,258


152,857Other


109,839


17,973Deferred income taxes


178,914


14,2946,212,173


4,342,424OTHER NONCURRENT ASSETSMarketable securities


5,924,525


7,374,754Investments in unconsolidated affiliates at
 equity


8,186,980


7,950,825Other investments at cost


609,092


611,707Goodwill


896,812


896,81215,617,409


16,834,098PROPERTY, PLANT AND EQUIPMENT


6,337,020


5,015,302TOTAL ASSETS

$
28,166,602

$
26,191,824LIABILITIES
 AND STOCKHOLDERS EQUITYCURRENT LIABILITIESCurrent portion of long-term debt

$
194,003

$
187,710Accounts payable


1,659,111


850,431Accrued taxes


408,474


390,660Other


164,227


116,0342,425,815


1,544,835LONG-TERM DEBT, less current portion


852,894


951,495OTHER NONCURRENT LIABILITIES


1,381,185


1,213,607STOCKHOLDERS EQUITYCommon stock, Class A - no par value,
 5,000,000 shares authorized, 28,245 and 28,923 shares issued and outstanding
 at $509 and $457 stated values, respectively


14,376,705


13,217,811Common stock, Class B - no par value,
 5,000,000 shares authorized, 2,606 and 2,013 shares issued and outstanding at
 $509 and $457 stated values, respectively


1,326,454


919,941Retained earnings


7,803,549


8,344,13523,506,708


22,481,887TOTAL LIABILITIES AND STOCKHOLDERS EQUITY

$
28,166,602

$
26,191,824The accompanying notes are an integral part
of these condensed consolidated financial statements.

2

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (UNAUDITED)
For the Three and Six Months Ended June 30, 2008 and 2007

For the Three Months Ended

For the Six Months Ended2008

2007

2008

2007OPERATING REVENUES

$
2,922,631

$
2,485,749

$
5,897,057

$
4,882,790OPERATING EXPENSESCost of services


1,498,369


1,468,633


2,822,634


2,620,410Depreciation and amortization


254,758


251,984


506,699


486,410Selling, general, and administrative


551,346


524,573


1,218,031


1,149,3792,304,473


2,245,190


4,547,364


4,256,199OPERATING INCOME


618,158


240,559


1,349,693


626,591OTHER INCOME (EXPENSES)Interest and dividend income


127,298


139,525


292,734


283,697Gain or (Loss) on sale of investments


9,102


(16,813
)

4,801


(21,608
)Gain on disposal of assets





8,163


8,985


9,963Interest expense


(20,092
)

(23,375
)

(41,028
)

(47,536
)Income from equity investments


283,478


397,297


517,153


813,812Other, net


(2,164
)

(3,093
)

(12,036
)

(15,032
)397,622


501,704


770,609


1,023,296INCOME BEFORE INCOME TAXES


1,015,780


742,263


2,120,302


1,649,887INCOME TAXES


381,785


260,240


809,828


579,018NET INCOME

$
633,995

$
482,023

$
1,310,474

$
1,070,869NET INCOME PER COMMON SHARE

$
20.55

$
15.54

$
42.46

$
34.53DIVIDENDS PER COMMON SHARE

$


$


$
8.00

$
7.00The accompanying notes are an integral part
of these condensed consolidated financial statements.

3

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY (UNAUDITED)

Common Stock, A and B ClassRetained
 EarningsShares

Amount


TotalBalance at
 December 31, 2006


31,016

$
12,220,304

$
8,036,925

$
20,257,229Comprehensive income:Net Income








2,478,330


2,478,330Dividends paid








(217,112
)

(217,112
)Common stock redeemed, net


(80
)

(36,560
)




(36,560
)Stated value stock adjustment





1,954,008


(1,954,008
)Balance at
 December 31, 2007


30,936


14,137,752


8,344,135


22,481,887Comprehensive income:Net Income








1,310,474


1,310,474Dividends paid








(246,808
)

(246,808
)Common stock redeemed, net


(85
)

(38,845
)




(38,845
)Stated value stock adjustment





1,604,252


(1,604,252
)Balance at
 June 30, 2008


30,851

$
15,703,159

$
7,803,549

$
23,506,708The accompanying notes are an integral part
of these condensed consolidated financial statements.

4

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended June 30, 2008 and 2007

2008

2007CASH FLOWS
 FROM OPERATING ACTIVITIESNet income

$
1,310,474

$
1,070,869Adjustments to reconcile net income to cash
 provided by operating activities:Depreciation and amortization


506,699


486,410Deferred income taxes


2,958


(52,298
)Amortization of investment premium/discount
 - net


25,043


19,501Equity income in unconsolidated affiliates,
 net of distributions received of $1,000,998 and $672,277 in 2008 and 2007,
 respectively


483,845


(141,534
)Realized gain on sale of property


(8,985
)

(59,274
)(Gain) or loss on sale of marketable
 securities


(4,801
)

21,608Changes in assets and liabilities:Increase in assets


(2,183,777
)

(152,075
)Increase in liabilities


703,457


404,193Net cash provided by operating activities


834,913


1,597,400CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures


(1,657,187
)

(333,739
)Proceeds from the sale of assets


8,985


57,474Purchase of marketable securities


(280,758
)

(754,149
)Purchase of equity investments


(720,000
)

(169,412
)Purchase of other investments - at cost


(6,171
)

Proceeds from the sale of marketable
 securities


1,699,986


644,704Proceeds from the sale of other investments
 - at cost


8,786


13,808Net cash used in investing activities


(946,359
)

(541,314
)CASH FLOWS FROM FINANCING ACTIVITIESRepayment of long term debt


(92,308
)

(86,415
)Common stock redeemed, net


(38,845
)

Dividends paid


(246,808
)

(217,112
)Net cash used in financing activities

$
(377,961
)
$
(303,527
)Net Increase (Decrease) in Cash and Cash
 Equivalents

$
(489,407
)
$
752,559Cash and Cash Equivalents at Beginning of
 Period


1,104,327


777,708Cash and Cash Equivalents at End of Period

$
614,920

$
1,530,267Supplemental Disclosures of Cash Flow
 InformationCash paid during the period for:Interest

$
41,028

$
47,536Income taxes

$
791,091

$
672,445The accompanying notes are an integral part of these condensed
consolidated financial statements.

5

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn the opinion
of management, the accompanying condensed consolidated financial statements contain
all adjustments (consisting of only normal recurring items) necessary to
present fairly the financial position as of June 30, 2008 and December 31, 2007
and the results of operation and changes in cash flows for the three and six
months ended June 30, 2008 and 2007.

Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Companys December 31, 2007
financial statements. The results of operations for the three and six month
period ended June 30, 2008 are not necessarily indicative of the operating
results of the entire year.

Certain
reclassifications have been made to the 2007 financial statements to conform
with the 2008 presentations.

NOTE 2.
NONCASH INVESTING ACTIVITIESNoncash
investing activities included $171,230 and $61,369 during the six months ended
June 30, 2008 and June 30, 2007, respectively, relating to plant and equipment
additions under construction during the period, which are reflected in accounts
payable at June 30, 2008 and June 30, 2007.

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

6

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 3.
OPERATING SEGMENTS (Continued)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.

Six
 Months Ended
 June 30, 2008

Local
 Exchange
 Carrier

Broadcast

Internet
 Service
 Provider

TotalRevenues

$
5,201,391

$
342,572

$
353,094

$
5,897,057Segment profit (loss)


1,790,225


(101,513
)

(378,238
)

1,310,474Six
 Months Ended
 June 30, 2007

Local
 Exchange
 Carrier

Broadcast

Internet
 Service
 Provider

TotalRevenues

$
4,194,774

$
356,986

$
331,030

$
4,882,790Segment profit (loss)


1,443,955


(103,198
)

(269,888
)

1,070,869Three
 Months Ended
 June 30, 2008

Local
 Exchange
 Carrier

Broadcast

Internet
 Service
 Provider

TotalRevenues

$
2,573,090

$
171,546

$
177,995

$
2,922,631Segment profit (loss)


1,091,364


(55,321
)

(402,048
)

633,995Three
 Months Ended
 June 30, 2007

Local
 Exchange
 Carrier

Broadcast

Internet
 Service
 Provider

TotalRevenues

$
2,132,827

$
178,713

$
174,209

$
2,485,749Segment profit (loss)


629,253


(50,077
)

(97,153
)

482,023NOTE 4.
NET INCOME PER COMMON SHARENet income per
common share for June 30, 2008 and 2007 was computed by dividing the weighted
average number of shares of common stock outstanding into the net income. The
weighted average number of shares of common stock outstanding for the three and
six months ended June 30, 2008 and 2007 were 30,851 and 31,016, and 30,866 and
31,016, respectively.

7

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS

NOTE 5.
STOCK VALUE ADJUSTMENTDuring March
2008, the board of directors authorized a $52 increase in the stated value of
each share of common stock from $457 to $509. There were 30,851 shares
outstanding at the time of the value adjustment, which reduced retained
earnings by $1,604,252.

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

8

Item 2.
Managements Discussion and Analysis of
 Financial Condition and Results of Operations.Various discussions and statements in this quarterly report contain
 forward-looking statements, which can be identified by the use of
 forward-looking terminology such as expects, estimates, plans,
 anticipates, forecasts, predicts, projects, believes, should,
 could, or other similar expressions or variations of those words, or by
 discussions of strategy. No assurance can be given that the future results
 covered by the forward-looking statements will be achieved. Some of the
 matters set forth in the Cautionary Statement on Forward Looking Statements
 section of Bredas Annual Report on Form 10-KSB for the year ended December
 31, 2007 constitute cautionary statements identifying factors with respect to
 such forward-looking statements, including certain risks and uncertainties,
 that could cause actual results to vary materially from the future results
 indicated in such forward-looking statements. Other factors could also cause
 actual results to vary materially from the future results indicated in such
 forward-looking statements.OverviewGeneralBreda is a 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
 historical or incumbent local exchange carrier (ILEC). BTC, Inc. began to
 offer competitive local exchange carrier (CLEC) services to residential and
 business customers in Carroll, Iowa in October 2003. Qwest is the incumbent
 local exchange carrier for that area. The telecommunication services provided
 by Breda or its subsidiaries include long distance services, dial-up and
 high-speed Internet services, cable TV services and satellite Internet
 services.Operating SegmentsBreda organizes its business into three reportable segments. Those
 segments are local exchange carrier services, broadcast services, and
 Internet service provider services. Breda has organized its business into
 those segments because the segments are each strategic business units that
 are managed separately and that offer different products and services in
 different regulatory environments.Local Exchange Carrier Services.
 This segment provides telephone, data services, and other services to
 customers in the local exchanges served by Breda9

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.The segments
 in which Breda and its subsidiaries operate are as follows:Local Exchange CarrierBredaPrairie
 Telephone Co., Inc.Westside
 Independent Telephone CompanyBTC, Inc.Broadcast ServicesTele-Services,
 Ltd.Internet Service ProviderBTC, Inc.Factors Affecting Bredas Operating PerformanceBreda
 believes that a number of industry and company-specific factors are affecting
 and will continue to affect Bredas results of operations. These factors
 include the following:
The effect
 on Bredas revenues of declining numbers of access lines caused by customer
 migration to cell phone usage only; technology advances allowing the
 provisioning of Internet 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 these trends includes efforts to introduce and provide
 enhanced local services and additional services like voice mail, dial-up and
 DSL Internet access, long distance services, and to provide cellular services
 through its agency agreement with U.S. Cellular. Breda 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, long10

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 in that market 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
 broadcast services (cable TV or satellite TV) for a competitive price.Breda has switching capabilities for the Carroll, Iowa market that
 allows Breda to offer another flavor of high-speed Internet services, in
 addition to its voice, long distance and present Internet services. The
 switching capabilities also allow Breda to consider bringing fiber to the
 home, which would be an overbuild of the Carroll market, and would allow
 Breda to be self-reliant in providing communication services to that
 community by no longer needing to lease access lines from Qwest to provide
 services.Breda continues to evaluate modifying its package offerings and
 adjusting 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. Breda has also begun the process of discontinuing its cable TV
 services in its smaller rural communities where the Company does not have
 voice services or where the headends are not combined. Breda will be
 discontinuing cable TV service operations in Bayard, Iowa on 7-1-2008, in
 Lohrville, Iowa on 8-1-2008, and in Thurman, Iowa on 9-1-2008. The
 discontinuance of cable TV service in these communities will affect
 approximately 128 customers.11


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 phone usage, and the designation of new technology
 by the FCC as data services, instead of voice services, have both decreased
 the minutes of use on Bredas networks, which results in less access
 revenue, and caused the industry access payment structure to be renegotiated
 by the new technology providers and wireless providers.RevenuesThe following table reflects, on a consolidated basis for Breda and
 its subsidiaries, the approximate percentage of Bredas and its subsidiaries
 aggregate revenue which was derived from the three segments described above
 and from investments for the three-month periods ended June 30 2008, and June
 30, 2007, respectively:Three Months Ended 
 June 30,

% of Total Revenues 
 for the Three Months Ended 
 Ended June 30,2008

2007

2008

2007OPERATING
 REVENUESLocal exchange
 carrier services

$
2,573,023

$
2,142,646


88.0
%

86.2
%Broadcast
 services


171,625


178,713


5.9
%

7.2
%Internet
 services


177,983


164,390


6.1
%

6.6
%$
2,922,631

$
2,485,749


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.12

The access
 charges for long distance services within Iowa are based on rates approved by
 the Iowa Utilities Board. Switched and special access charges for interstate
 and international services are based on rates approved by the Federal
 Communications Commission. The transport and termination charges paid by
 wireless carriers are specified in interconnection agreements negotiated with
 each individual wireless carrier.3.

Long
 Distance Services.   Breda generates revenues for
 providing long distance services to its customers. This revenue category also
 includes fees related to the provision of directory assistance and operator
 assistance services.4.

Cellular
 Services.   Breda is an agent for the U.S. Cellular
 service area in Iowa. As an agent for U.S. Cellular, Breda generates
 commission revenue from the sale of the wireless calling plans offered by
 U.S. Cellular to Bredas customers. Breda also generates revenue from the
 sale of phones and accessories needed to receive wireless phone service.5.

Billing and
 Collection Services.   Breda receives revenue for
 performing billing and collection services for long distance carriers. Breda
 receives a minimal percentage of the long distance call dollars that Breda
 receives and processes through its customer billing system. The customer
 receives one bill, which includes both local and long distance charges,
 instead of receiving a separate bill from their long distance carrier.6.

Miscellaneous.   Phone-related services generated by Breda include revenues from directory
 publishing, directory advertising, inside line care, the sale and maintenance
 of customer premise equipment, the sale and maintenance of phone systems, and
 the sale of pager services. A significant revenue source is the rental of
 Bredas fiber optic toll trunks to other telecommunication providers.Broadcast Services.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. The revenue that is
 generated through the offering of a satellite-based Internet service and a
 wireless Internet service are also included in Internet Services revenues.13

Operating ExpensesOperating Expense Categories.Bredas
 operating expenses are categorized as cost of services; depreciation and
 amortization; and selling, general and administration.Cost of Services.   This category includes
 expense for salaries and wages relating to plant operation and maintenance;
 network access costs; long distance provisioning costs; conference bridge
 provisioning costs; salary, wage, equipment, training, and advertising costs
 for cellular and retail services; postage; utilities; and Internet service
 provisioning costs.Depreciation and amortization.This category
 of costs includes depreciation of the telecommunication equipment and
 network; Internet services equipment; cable TV programming equipment and
 transmission equipment; buildings; and amortization of intangible assets.Selling, General and Administration.This
 category includes expenses for legal and accounting services; wages and
 benefits; contract service payments; travel, meals and lodging; investment
 fees; board of director fees and expense reimbursements; insurance premiums;
 supplies; advertising and promotion costs; dues and subscriptions; property
 taxes; and all customer service operations, marketing and sales operations,
 and administrative operations costs.Results of OperationsThe
 following table sets forth certain items reflected in Bredas consolidated
 statements of operations for the periods indicated, expressed as a percentage
 of total revenues:Three Months Ended
 June 30,

Six Months Ended
 June 30,2008

2007

2008

2007Operating revenues


100
%

100
%

100
%

100
%Cost of services


51
%

59
%

48
%

54
%Depreciation and
 amortization


9
%

10
%

8
%

10
%Selling, general and
 administrative


19
%

21
%

21
%

23
%Operating income


21
%

10
%

23
%

13
%Other income (expenses)


14
%

20
%

13
%

21
%Income taxes


13
%

11
%

14
%

12
%Net income


22
%

19
%

22
%

22
%14

Three Months Ended June 30, 2008 and 2007The table
 below sets forth the components of Bredas revenues for the three months
 ended June 30, 2008, compared to the same period in 2007.Three Months Ended
 June 30,

Change2008

2007

Amount

PercentOPERATING REVENUESLocal Exchange CarrierLocal network services

$
236,817

$
228,311

$
8,506


3.7
%Network access services


2,603,323


1,414,652


1,188,671


84.0
%Long distance services


74,025


71,386


2,639


3.7
%Cellular services


420,907


382,040


38,867


10.2
%Billing and collection services


4,470


3,198


1,272


39.8
%Miscellaneous


(766,519
)

43,059


(809,578
)

-1,880.2
%$
2,573,023

$
2,142,646

$
430,377


20.1
%Broadcast Services

$
171,625

$
178,713

$
(7,088
)

-4.0
%Internet services

$
177,983

$
164,390

$
13,593


8.3
%$
2,922,631

$
2,485,749

$
436,882


17.6
%There was an increase in
 total operating revenues for the three-month period ended June 30, 2008, when
 compared to the three-month period ended June 30, 2007, of $436,882, or
 17.6%.Local
 Exchange Carrier Services - $430,377Local exchange carrier
 services revenues accounted for 88.0% of all operating revenues in the
 three-month period ended June 30, 2008. There was a $430,377, or 20.1%,
 increase in local exchange carrier services revenues for the three-month
 period ended June 30, 2008, when compared to the three-month period ended
 June 30, 2007.Local network services
 revenues increased $8,506, or 3.7%, for the three months ended June 30, 2008,
 as compared to the same period in 2007, primarily because of the increased
 number of customers taking phone service from BTC, Inc. in Carroll, Iowa.
 Bredas long distance services revenue increased $2,639, or 3.7%, for the
 three months ended June 30, 2008, as compared to the three-month period ended
 June 30, 2007. Breda has seen a 3.4% increase in its long distance customer
 base when comparing the two periods, and the increase has offset a general
 decrease in the average minutes used by each customer on a monthly basis.
 Breda has received a good response to its package offerings that include
 local and long distance service from both residential and business customers.Network access services
 increased $1,188,671, or 84.0%, for the three-month period ended June 30,
 2008, when compared to the three-month period ended June 30, 2007. This
 increase mainly resulted from increased terminating access revenues received
 from traffic delivered to Bredas conference bridge in Carroll, Iowa. Breda
 has contracted with conference bridge vendors for the transport of long
 distance calls over Bredas networks. Bredas access revenue has also
 increased because, as noted previously, BTC, Inc.s switch in its Carroll,
 Iowa location, allows BTC, Inc. to receive tandem switching payments for15

consolidating and
 switching its traffic from six of Bredas own seven telephone exchanges.
 There was also some increase in Bredas access revenue because of an
 increased customer base taking Bredas long distance services. These
 customers generate access revenue when they use Bredas networks to make long
 distance calls.Cellular services
 increased $38,867, or 10.2%, for the three-month period ended June 30, 2008,
 when compared to the three-month period ended June 30, 2007. Both Bredas new
 cellular customer count and its returning customer base increased during the
 three-month periods ended June 30, 2008, when compared to the three-month
 period ended June 30, 2007. U.S. Cellular marketed aggressive promotions for
 the second quarter of 2008, and Breda saw its customer service statistics
 increase during the months March through June 2008 from these promotions.
 U.S. Cellular also now allows customers to enter into new contracts when
 their present contracts are 18 months old instead of the previous 20-month
 time frame.Billing and collection
 services increased $1,272, or 39.8%, during the three-month period ended June
 30, 2008 when compared to the three-month period ended June 30, 2007. This revenue
 correlates directly to the amount of long distance minutes that Bredas
 customers use on carrier long distance plans where Breda bills the carriers
 toll on the same invoice that Breda sends to its customers. Breda then
 receives a small fee for performing these billing services for the carriers.
 Miscellaneous revenues decreased $809,578, or 1,880.2%, for the three-month
 period ended June 30, 2008, when compared to the three-month period ended
 June 30, 2007. The decrease is mainly attributable to an additional $814,049
 allowance for doubtful interexchange carrier accounts taken by Breda for
 estimated uncollectible conference bridge network access revenue during the
 three-month period ended June 30, 2008. This allowance is Bredas estimate of
 access charges that may not be collected from its conference bridge services
 if a settlement is reached with some of the major carriers who believe they
 should pay reduced rates based on the volume of conference bridge minutes
 instead of paying BTC, Inc.s normal tariffed access rate on these minutes.
 Verizon filed a suit with the Iowa Utilities Board on May 29, 2008, against
 BTC, Inc. and two other CLECs regarding the provisioning of conference
 bridge services. Motions for extension of time have been agreed to by both
 parties as they continue to negotiate acceptable terms regarding this
 traffic. Breda may have to initiate, and is seriously considering taking
 collection action through legal means to receive payment for some of the
 conference bridge network access revenue services. The second main component
 of miscellaneous revenue is the receipt of rent from other telephone
 companies or industry carriers for the lease of capacity over fiber optic
 rings owned by Breda, or owned jointly with neighboring telephone companies.
 This source of miscellaneous revenue remained consistent when comparing the
 two three-month periods. The remaining decrease in miscellaneous revenues
 when comparing the three-month period ended June 30, 2008 to the three-month
 period ended June 30, 2007 resulted from a $9,640 decrease in tandem
 switching revenue from unrelated neighboring telephone companies. BTC, Inc.
 provided switching services to neighboring telephone companies from July 2006
 through August 2007. Because of industry requirements, BTC, Inc. was no
 longer able to provide this service to anyone other than its own exchanges
 after September 1, 2007. There is no comparable revenue for these switching
 services during the three month period ended June 30, 2008, when compared to
 the three-month period ended June 30, 2007.16

Broadcast Services  ($7,088)Broadcast
 services decreased $7,088, or 4.0%, for the three-month period ended June 30,
 2008, when compared to the three-month period ended June 30, 2007. Tele-Services
 continues to lose customers and to face stiff competition from satellite
 providers, who are able to provide extensive channel line-up packages, and
 who are now also able to include local channels in their package offerings. Breda
 has consolidated Tele-Services cable TV communities where feasible in order
 to reduce operating costs through consolidation of equipment and maintenance
 costs. Tele-Services continues to face declining population bases in the
 small rural communities served by Tele-Services and is actively attempting to
 sell all of its cable TV systems except those with combined head ends that
 are provisioned out of its local telephone service communities. Breda plans
 to discontinue operations in the small rural communities that it is not able
 to sell, or which are not provisioned out of one of its local telephone
 service communities. Breda has already taken the necessary notification and
 regulatory steps to discontinue cable TV services in Bayard, Iowa on July 1,
 2008, in Lohrville, Iowa on August 1, 2008, and in Thurman, Iowa on September
 1, 2008.Internet Services  $13,593Internet
 services revenue increased $13,593, or 8.3%, for the three-month period ended
 June 30, 2008, when compared to the three-month period ended June 30, 2007. Breda
 has seen a decrease of 42.4% in its dial-up customer base and a 76.1%
 increase in its high-speed Internet customer base when comparing the two
 three-month periods. The decrease in dialup Internet customers is the result
 of the intense competition by multiple suppliers in the Carroll, Iowa market
 area, and the migration of customers to high speed Internet because of an
 overall decrease in the price for high speed Internet. Breda is gaining
 high-speed Internet customers in the Carroll, Iowa area because BTC, Inc. is
 offering bundled services packages that include Internet services, as well as
 local telephone and other communication services. In May 2007, Breda
 consolidated its high speed Internet offering into two price and bandwidth
 options which has met with great customer acceptance and increased Bredas customer
 base for the three-month period ended June 30, 2008. Also, with the advent of
 newer technologies that could expand the range for high-speed Internet
 services from Bredas central office, Breda is offering newer longer-reach,
 high-speed Internet services in its remaining five outlying ILEC communities
 that previously were not able to receive those services from Breda. Breda was
 able to provide high speed Internet service to these previously unserved
 areas because reliable technology is now available in the industry, allowing
 Breda to provide service to customers residing a great distance from central
 office. These service offerings were begun during the fourth quarter 2006,
 and Breda has had a very favorable response to these new technology Internet
 offerings. This increase in customer base is, however, offset by a decrease
 in the price that customers are charged for Bredas high-speed Internet
 offerings. Breda began to market a high-speed wireless Internet service in the first quarter of 2008,
 which has received great
 acceptance in some of the rural areas that Breda had been unable to reach
 with their high speed Internet service. Breda also continues to face intense
 competition by multiple suppliers in the Carroll, Iowa market area.17

OPERATING
 EXPENSESThe table below sets forth the components of Bredas
operating costs
 for the three months ended June 30, 2008, compared to the same period in
 2007.Three Months Ended
 June 30,

Change2008

2007

Amount

PercentOPERATING EXPENSESCost of servicesPlant specific
operations

$
793,620

$
780,362

$
13,258


1.7
%Plant
nonspecific operations


90,250


98,802


(8,552
)

-8.7
%Cost of long
distance


66,629


42,011


24,618


58.6
%Cost of
cellular


319,267


298,975


20,292


6.8
%Cost of
internet


115,072


139,359


(24,287
)

-17.4
%Cost of
programming


113,531


109,124


4,407


4.0
%Total cost of
services

$
1,498,369

$
1,468,633

$
29,736


2.0
%Depreciation and
amortization

$
254,758

$
251,984

$
2,774


1.1
%Selling, general and
administrativeCustomer
operations

$
230,535

$
199,750

$
30,785


15.4
%Corporate
operations


266,913


279,705


(12,792
)

-4.6
%General
taxes


53,898


45,118


8,780


19.5
%Total selling,
general and administrative

$
551,346

$
524,573

$
26,773


5.1
%$
2,304,473

$
2,245,190

$
59,283


2.6
%Cost of
 Services - $29,736Cost
 of services increased $29,736, or 2.0%, for the three-month period ended June
 30, 2008, when compared to the three-month period ended June 30, 2007. There
 was a $355 increase in costs incurred for the provisioning of the conference
 bridge services for the three-month period ended June 30, 2008 when compared
 to the three-month period ended June 30, 2007, and is a direct correlation to
 the increased revenue generated from conference bridge services. All other
 plant specific and plant non-specific costs increased $4,351 when comparing
 the two three-month periods and resulted mainly from a decrease in outside
 plant maintenance and repairs, decreases in fiber lease expense, decreases in
 circuit equipment expense and increased labor and benefit expense. Breda is
 presently replacing some of its aged switches with soft switches and those
 costs will be capitalized. Cellular provisioning costs for the purchase of
 phones and accessories increased by 6.8%, or $20,292, for the three-month
 period ended June 30, 2008 when compared to the three-month period ended June
 30, 2007. Overall Internet costs decreased $24,287, or 17.4%, during the
 three-month period ending June 30, 2008, when compared to the three-month
 period June 30, 2007. With the conversion of dial-up customers to Bredas
 high-speed Internet services, Breda no longer has the magnitude of long distance
 charges and local telephone provisioning services costs especially for its
 customers in its southern Iowa telephone exchanges. Breda has also been able
 to provision its high speed Internet services over more cost effective
 network connections.Bredas
 cost to provide long distance service increased $24,618, or 58.6% for the
 three-month period ended June 30, 2008 when compared to the three-month
 period ended June 30, 2007. Breda had a 3.4% increase in customers
 subscribing to Bredas long distance18

services for the
 three-month period ended June 30, 2008, when compared to the three-month
 period ended June 30, 2007.While Tele-Services
 overall customer growth for cable TV services continued to decline, its
 programming costs increased $4,407, or 4.0%, for the three-month period ended
 June 30, 2008, when compared to the three-month period ended June 30, 2007.
 Even though Tele-Services is a member of an industry programming purchasing
 group, it continues to see significant increases in the programming rates
 paid by Tele-Services in order to offer its cable TV offerings.Depreciation
 and Amortization  $2,774Depreciation and
 amortization expense increased $2,774, or 1.1%, for the three-month period
 ended June 30, 2008, when compared to the three-month period ended June 30,
 2007. Breda had significant capital investments in outside plant equipment
 and in new financial and provisioning software during 2007. The depreciation
 on these items is now showing in the three-month period ended June 30, 2008,
 when compared to the three-month period ended June 30, 2007. Breda did not
 see a huge change in its depreciation expense when comparing the two
 three-month period because a significant amount of its assets are becoming
 depreciated in full which offsets the depreciation for new assets being
 placed in service.Selling,
 General and Administration  $26,773Selling, general and
 administration expenses increased $26,773, or 5.1%, for the three-month
 period ended June 30, 2008, when compared to the three-month period ended
 June 30, 2007. Customer operations increased $30,785, or 15.4%, for the
 three-month period ended June 30, 2008 when compared to the three-month
 period ended June 30, 2007, and mainly resulted from increased labor and
 benefit costs for the three-month period ended June 30, 2008. Corporate
 operations decreased $12,792, or 4.6%, when comparing the three-month periods
 and the decrease was mainly attributable to decreased consulting fees for the
 three-month period ended June 30, 2008 when compared to the three-month
 period ended June 30, 2007. There was a decrease in legal and consulting fees
 during the three-month period ended June 30, 2008, because Breda had incurred
 fees and costs to participate in the AWS auction in early 2007, and for
 which, there is no corresponding fees in the three-month period ended June
 30, 2008. Property tax expense increased $8,780, or 19.5%, when comparing the
 three-month period ended June 30, 2008 to the three-month period ended June
 30, 2007.OTHER INCOME (EXPENSE)The table below sets forth
 the components of other income (expense) for the three-month period ended
 June 30, 2008, compared to the same period in 2007.19

Three Months Ended
 June 30,

Change2008

2007

Amount

PercentOTHER INCOME (EXPENSE)Interest and dividend
income

$
127,298

$
139,525

$
(12,227
)

-8.8
%Gain or (Loss) on sale of
investments


9,102


(16,813
)

25,915


154.1
%Gain on disposal of
assets





8,163


(8,163
)

100.0
%Interest expense


(20,092
)

(23,375
)

3,283


-14.0
%Income from equity
investments


283,478


397,297


(113,819
)

-28.6
%Other, net


(2,164
)

(3,093
)

929


-30.0
%$
397,622

$
501,704

$
(104,082
)

-20.7
%Interest
 and Dividend Income.Interest
 and dividend income decreased $12,227, or 8.8%, for the three-month period
 ended June 30, 2008, when compared to the three-month period ended June 30,
 2007. Breda sold $1,281,931 of its marketable securities during the
 three-month period ended June 30, 2008, to fund its $1,377,673 of capital
 improvements. The decrease in marketable security investments and a decrease
 in interest rates caused the decrease in Bredas interest and dividend income
 for the three-month period ended June 30, 2008 when compared to the same
 three-month period in 2007.Gain
 (Loss) on sale of investments. Both the $9,102 gain on sale of investments for the three-month
 period ended June 30, 2008, and the $16,813 loss on sale of investments for
 the three-month period ended June 30, 2007, represent the loss on the
 redemption of temporary investments.Gain on
 disposal of assets.
 Breda had no gain or loss on the disposal of assets for the three-month
 period ended June 30, 2008. The $8,163 gain for the three-month period ended
 June 30, 2007 resulted from the sale of service vehicles.Interest
 Expense.The
 $3,283, or 14.0%, decrease in interest expense for the three-month period
 ended June 30, 2008, when compared to the three-month period ended June 30,
 2007, is the result of the reduction of the Rural Telephone Finance
 Cooperative loan balance on which interest is calculated because of the
 payment of the scheduled principal payments on the loan. There has been no
 change in interest rate and no additional loan amounts have been borrowed.Income
 from Equity Investments.Income from equity investments decreased $113,819, or 28.6%, for the
 three-month period ended June 30, 2008, when compared to the three-month
 period ended June 30, 2007. The equity investments income shown on Bredas
 financial statements is Bredas pro-rata share of the net income or net loss
 of each equity investment, based on Bredas percentage of ownership in each
 equity investment. The decrease in equity investments income reported on
 Bredas income statement for the three-month period ended June 30, 2008 is a
 reflection of the net increases and decreases in the net income of Bredas
 equity investments. Most of Bredas equity investments are in cellular
 partnerships. Some of these cellular investments now receive universal
 service funding which has increased their overall operating revenue. An
 additional source of income from equity investments arises from Bredas
 ownership interest in Alpine Communications, L.C., an operating telephone
 company in northeastern Iowa; and in Bug Tussel, LLC, a wireless cell site
 provider; and in Spiralight Network, LLC, a fiber optic network provider in
 rural areas of Wisconsin and Illinois.20

Other, Net.The
 $929 increase in other net income for the three-month period ended June 30,
 2008, when compared to the three-month period ended June 30, 2007, is mainly
 attributable to decreased partnership-related expenses.Income Tax Expense.Income
 taxes increased $121,545, or 46.7%, for the three-month period ended June 30,
 2008, when compared to the same period in 2007. The increase is a direct
 reflection of the increased income generated from operations and other income
 sources. The effective tax rate for the three-month period ended June 30,
 2008 is 37.6%, compared to a 35.1% tax rate for the same three-month period
 in 2007. The effective tax rate differs from the U.S. statutory rate due to
 state income taxes and the proportion of income from investments which are
 exempt from income tax.Net Income.Net
 income increased $151,972, or 31.5%, for the three-month period ended June
 30, 2008, when compared to the same period in 2007, and was mainly
 attributable to a increase in income from operations.Six Months Ended June 30, 2008 and 2007The table below sets forth the components of Bredas revenues
for the
 six months ended June 30, 2008, compared to the same period in 2007.Six Months Ended
 June 30,

Change2008

2007

Amount

PercentOPERATING REVENUESLocal Exchange CarrierLocal network
services

$
469,237

$
457,350

$
11,887


2.6
%Network access
services


5,046,305


2,747,369


2,298,936


83.7
%Long distance
services


142,502


140,539


1,963


1.4
%Cellular
services


755,998


754,498


1,500


0.2
%Billing and
collection services


7,453


6,444


1,009


15.7
%Miscellaneous


(1,220,104
)

99,379


(1,319,483
)

-1,327.7
%$
5,201,391

$
4,205,579

$
995,812


23.7
%Broadcast Services

$
342,572

$
356,986

$
(14,414
)

-4.0
%Internet services

$
353,094

$
320,225

$
32,869


10.3
%$
5,897,057

$
4,882,790

$
1,014,267


20.8
%There was an increase in total operating revenues for the six-month
 period ended June 30, 2008, when compared to the six-month period ended June
 30, 2007, of $1,014,267, or 20.8%.Local Exchange Carrier Services - $995,812Local exchange carrier services revenues accounted for 88.2% of all
 operating revenues in the six-month period ended June 30, 2008. There was a
 $995,812, or 23.7%, increase in local exchange carrier services revenues for
 the six-month period ended June 30, 2008, when compared to the six-month
 period ended June 30, 2007.21

Local network services revenues increased $11,887, or 2.6%, for the
 six months ended June 30, 2008, as compared to the same period in 2007,
 primarily because of the increased number of customers taking phone service
 from BTC, Inc. in Carroll, Iowa. Bredas long distance services revenue
 increased $1,963, or 1.4%, for the six months ended June 30, 2008, as
 compared to the six-month period ended June 30, 2007. Breda has seen a 3.4%
 increase in its long distance customer base when comparing the two periods,
 and the increase has offset a general decrease in the average minutes used by
 each customer on a monthly basis. Breda has received a good response to its
 package offerings that include local and long distance service from both
 residential and business customers.Network access services increased $2,298,936, or 83.7%, for the
 six-month period ended June 30, 2008, when compared to the six-month period
 ended June 30, 2007. This increase mainly resulted from increased terminating
 access revenues received from traffic delivered to Bredas conference bridge
 in Carroll, Iowa. Breda has contracted with conference bridge vendors for the
 transport of long distance calls over Bredas networks. Bredas access
 revenue has also increased because, as noted previously, BTC, Inc.s switch
 in its Carroll, Iowa location, allows BTC, Inc. to receive tandem switching payments
 for consolidating and switching its traffic from six of Bredas own seven
 telephone exchanges. There was also some increase in Bredas access revenue
 because of an increased customer base taking Bredas long distance services.
 These customers generate access revenue when they use Bredas networks to
 make long distance calls.Cellular services increased $1,500, or .2%, for the six-month
period
 ended June 30, 2008, when compared to the six-month period ended June 30,
 2007. Bredas new cellular customer activations decreased and its returning
 customer base contracts increased during the six-month period ended June 30,
 2008, when compared to the six-month period ended June 30, 2007. U.S.
 Cellular marketed aggressive promotions for the second quarter of 2008, and
 Breda saw its customer service statistics increase during the months March
 through June 2008 from these promotions. U.S. Cellular also now allows
 customers to enter into new contracts when their present contracts are 18
 months old instead of the previous 20-month time frame. Breda receives less
 revenue from commissions on retention contracts than from new customer
 activations.Billing and collection services increased $1,009, or 15.7%, during
 the six-month period ended June 30, 2008 when compared to the six-month
 period ended June 30, 2007. This revenue correlates directly to the amount of
 long distance minutes that Bredas customers use on carrier long distance
 plans where Breda bills the carriers toll on the same invoice that Breda sends
 to its customers. Breda then receives a small fee for performing these
 billing services for the carriers. Miscellaneous revenues decreased
 $1,319,483, or 1,327.7%, for the six-month period ended June 30, 2008, when
 compared to the six-month period ended June 30, 2007. The decrease is mainly
 attributable to a $1,310,604 allowance for doubtful interexchange carrier
 accounts taken by Breda for estimated uncollectible conference bridge network
 access revenue during the six-month period ended June 30, 2008. This
 allowance is Bredas estimate of access charges that may not be collected
 from its conference bridge services if a settlement is reached with some of
 the major carriers who believe they should pay reduced rates based on the
 volume of conference bridge minutes instead of paying BTC, Inc.s normal
 tariffed access rate on these minutes. Verizon filed a suit with the Iowa
 Utilities Board on May 29, 2008, against BTC, Inc. and two other CLECs
 regarding the provisioning of conference bridge services. Motions for
 extension of time have been agreed to by both parties as they continue to
 negotiate22

acceptable terms regarding this traffic. Breda may have to
initiate,
 and is seriously considering taking collection action through legal means to
 receive payment for some of the conference bridge network access revenue
 services. The second main component of miscellaneous revenue is the receipt
 of rent from other telephone companies or industry carriers for the lease of
 capacity over fiber optic rings owned by Breda, or owned jointly with
 neighboring telephone companies. This source of miscellaneous revenue
 remained consistent when comparing the two six-month periods. The remaining
 decrease in miscellaneous revenues when comparing the six-month period ended
 June 30, 2008 to the six-month period ended June 30, 2007 resulted from a
 $9,640 decrease in tandem switching revenue from unrelated neighboring
 telephone companies. BTC, Inc. provided switching services to neighboring
 telephone companies from July 2006 through August 2007. Because of industry
 requirements, BTC, Inc. was no longer able to provide this service to anyone
 other than its own exchanges after September 1, 2007. There is no comparable
 revenue for these switching services during the three month period ended June
 30, 2008, when compared to the six-month period ended June 30, 2007.Broadcast Services  ($14,414)Broadcast services decreased $14,414, or 4.0%, for the six-month
 period ended June 30, 2008, when compared to the six-month period ended June
 30, 2007. Tele-Services continues to lose customers and to face stiff
 competition from satellite providers, who are able to provide extensive
 channel line-up packages, and who are now also able to include local channels
 in their package offerings. Breda has consolidated Tele-Services cable TV
 communities where feasible in order to reduce operating costs through
 consolidation of equipment and maintenance costs. Tele-Services continues to
 face declining population bases in the small rural communities served by
 Tele-Services and is actively attempting to sell all of its cable TV systems
 except those with combined head ends that are provisioned out of its local
 telephone service communities. Breda plans to discontinue operations in the
 small rural communities that it is not able to sell, or which are not
 provisioned out of one of its local telephone service communities. Breda has
 already taken the necessary notification and regulatory steps to discontinue
 cable TV services in Bayard, Iowa on July 1, 2008, in Lohrville, Iowa on
 August 1, 2008, and in Thurman, Iowa on September 1, 2008.Internet Services  $32,869Internet services revenue increased $32,869, or 10.3%, for the
 six-month period ended June 30, 2008, when compared to the six-month period
 ended June 30, 2007. Breda has seen a decrease of 36.2% in its dial-up
 customer base and a 60.9% increase in its high-speed Internet customer base
 when comparing the two six-month periods. The decrease in dialup Internet
 customers is the result of the intense competition by multiple suppliers in
 the Carroll, Iowa market area, and the migration of customers to high speed
 Internet because of an overall decrease in the price for high speed Internet.
 Breda is gaining high-speed Internet customers in the Carroll, Iowa area
 because BTC, Inc. is offering bundled services packages that include Internet
 services, as well as local telephone and other communication services. In May
 2007, Breda consolidated its high speed Internet offering into two price and
 bandwidth options which has met with great customer acceptance and increased
 Bredas customer base for the six-month period ended June 30, 2008. Also,
 with the advent of newer technologies that can expand the range for
 high-speed Internet services from Bredas central office, Breda is offering
 new longer-reach, high-speed Internet services in its remaining five outlying
 ILEC communities that previously were not able to receive those services from
 Breda. Breda was able to provide high speed Internet service23

to these previously unserved areas because reliable technology is
now
 available in the industry, allowing Breda to provide service to customers
 residing a great distance from central office. These service offerings were
 begun during the fourth quarter 2006, and Breda has had a very favorable
 response to these new technology Internet offerings. This increase in
 customer base is, however, offset by a decrease in the price that customers
 are charged for Bredas high-speed Internet offerings. Breda began to market
 a high-speed wireless Internet service
 in the first quarter of 2008, which has received
 great acceptance in some of the rural areas that Breda had been unable to
 reach with their high speed Internet service. Breda also continues to face
 intense competition by multiple suppliers in the Carroll, Iowa market area.OPERATING
 EXPENSESThe table below sets forth the components of Bredas
operating costs
 for the six months ended June 30, 2008, compared to the same period in 2007.Six Months Ended
June 30,

Change2008

2007

Amount

PercentOPERATING EXPENSESCost of servicesPlant specific
operations

$
1,464,915

$
1,213,181

$
251,734


20.7
%Plant
nonspecific operations


177,272


173,782


3,490


2.0
%Cost of long
distance


119,695


97,806


21,889


22.4
%Cost of
cellular


605,113


588,556


16,557


2.8
%Cost of
internet


225,687


331,383


(105,696
)

-31.9
%Cost of
programming


229,952


215,702


14,250


6.6
%Total cost of
services

$
2,822,634

$
2,620,410

$
202,224


7.7
%Depreciation and
amortization

$
506,699

$
486,410

$
20,289


4.2
%Selling, general and
administrativeCustomer
operations

$
453,942

$
416,319

$
37,623


9.0
%Corporate
operations


656,009


640,710


15,299


2.4
%General
taxes


108,080


92,350


15,730


17.0
%Total selling,
general and administrative

$
1,218,031

$
1,149,379

$
68,652


6.0
%$
4,547,364

$
4,256,199

$
291,165


6.8
%Cost of Services - $202,224Cost of services increased $202,224, or 7.7%, for the six-month
 period ended June 30, 2008, when compared to the six-month period ended June
 30, 2007. There was a $270,493 increase in costs incurred for the
 provisioning of the conference bridge services for the six-month period ended
 June 30, 2008 when compared to the six-month period ended June 30, 2007, and
 is a direct correlation to the increased revenue generated from conference
 bridge services. All other plant specific and plant non-specific costs
 decreased $15,269 when comparing the two six-month periods and resulted
 mainly from a decrease in outside plant maintenance and repairs, decreases in
 fiber lease expense, decreases in circuit equipment expense and decreases in
 overtime labor and benefits. Breda is presently replacing some of its aged
 switches with soft switches and those costs will be capitalized. Cellular
 provisioning costs including the purchase of phones and accessories increased
 by 2.8%, or $16,557, for the six-month period ended June 30, 2008 when
 compared to the six-month24

period ended
 June 30, 2007. Overall Internet costs decreased $105,696, or 31.9%, during
 the six-month period ending June 30, 2008, when compared to the six-month
 period June 30, 2007. With the conversion of dial-up customers to Bredas
 high-speed Internet services, Breda no longer has the magnitude of long
 distance charges and local telephone provisioning services costs especially
 for its customers in its southern Iowa telephone exchanges. Breda has also
 been able to provision its high speed Internet services over more cost
 effective network connections.Bredas cost
 to provide long distance service increased $21,889, or 22.4%, for the
 six-month period ended June 30, 2008 when compared to the six-month period
 ended June 30, 2007. Breda had a 3.4% increase in customers subscribing to
 Bredas long distance services for the six-month period ended June 30, 2008,
 when compared to the six-month period ended June 30, 2007.While
 Tele-Services overall customer growth for cable TV services continued to
 decline, its programming costs increased $14,250, or 6.6%, for the six-month
 period ended June 30, 2008, when compared to the six-month period ended June
 30, 2007. Even though Tele-Services is a member of an industry programming
 purchasing group, it continues to see significant increases in the
 programming rates paid by Tele-Services in order to offer its cable TV
 offerings.Depreciation and Amortization  $20,289Depreciation
 and amortization expense increased $20,289, or 4.2%, for the six-month period
 ended June 30, 2008, when compared to the six-month period ended June 30,
 2007. Breda had significant capital investments in outside plant equipment
 and in new financial and provisioning software during 2007. The depreciation
 on these items is now showing in the six-month period ended June 30, 2008,
 when compared to the six-month period ended June 30, 2007.Selling, General and Administration  $68,652Selling,
 general and administration expenses increased $68,652, or 6.0%, for the six-month
 period ended June 30, 2008, when compared to the six-month period ended June
 30, 2007. Customer operations increased $37,623, or 9.0%, for the six-month
 period ended June 30, 2008 when compared to the six-month period ended June
 30, 2007, and mainly resulted from increased labor and benefit costs for the
 six-month period ended June 30, 2008. Corporate operations increased $15,299,
 or 2.4%, when comparing the six-month periods and the increase was mainly
 attributable to increased computer and information technology maintenance
 fees for the six-month period ended June 30, 2008 when compared to the
 six-month period ended June 30, 2007. Property tax expense increased $15,730,
 or 17.0%, when comparing the six-month period ended June 30, 2008 to the
 six-month period ended June 30, 2007 and was the result of new appraisals and
 valuations undertaken by most all of Iowas counties, which caused higher
 appraised property values or new methods of tax rate computation causing an
 overall increase in property tax rates.OTHER INCOME
 (EXPENSE)The table
 below sets forth the components of other income (expense) for the six-month
 period ended June 30, 2008, compared to the same period in 2007.25

Six Months Ended 
 June 30,

Change2008

2007

Amount

PercentOTHER INCOME
 (EXPENSE)Interest and
 dividend income

$
292,734

$
283,697

$
9,037


3.2
%Gain or
 (Loss) on sale of investments


4,801


(21,608
)

26,409


-122.2
%Gain on
 disposal of assets


8,985


9,963


(978
)

9.8
%Interest
 expense


(41,028
)

(47,536
)

6,508


-13.7
%Income from
 equity investments


517,153


813,812


(296,659
)

-36.5
%Other, net


(12,036
)

(15,032
)

2,996


-19.9
%$
770,609

$
1,023,296

$
(252,687
)

-24.7
%Interest and Dividend Income.Interest and
 dividend income increased $9,037, or 3.2%, for the six-month period ended
 June 30, 2008, when compared to the six-month period ended June 30, 2007.
 Breda sold $1,653,598 of its marketable securities during the six-month
 period ended June 30, 2008, to fund its $1,657,187 of capital improvements.
 The decrease in marketable security investments and a decrease in interest
 rates caused some decrease in Bredas interest and dividend income for the
 six-month period ended June 30, 2008 when compared to the same six-month
 period in 2007. The net overall increase in interest and dividend income
 resulted from a $17,899 extraordinary dividend payout from Westside Telephone
 and Prairie Telephones investments in Iowa Network Services in the first
 quarter of 2008. Bredas interest income also increased approximately $21,000
 for the six-month period ended June 30, 2008 from accrued interest on the
 promissory note to Spiralight Network, LLC, and for which there is no
 corresponding entry for the six-month period ended June 30, 2007.Gain (Loss) on sale of investments. Both the
 $4,801 gain on sale of investments for the six-month period ended June 30,
 2008, and the $21,608 loss on sale of investments for the six-month period
 ended June 30, 2007, represent the loss on the redemption of temporary
 investments.Gain on disposal of assets. The $8,985 gain
 on disposal of assets for the six-month period ended June 30, 2008 and the
 $9,963 gain on disposal of assets for the six-month period ended June 30,
 2007 resulted from the sale of service vehicles.Interest Expense.The $6,508, or 13.7%,
 decrease in interest expense for the six-month period ended June 30, 2008,
 when compared to the six-month period ended June 30, 2007, is the result of
 the reduction of the Rural Telephone Finance Cooperative loan balance on
 which interest is calculated because of the payment of the scheduled
 principal payments on the loan. There has been no change in interest rate and
 no additional loan amounts have been borrowed.Income from Equity Investments.Income from
 equity investments decreased $296,659, or 36.5%, for the six-month period
 ended June 30, 2008, when compared to the six-month period ended June 30,
 2007. The equity investments income shown on Bredas financial statements is
 Bredas pro-rata share of the net income or net loss of each equity
 investment, based on Bredas percentage of ownership in each equity
 investment. The decrease in equity investments income reported on Bredas
 income statement for the six-month period ended June 30, 2008 is a reflection
 of the net increases and decreases in the net income of Bredas equity
 investments. Most of Bredas equity investments are in cellular partnerships.
 Some of these cellular investments now receive universal service funding
 which has26

increased
 their overall operating revenue. An additional source of income from equity
 investments arises from Bredas ownership interest in Alpine Communications,
 L.C., an operating telephone company in northeastern Iowa; and in Bug Tussel,
 LLC, a wireless cell site provider; and in Spiralight Network, LLC, a fiber
 optic network provider in rural areas of Wisconsin and Illinois. Two of the
 non-cellular investments are still considered start-up operations and are
 experiencing negative income from the capitalization of their networks.Other, Net.The $2,996 increase in other net
 income for the six-month period ended June 30, 2008, when compared to the
 six-month period ended June 30, 2007, is mainly attributable to decreased
 partnership-related expenses.Income Tax Expense.Income taxes increased
 $230,810, or 39.9%, for the six-month period ended June 30, 2008, when
 compared to the same period in 2007. The increase is a direct reflection of
 the increased income generated from operations and other income sources. The
 effective tax rate for the six-month period ended June 30, 2008 is 38.2%,
 compared to a 35.1% tax rate for the same six-month period in 2007. The
 effective tax rate differs from the U.S. statutory rate due to state income
 taxes and the proportion of income from investments which are exempt from
 income tax.Net Income.Net income increased $239,605,
 or 22.4%, for the six-month period ended June 30, 2008, when compared to the
 same period in 2007, and was mainly attributable to a increase in income from
 operations.Liquidity and Capital ResourcesBreda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, 2008 and June 30, 2007, cash provided by
 operating activities was $834,913 and $1,597,400 respectively.To fund any
 significant future acquisitions or investments, Breda would consider the
 redemption of its short-term and long-term marketable securities investments;
 the use of its revolving lines of credit with the Rural Telephone Finance
 Cooperative; or the addition of long-term debt from industry lenders. Breda
 presently has an unused line of credit with the Rural Telephone Finance
 Cooperative of $1,500,000, and Prairie Telephone has an unused line of credit
 with the Rural Telephone Finance Cooperative of $500,000. Breda believes that
 its present revenues would be able to sustain the costs of additional debt if
 the need arose. All potential acquisitions or investments will, however, be
 evaluated on their own merits for, among other things, potential cash and
 revenue production, and if the potential return on investment will be
 sufficient to incur the additional debt.Breda has
 historically funded its operations and capital expenditure requirements
 primarily from cash from operations. The following table summarizes Bredas
 short-term liquidity, as of June 30, 2008, and December 31, 2007.27

As ofJune 30,
 2008

December 31,
 2007Short-Term
 LiquidityCurrent
Assets

$
6,212,173

$
4,342,424Current
Liabilities


2,425,815


1,544,835Net Working
Capital

$
3,786,358

$
2,797,589Cash and Cash
Equivalents

$
614,920

$
1,104,327Short Term
Marketable Securities

$
491,070

$
480,311Available on
Line of Credit

$
2,000,000

$
2,000,000Current
 assets increased $1,869,749, or 43.1%%, for the six-month period ended June
 30, 2008, when compared to the year ended December 31, 2007. The net increase
 was due mainly to the $478,648 decrease in cash, cash equivalents, and
 marketable securities, and the $2,011,037 increase in accounts receivable,
 which was due to unpaid conference bridge network access services. As
 discussed previously, interexchange carriers such as Verizon, Sprint and
 AT&T are refusing to pay for these services. Bredas inventory increased
 $70,401, its deferred income taxes increased $164,620, and its other current
 assets increased $91,866. $90,000 of the other current assets is money held
 for the purchase of a partners one-third interest in a wireless partnership.
 The transaction is awaiting FCC approval for the transfer of PCS licenses.At June 30,
 2008, and at December 31, 2007, Breda held a $254,383 note receivable from
 Jaguar Communications, Inc. earning interest at the rate of 4.81%, and which
 was acquired with Prairie Telephones sale of its interest in Desktop Media,
 LLC in September 2007. Breda also holds a $480,000 promissory note to its
 unconsolidated affiliate, Spiralight Network, LLC, which earns interest at
 the rate of 8.5% per annum. These notes account for the increase in interest
 receivable when comparing the two six-month periods.Current
 liabilities increased $880,980, or 57.0%, for the six-month period ended June
 30, 2008, when compared to the year ended December 31, 2007. Accounts payable
 increased $808,680, or 95.1%, when comparing the two periods, which is mainly
 attributable to an increase in the amount incurred as of June 30, 2008 for
 the provisioning of conference bridge services, as compared to the amounts
 incurred for those services as of December 31, 2007. Other increased accounts
 payable resulted from construction projects and associated consulting fees.
 Accrued taxes increased $17,814, or 4.6%, for the six-month period ended June
 30, 2008, when compared to the year ended December 31, 2007. The increase is
 attributable to an increase in the provision for income taxes for the first
 quarter of 2008. There was also an increase in other accrued liabilities of
 $48,193, which represents accrued payroll and associated benefits for the six-month
 period ended June 30, 2008, when compared with the year ended December 31,
 2007.The
 following table summarizes Bredas sources and uses of cash for the three
 months ended June 30, 2008 and 2007.For the Six Months Ended
 June 30,2008

2007Net Cash Provided
(Used)Operating
Activities

$
834,913

$
1,597,400Investing
Activities


(946,359
)

(541,314
)Financing
Activities


(377,961
)

(303,527
)28

For the six
 months ended June 30, 2008 and June 30, 2007, cash provided by operating
 activities was $834,913 and $1,597,400, respectively.Cash used in
 investing activities was $946,359 for the six-months ended June 30, 2008.
 Cash used for investing activities was $541,314 for the six-month period
 ended June 30, 2007. There was a decrease in cash used to purchase marketable
 securities of $473,391 for the six-month period ended June 30, 2008, when
 compared to the same period in 2007, but there was a $550,588 increase in the
 purchase of equity investments during the six-month period ended June 30,
 2008. Breda invested in a company with three other partner ILECs to purchase
 available telephone companies. As noted in this filing, the new company
 purchased Swisher Telephone Company in May 2008. There was an increase in
 cash used for capital expenditures of $1,323,448, as well as an increase in
 proceeds from the redemption of marketable securities of $1,055,282, for the
 six-month period ended June 30, 2008, when compared to the same period in
 2007.Cash used in
 financing activities was $377,961 for the six-month period ended June 30,
 2008, and $303,527 for the six-month period ended June 30, 2007. Cash used to
 repay Rural Telephone Finance Cooperative long-term debt was $92,308 and
 $86,415 respectively. Cash used during the six-month period ended June 30,
 2008 to redeem eighty-five shares of Breda Telephone Corp. common stock was
 $38,845. Cash used to pay dividends to shareholders during the six-month
 periods ended June 30, 2008 and June 30, 2007 were $246,808 and $217,112,
 respectively. Dividends paid were $8 per share in 2008 and $7 per share in
 2007.Long Term
 DebtAs of June
 30, 2008, Breda had $852,894 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 CommitmentsBredas
 ongoing capital commitments include capital expenditures and debt service
 requirements. For the six months ended June 30, 2008, capital expenditures
 were $1,657,187.29

Bredas
 contractual obligations as of June 30, 2008 are:2008

$
194,0032009


207,2302010


221,3582011


236,4492012 and
 After


187,857Breda
 believes that cash provided by operations and current cash balances will be
 adequate to meet Bredas foreseeable operational, capital expenditure, and
 debt service requirements. However, Bredas actual cash needs and the
 availability of required funding may differ from Bredas expectations and
 estimates, and those differences could be material. Future capital requirements
 will depend on many factors, including, among others, the demand for Bredas
 services in Bredas existing markets and regulatory, technological and
 competitive developments.Off-Balance
 Sheet Risk and Concentration of Credit RiskBreda has no
 off-balance sheet exposure or risk.Breda has
 certain financial instruments which could potentially subject Breda to
 concentrations of credit risk. These financial instruments consist primarily
 of trade receivables and cash and temporary cash investments.Other Activities and IssuesRecent
 Accounting PronouncementIn May 2008,
 The Financial Accounting Standards Board (FASB) issued a Statement of
 Financial Accounting Standards FAS No. 157  Fair Value Measurements. This
 Statement defines fair value, establishes a framework for measuring fair
 value in generally accepted accounting principles (GAAP), and expands
 disclosures about fair value measurements. This Statement does not require
 any new fair value measurements, but for some entities, the application of
 the Statement would change current practice.While the
 fair value concept has been in place for many decades, the FASB has deferred
 the use of fair value for all assets and liabilities, and currently only
 mandates it for financial assets and liabilities. The new required estimates
 are intended to provide investors with the value of an asset or liability on
 the measurement day, rather than reporting a value based on some future date,
 such as a future settlement or maturity date.Whether and
 when fair value is required depends on the types of financial assets that are
 the subject of the accounting and, to varying degrees, the reporting entitys
 intent with respect to those assets. Fair value is used on an ongoing basis
 principally for derivatives, trading securities, and available-for-sale
 securities. Fair value also is used to recognize impairments, that is,
 declines in the value of financial assets in down markets. And while loans
 held for investment are subject to impairment, they are not necessarily
 written down to fair value, but more typically to the present value of
 expected future cash flows discounted at the loans original effective
 interest rate.30

Bredas marketable securities are held-to-maturity
securities, not
 trading securities. Breda therefore reports the fair value of these bonds and
 securities as a footnote to its financial statements. The issuance of the
 Statement of Financial Accounting Standards FAS No. 157  Fair Value
 Measurements had no effect on the companys financial position, results of
 operations or cash flows.In July 2006, the Financial Accounting Standards Board (FASB)
issued
 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxesan
 interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting
 for uncertainty in income taxes recognized in accordance with Statement of
 Financial Accounting Standards No. 109, Accounting for Income Taxes. Guidance
 is provided on derecognition, classification, interest and penalties
 accounting in interim periods, disclosure and transition. FIN 48 requires
 that we recognize in our financial statements the impact of a tax position,
 if that position is more likely than not of being sustained on audit, based
 on the technical merits of the position. The provisions of FIN 48 were
 effective as of the beginning of our 2007 fiscal year, with the cumulative
 effect of the change in accounting principle recorded as an adjustment to
 opening retained earnings. Adoption of FIN 48 on January 1, 2007, had no
 effect on our financial position, results of operations or cash flows.Other Activities and IssuesRegulatory and CompetitiveAccess 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 intercarrier compensation plans which
 are now before the FCC. One plan before the FCC is the Missoula Plan, which
 is a set of proposals put together by a coalition of telecom companies,
 including the Rural Alliance. The Missoula Plan grew out of a set of
 proposals to counter the big carriers and the original FCC plan to use bill
 and keep for intercarrier compensation. Bill and keep would have meant that
 a company such as Breda would bill its own customers and get no payments from
 any other carrier, such as AT&T or MCI, for the use of its networks to
 carry toll traffic.While various industry organizations have compiled and submitted
data
 since 2005 and the FCC continues to solicit comments, the complexity of the
 issue has resulted in no final plan being adopted. In January 2007, the
 supporters of the Missoula Plan filed an amendment intended to target new
 federal support to states that have already reduced intrastate access rates
 and the highest end-user rates.31

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 Iowa Utilities Board regarding intrastate rates, and
 whether alternative intrastate intercarrier compensation mechanisms should be
 investigated. While various industry organizations have compiled data and
 worked on this issue since 2003, no final plan had been adopted on a
 statewide level. Since access charge revenues constitute a substantial
 portion of Bredas total consolidated revenues, this is an area of material
 risk to Breda and its subsidiaries.The Iowa Utilities Board conducted a hearing on the ITA Intrastate
 Access Tariff on April 1 and 2, 2008. Sprint, Verizon and AT&T asked the
 IUB to reduce the intrastate access rates in the ITA tariff from present
 levels down to the NECA interstate levels. Specifically, the interexchange
 carriers requested that the IUB eliminate the 1.5-cent transport
 interconnection charge, reduce the local switching charge by 1.9 cents, and
 eliminate the 3-cent common carrier line charge. The total requested
 reduction would be 6.4 cents on each intrastate minute. The parties involved
 in the hearing had until April 25, 2008 to file post-hearing briefs. The IUB
 issued a final order on May 30, 2008 where it directed the ITA to within 30
 days, remove the 1.5 cent transport interconnection rate element and to lower
 the local switching rate element to 2.4435 cents per minute to mirror the
 NECA interstate tariff rate. The IUB also stated that it would open a rule
 making to determine whether to eliminate the 3-cent common carrier line
 charge. All telephone companies such as Breda concurring in the ITA
 intrastate tariff would be required by June 29, 2008, to reduce their
 intrastate access charges by 3.5 cents.The IUB did
 note that it was sensitive to the potential revenue losses that some
 independent local exchange carriers would experience from this action. On
 June 19, 2008, the ITA filed an Application for Rehearing or Reconsideration
 and for Stay of Order Pending Application with the IUB in the intrastate
 tariff docket. ITA submitted data to show that of 136 companies studied who
 concur in the ITA Tariff, the total revenue loss from the IUBs Order would
 exceed $14 million per year. ITA also submitted data that showed an average
 rate increase of over $5.65 per line per month would be necessary to recoup
 this revenue loss. Their data also showed that this order would have a
 significant impact on rural carrier investments and would cause a significant
 drain of resources out of rural Iowa. Bredas independent analysis showed
 that Bredas average rate increase to offset the projected revenue shortfall
 would average $5.69 per line per month. However, some of its individual ILEC
 would be over $8 per month to offset the projected revenue shortfall. Breda
 determined that its intrastate access revenue shortfall if the IUB Order were
 to be implemented could exceed $221,450 per year.The ITA asked the IUB to enter a stay that delayed the effective
date
 of the June 29th deadline for ITA to reduce its intrastate access
 rates while the IUB considers the economic impact of its Order. The ITA also
 requested the IUB open an investigation docket or a rulemaking docket to
 consider reasonable approaches to the determination of Iowa intrastate access
 rates; establish a three-year phase-in period for implementation of32

the 1/3
 reduction in the intrastate access charges; and delay implementation of the
 Order for 90 days. On June 27, 2008, the IUB granted ITAs application for
 Stay of the May 30, 2008 order on intrastate access, and it also granted the
 ITAs Motion for Rehearing to further consider the existing record and the
 arguments. No further decisions have been received from the IUB as of the
 date of this filing.Breda believes that it is extremely likely that intra-state access
 rates will be lowered, and if that occurs, it will have a negative impact on
 Bredas operating income.Universal
 service funding is also an important part of Bredas consolidated revenues,
 and the regulation of universal service funding by the FCC is another area of
 material risk to Breda and its subsidiaries. The universal service funds are
 also now being paid to more telecommunications providers than in the past.
 Breda anticipates that there may be changes in the future on how universal
 service funds are disbursed among the numerous eligible telecommunications providers.In August 2005, the FCC opened an extremely broad comment
proceeding
 on Universal Service Funding (USF), in which it sought input on a variety of
 specific USF proposals offered by members of the Federal-State Joint Board on
 Universal Service. State industry associations have been meeting with FCC
 staff members and with various Washington legislative staff members to
 discuss proposed legislation preserving and improving USF, including how
 funds are expended and assessing levels of broadband deployment in Iowa. The
 issues at stake are both on how the revenue is assessed and generated for the
 universal service fund, and the criteria for the disbursement of funds from
 the universal service pool. Some of the suggested changes on the revenue side
 of the debate would be to have all current entities paying into the USF
 continue to pay into the fund; have any service provider that uses telephone
 numbers, IP (Internet Protocol) addresses or their functional equivalents to
 provide real-time voice communications pay into the fund; and any provider
 that offers a network connection for a fee to the public, including DSL,
 cable modem connections, WiMax and broadband over power lines, pay into the
 fund. This would increase the revenue base to more than just carriers
 providing telephone line services.On the disbursement side, some proposals would limit the number of
 eligible telecommunication carriers by specifying the criteria that must be
 met by recipients, including that the provider must provide service
 throughout their service area; remain functional in emergency situations; and
 satisfy both consumer protection and service quality standards. Unlike
 present USF payments, the proposals include that USF payments would allow
 recovery based on actual costs, rather than the incumbent carriers costs.On May 1, 2008, the FCC voted in favor of an interim cap on
payments
 to competitive eligible telecommunications carriers under the USF High Cost
 funding program. Most CETC recipients are wireless carriers, and the FCC is
 attempting to slow the growth of payments to CETCs, which have grown from
 approximately $1.5 million in 2000 to more than $1 billion in 2007. On July
 2, 2008, the Federal Register published the FCC order adopting an interim cap
 on USF payments to CETCs. Therefore the order will become effective on August
 1, 2008. Breda supports this action of the FCC.33

Breda believes that federal universal service fund criteria will
 continue to change but is unable to determine estimated time frames or
 estimated financial ramifications as of the date of this filingThe National Exchange Carrier Association (NECA) has been delegated
 some authority by the FCC regarding the regulation of interstate access
 charge rates. In a letter dated January 15, 2007, NECA notified Breda that
 beginning July 1, 2007 most carriers could expect an overall average cost
 settlement decrease of 7.27% as a result of the new settlement formulas filed
 by NECA with the FCC in December 2006. Overall, NECA projected that the majority
 of companies settlements will decrease between 5% and 15%. The decrease
 generally reflects new overall reduced cost levels and decreases due to Line
 Haul Distance Sensitive formula structure changes. NECAs 2007 Modification
 of Average Schedules filing included a proposed 24-month transition plan to
 help companies adjust to reduced settlements.During the nine-month period from July 1, 2007 through June 30,
2008,
 Breda and its subsidiaries experienced an overall increase in average monthly
 settlement revenue mainly due to the increase in interstate access rate
 payments for the individual elements making up the interstate access rate
 that also became effective on July 1, 2007.On June 16, 2008, the National Exchange Carrier Association filed
 changes to Interstate Tariff #5. In that tariff filing, NECA proposed an
 average increase of 4.6% for its traffic sensitive switched access rates, and
 an average increase of .2% for its special access rates with an effective
 date of July 1, 2008. AT&T and Verizon asked the FCC to suspend and
 investigate NECAs tariff filing, but the FCC rejected this request on June
 30, 2008, and the interstate tariff went into effect July 1, 2008.Phantom traffic is another issue related to intercarrier
compensation.
 Studies have shown that a sizable portion (sometimes up to 20-30%) of traffic
 now terminating on ILEC switches is being delivered in a form in which
 billing information is absent, lost, stripped or altered. Studies have also
 shown that ILECs, such as Breda, could be losing between 10-15% of revenue
 as a result of phantom traffic. Another problem is that even when the
 originating service provider of the phantom traffic is discovered, it is
 difficult to get proper payment from the provider, in part because there are
 no penalties imposed for failing to make payment. In November 2006,
 supporters of the Missoula Plan filed a proposal for a uniform process for
 the creation and exchange of call detail data to be implemented as part of an
 interim phantom traffic solution. The proposal sets forth standards and
 details responsibilities by which carriers are to create call detail records
 and call summary information, as well as applicable charges for the records.
 The FCC has put this proposal out for public comment. Breda and other
 carriers believe that penalty and arbitration provisions should also be
 implemented in addition to the proposed truth in labeling requirements. The
 Iowa Telecommunications Association Qwest Committee is also working with
 Qwest to address the issue of phantom traffic that traverses its network, and
 for which Qwest refuses to pay terminating access charges to ILECs. No final
 resolution had come out of these efforts as of the date of this filing.Beginning in late 2006, AT&T began withholding payment of
access
 charges from many of the Iowa independent telephone companies (ILECs) that
 provided conference-bridging services because AT&T thought the ILEC and
 CLEC (competitive local exchange carrier such as BTC, Inc.) access charges
 and traffic volumes were too high. Within a matter of weeks, Qwest, Verizon,
 Sprint and AT&T Wireless also began to withhold payment of34

access charges. In response, and consistent with the FCCs
explicit
 orders on this matter, seven of the Iowa ILECs filed a collection action in
 federal district court for collection of these charges.Breda is not a party to any of these lawsuits or collection
actions,
 and was being paid for conference bridging services by most carriers until
 January 2008. However, beginning in May 2007, and continuing through to
 January 2008, BTC, Inc. began to receive dispute notifications from the
 various major interexchange carriers disputing the volume of minutes and
 disputing interstate and intrastate switched access charges billed by BTC,
 Inc. to them. BTC, Inc. had contacted legal counsel for assistance in its
 collection actions against Verizon Business, Sprint, AT&T and Qwest. In
 addition to working with legal and industry consultants on collection
 actions, BTC, Inc. was also monitoring the outcome of the various court
 proceedings in Iowa, Minnesota, and New York as well as oral arguments and
 proceedings before the FCC and the Iowa Utilities Board. While BTC, Inc.s
 situation is not identical to these proceedings, some of the rulings will be
 applicable to BTC, Inc.s situation. The FCC has ruled in prior cases
 involving carrier non-payment of access charges that carriers could not take
 these kinds of self-help actions and could not block traffic traversing
 their networks.On October 2, 2007, the FCC issued an Order granting in part and
 denying in part the complaint filed by Qwest Communications against Farmers
 and Merchants Mutual Telephone Company of Wayland, Iowa. The FCC found that
 the telephone company had not acted unlawfully by imposing interstate access
 charges for conference bridge services. While the FCC ruled that the
 telephone company did generate an excessive rate of return, the telephone
 companys tariff was found to be lawful under the Telecommunications Act, and
 therefore Qwest could not recover damages. Qwest filed a Petition for Partial
 Reconsideration of the FCCs order on November 1, 2007, and the FCC issued an
 Order on January 29, 2008 granting in part Qwests request to have Farmers
 produce certain documents that it had produced in a related proceeding before
 the Iowa Utilities Board. The FCC also granted Qwests petition for
 additional FCC proceedings to consider the relevance of that new evidence.
 BTC, Inc. anticipates continued rulings and decisions on many of these
 outstanding cases and proceedings within six weeks to two months.Also, on October 2, 2007, the FCC published a rulemaking proceeding
 to investigate cost and tariffing issues raised by allegations that some
 rural local exchange carriers are experiencing significant increases in
 access demand, resulting in unreasonable access rates. The FCC is seeking
 comment on several possible approaches to address alleged access stimulation
 strategies. One proposal being considered would require carriers to file
 revised tariffs if demand increased beyond a threshold level. The FCC is
 requesting information on rate-of-return LECs, such as Breda, Prairie
 Telephone and Westside Independent, price-cap LECs, and CLECs such as BTC,
 Inc. No final determinations have been made as of the date of this filing.On May 29, 2008, Verizon filed a complaint with the Iowa Utilities
 Board against BTC, Inc. alleging violations of the terms, conditions, and
 application of the intrastate tariffs of BTC, Inc. regarding its conference
 bridging services. Bredas legal counsel is in discussions with Verizon and
 the case has been granted a joint motion for extension of time as these
 discussions are taking place.35

The Communications Assistance For Law Enforcement Act (CALEA) was
 passed in 1994 and sets forth the assistance capabilities that
 telecommunications carriers need to maintain so that they can support law
 enforcement in the conduct of lawfully authorized electronic surveillance.
 Breda installed a soft switch in its CLEC exchange in the last quarter of
 2005, and the technology in this switch allows for CALEA compliance in both
 its CLEC exchange of Carroll, Iowa, and its ILEC exchange in Breda, Iowa.
 Breda currently is working through the installation of stand-alone switches
 in five small exchange locations throughout its service territory. Breda
 estimates that its final cost to upgrade the remaining switches will be close
 to $2,000,000.On May 12, 2006, the Federal Communications Commission adopted an
order
 whereby all broadband Internet and interconnected voice over Internet
 protocol (VoIP) providers must comply with CALEA surveillance regulations by
 May 14, 2007. The FCC declined to exclude any facilities-based broadband
 Internet access providers from CALEA, noting that Trusted Third Parties and
 service bureaus can assist small entities in processing surveillance orders
 in accordance with the system security requirements, thereby ameliorating
 burdens for these providers.For telephone companies with separate broadband and VoIP entities,
 these requirements are in addition to those for their carrier operations, and
 require separate reports to be filed for each operation. Breda has enlisted
 Iowa Network Services to be its Trusted Third Party resource in meeting the
 CALEA requirements. Breda has timely filed all required CALEA reports.Telephone service providers like Breda, Prairie Telephone, Westside
 Independent and BTC, Inc. are subject to competition from other providers. As
 a result of the Telecommunications Act of 1996, telephone companies are no
 longer afforded exclusive franchise service areas. Under that Act,
 competitors can now offer telephone services to Bredas, Prairie Telephones,
 Westside Independents and BTC, Inc.s subscribers, and also request access
 to their lines and network facilities in order to offer any type of service
 that can be provided through those lines and facilities. The Act and the
 regulations promulgated by the FCC and state regulatory agencies to implement
 various parts of the Act could have a material adverse effect on Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. because they open up
 Breda, Prairie Telephone, Westside Independent and BTC, Inc. to potential
 competition that they were not subject to in the past.There are numerous telephone companies which have filed to provide
 telephone services throughout all of Iowa. To date, however, no company has
 chosen to compete in any of Bredas, Prairie Telephones or Westside
 Independents service areas. Breda does not know the plans of any companies,
 but Breda currently believes the possibility of any company entering any of
 those service areas in 2008 is small.BTC, Inc. provides telephone services in the Carroll, Iowa market
 area. There are various other companies providing telephone services in that
 area. For example, Mediacom, which is a large cable television operator in
 the United States and the local cable provider in the Carroll, Iowa market,
 has a phone service offering in the Carroll market through Mediacoms
 partnership with Sprint. Mediacoms offering includes a triple play option
 where a subscriber can receive phone, cable and Internet services through
 Mediacom. The incumbent local exchange carrier, Qwest, is also marketing a
 triple play offering through its agreement with DirecTV which allows it to36

provide a satellite television offering along with Qwests
phone
 service and high speed Internet offerings.Breda also anticipates that it will face competition from other
 providers of newer VoIP (voice over Internet protocol) technologies, such as
 Vonage and Skype, in all of its exchanges.Breda anticipates that Mediacoms and any such other
offerings will
 result in a reduction of revenue. Breda believes there will also be
 reductions in revenue if any other telephone companies at some point
 determine to provide service in any of Bredas, Prairie Telephones, Westside
 Independents or BTC, Inc.s service areas.Revenues are also generated from sales of cellular phones and
related
 service packages, which are made pursuant to Bredas June 1, 1999 agency
 agreement with U.S. Cellular. The agreement allows Breda to sell cellular
 phones and related packages to the public, and Breda receives commissions on
 those sales. The agency agreement provides that it automatically renews for a
 period of one year on each June 1, unless either Breda or U.S. Cellular gives
 the other written notice of nonrenewal at least thirty days before the end of
 the current one-year term, but subject to immediate termination if there is a
 material breach of the agency agreement. Breda anticipates that a new agency
 agreement will need to be entered into with U.S. Cellular at some point.
 Breda is hopeful, however, based on its past negotiations with U.S. Cellular,
 that any new agreement will, at worst, have a neutral impact on Bredas
 cellular commissions revenue.Breda had two retail outlets in the Carroll, Iowa market during the
 twelve months ended December 31, 2007. The two retail outlets were located at
 Bredas and BTC, Inc.s office in Carroll, Iowa and the Wal-Mart store in
 Carroll, Iowa. On February 22, 2008, Breda combined its Wal-Mart retail
 outlet with its Carroll office outlet when Wal-Mart moved its former
 operations to a new Super Walmart store at the edge of Carroll. Breda was
 informed that Super Walmart space allocations would only allow for the
 corporate cellular account, which is a competing service provider to Bredas
 U.S. Cellular service. Breda is continuing to pursue a second retail outlet
 location in Carroll, but has not experienced a slowdown in its cellular
 traffic because it expanded its office hours in its Carroll office outlet.Tele-Services faces competition in various forms. For example,
 Tele-Services experiences strong competition from wireless and satellite dish
 providers, and that competition has been increasing in recent years. The FCC
 began to allow satellite dish providers to provide local channels in 1999,
 which had an adverse effect on Tele-Services because its ability to provide
 local channels was, in the past, one reason subscribers might choose
 Tele-Services cable services over a satellite dish. Other rulings and
 decisions by the FCC are possible, and may provide satellite dish or other
 providers with equal or greater advantages than Tele-Services, which could
 have further adverse effects on Tele-Services business. The
 telecommunications and cable industry are also continually changing, and
 technological advances may provide Tele-Services subscribers with other
 options. For example, Iowa Network Services is offering cable services in
 Iowa over existing telephone lines, and it is estimated that up to 70
 independent telephone companies in mostly rural Iowa are able to offer cable
 television programming over their telephone lines. This option, and others
 which might arise through other changes or advancements in technology, could
 have material adverse effects on Tele-Services in the future.37

The Deficit Reduction Omnibus Reconciliation Act of 2005 includes
the
 digital television transition legislation. The Act establishes February 17,
 2009 as the deadline for broadcasters to transition from analog to digital
 spectrum. The Act also includes up to $1.5 billion to subsidize set-top box
 purchases, and $1 billion for public safety interoperability. All of
 Tele-Services cable service systems are analog systems so for any channels
 presently transmitted digitally and when the remaining channels are
 transmitted digitally by February 17, 2009, Tele-Services must have new
 antennas and receivers to receive the digital channel signals. Tele-Services
 will have to convert those signals back to an analog signal before sending
 the signals out to its customers over its analog system. Tele-Services is
 working to obtain cost estimates to determine its options and to formulate a
 business plan in order to meet the February 17, 2009 deadline. Tele-Services,
 Ltd. is actively seeking buyers for eleven of its eighteen cable TV systems
 that do not have combined head ends associated with Bredas independent
 telephone exchange communities. Tele-Services has also begun discontinuing
 its cable TV service in communities that it has not sold. Tele-Services
 discontinued service in its Bayard, Iowa community on July 1, 2008, its
 Lohrville, Iowa community on August 1, 2008, and will discontinue its cable
 TV service in Thurman, Iowa location on August 1, 2008.On September 11, 2007, the FCC approved rules which require cable
 operators to guarantee that analog-only cable subscribers will receive
 broadcast channels until February 2012. The rules require that cable
 operators make the signals of must-carry stations viewable to all of their
 subscribers, and the operator could be required to carry the broadcasters
 digital signal in digital and analog form. Tele-Services is working with
 consultants on how to best implement the rules.The State of Iowa passed a state-wide cable franchise bill on May
30,
 2007 with an immediate effective date. The utilities division of the Iowa
 Department of Commerce will now issue franchises. A competitive provider must
 notify the communities it intends to serve. At that time, an incumbent
 operator with an active local franchise can decide whether to also seek a
 state franchise. The Department will have 15 days to award the franchises,
 which will be for a term of 10 years. Competitive providers will have to pick
 up a portion of the basic maintenance of current, noncommercial institutional
 networks, but municipalities will have to take over that cost after 10 years.
 This bill allows incumbent cable providers to utilize the current franchising
 process, or, upon expiration of their local franchise, to opt in to the
 state-issued franchise. New cable providers can chose to use either the state
 or a local franchise. The legislation caps the franchise fee for a new market
 entrant under the state franchise at the lower of the same percentage as the
 incumbent provider or five percent of gross revenues. The legislation also
 requires competitive cable providers under the state franchise to provide the
 same amount of public, education and government access (PEG) channels as an
 incumbent provider, and to pay PEG fees if the incumbent is paying PEG fees.
 In the state franchise, build-out requirements are eliminated and cities
 maintain control over rights-of-way. Tele-Services does not believe the new
 legislation will have an effect on its operations.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.38

As of
 December 31, 2007, Breda was a 33.33% owner of Carroll County Wireless,
 L.L.C. As of the date of this filing, Breda is exercising its right of first
 refusal to purchase the 33.33% interest of one of the partners in Carroll
 County Wireless, L.L.C. Carroll County Wireless, L.L.C. and the other 33.33%
 partner have already signed a consent and waiver to the purchase of the
 additional 33.33% interest in Carroll Co. Wireless, L.L.C. by Breda Telephone
 Corp. This transaction is not material to Bredas operations but Bredas
 66.66% interest will require that the operations of this asset be reported on
 a consolidated basis with Bredas other subsidiaries. As of the date of this
 filing, Breda is awaiting FCC approval for the consummation of this
 transaction.On January
 7, 2008, Breda Telephone Corp. became a founding member with a 25% interest
 in an entity called Telephone Acquisition Company, L.L.C. This limited
 liability corporation was formed to acquire and operate a telecommunication
 company. On May 19, 2008, the Telephone Acquisition Company, L.L.C.,
 purchased all of the stock of Swisher Telephone Company in Swisher, Iowa.
 This transaction was not material to Bredas operations. On July 7, 2008, the
 Telephone Acquisition Company, L.L.C. received a signed Purchase Agreement
 from South Slope Cooperative Telephone Co. for the purchase of Swisher
 Telephone Company. South Slope is a neighboring telephone company to Swisher
 Telephone Company with plans to overbuild the Swisher Telephone Company
 exchange area with fiber to the home.Item 3.
Quantitative and Qualitative Disclosures About Market Risk.This Item is
 not applicable to smaller reporting companies such as Breda.Item 4T.
Controls and Procedures.Evaluation of Disclosure Controls and
 ProceduresThe
 principal executive officer and the principal financial officer of Breda have
 evaluated the effectiveness of Bredas disclosure controls and procedures (as
 defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the
 end of the period covered by this quarterly report, and they have concluded
 that the disclosure controls and procedures have been effective for the
 purposes for which they are intended. Breda believes that a control system,
 no matter how well designed and operated, cannot provide absolute assurance
 that the objectives of the control system are met, and no evaluation of
 controls can provide absolute assurance that all control issues and instances
 of fraud, if any, within a company have been detected.Changes in Internal Control Over Financial
 ReportingNo 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.39

PART II - OTHER INFORMATION

Item 1.
Legal Proceedings.On May 29,
 2008, Verizon filed a complaint with the Iowa Utilities Board (IUB) against
 BTC, Inc. alleging violations of the terms, conditions and application of the
 intrastate tariffs of BTC, Inc. regarding its conference bridging services.
 BTC, Inc. was one of three competitive local exchange carriers named in this
 proceeding. Verizon alleges that the named defendants are engaged in traffic
 pumping schemes with their conference bridging services; are assessing
 fraudulent charges for traffic terminated to sham customers; and, in the case
 of the other two defendants, are fraudulently increasing the transport
 charges assessed on long distance telephone companies.Verizon asks
 the IUB to stop the alleged traffic pumping by ruling that interexchange
 carriers like Verizon do not have to pay charges for this traffic; giving
 notice to the defendants that continuing this service will result in the
 imposition of civil penalties; revoking the defendants certificate of public
 convenience which allows them to provide telecommunication services; and, as
 an interim measure, allow Verizon to discontinue delivery of interexchange
 traffic to defendants partners in providing the service.BTC, Inc.
 denies the allegations contained in the compliant and intends to mount a
 vigorous defense in this proceeding. BTC, Inc. has not filed any responsive
 pleadings in the proceeding, as the parties have mutually requested, and been
 granted by the IUB, extensions of time to explore settlement opportunities.As of the
 date of this quarterly report, Breda was not aware that any governmental
 authority was contemplating any proceeding against Breda or any of its
 subsidiaries or any of their respective property.Item 1A.
Risk Factors.This Item is
 not applicable to smaller reporting companies such as Breda.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, 2008
 through June 30, 2008.Breda did
 not purchase any shares of its common stock from its shareholders, either
 pursuant to the redemption right or the right of first refusal (contained in
 its Articles of Restatement) or otherwise, during the period of April 1, 2008
 through June 30, 2008. Breda does not have any publicly announced plans or
 programs with respect to purchase of its common stock.There were
 fourteen separate transfers of shares of Bredas common stock during the
 period of April 1, 2008 through June 30, 2008 with respect to which Breda did
 not exercise Bredas right of first refusal to purchase the shares. Those
 transactions are summarized in the following numbered paragraphs:40

1.
Two hundred
 twelve shares were transferred equally to four individuals.2.
Two shares
 were transferred from one spouse to another.3.
Three shares
 were transferred from one spouse to another.4.
Two shares
 were sold for $509 per share.5.
Two shares
 were sold for $509 per share.6.
Two shares
 were sold for $509 per share.7.
Fifteen
 shares were sold for $510 per share.8.
Thirty
 shares for sold for $1 per share.9.
Eight shares
 were transferred equally to four individuals.10.
Two hundred
 twelve shares were transferred to the shareholders son.11.
Twelve
 shares were sold for $509 per share.12.
Thirty eight
 shares were sold for $509 per share.13.
Two shares were
 sold for $509 per share.14.
Two shares
 were sold for $509 per share.Item 3.
Defaults Upon Senior Securities.There has
 been no material default in the payment of principal, interest, a sinking or
 purchase fund installment, or any other material default not cured within
 thirty days, with respect to any indebtedness of Breda or any of its
 subsidiaries exceeding 5% of the total assets of Breda and its consolidated
 subsidiaries.No material
 arrearage in the payment of dividends or any other material delinquency has
 occurred with respect to any class of preferred stock of Breda or any of its
 subsidiaries which is registered or which ranks prior to any class of
 registered common stock of Breda.Item 4.
Submission of Matters to a Vote of Security Holders.The annual
 meeting of the shareholders of Breda was held on May 22, 2008. The only
 matters voted upon by the shareholders at the annual meeting were the41

election of
 two directors for Breda and the ratification of the appointment of Bredas
 auditor for the year 2008.Breda has
 seven directors, who are divided into three classes based upon the length of
 their term. Each director is elected to a three year term and until his or
 her successor is elected or until his or her death, resignation or removal.
 The terms of office of the directors are staggered, so that three of the
 directors terms expire in one year, two expire the next year, and two expire
 the following year.The two
 directors whose term expired at the annual meeting were Dave Grabner and
 Daniel Nieland.Any number
 of shareholders present in person or represented by proxy or ballot
 constitutes a quorum for purposes of meetings of the shareholders of Breda,
 and the directors of Breda are elected by a plurality of the votes cast by
 the shareholders.Daniel
 Nieland and Dean Schettler were the only nominees for the two director
 positions to be filled at the annual meeting, and they were both elected at
 the annual meeting to serve as directors of Breda until the annual meeting of
 the shareholders of Breda which will be held in 2011.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-VotesDaniel
 Nieland

162





Dean
 Schettler

126





The
 directors whose term of office continued after the annual meeting of the
 shareholders were Rick Anthofer, Clifford Neumayer, Robert Buelt, Charles
 Thatcher and Neil Kanne.The only
 other matter voted upon by the shareholders at the annual meeting was the
 ratification of Keisling Associates, LLP as Bredas auditor for the year
 2008. The matter was approved by the necessary vote of the shareholders, and
 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-Votes149

6

26

42

Item 5.
Other Information.There was no
 information required to be disclosed in a report on Form 8-K during the
 period covered by this quarterly report which was not reported on a Form 8-K.Bredas
 board of directors declared a dividend of $8.00 per share on March 11, 2008,
 payable to shareholders of record on March 12, 2008. The aggregate amount of
 the dividend was $246,808. The dividend was paid to the shareholders on April
 1, 2008.Bredas
 board of directors adopted a resolution at a meeting on March 11, 2008 fixing
 the redemption price for Bredas shares of common stock to be $509 per share.
 The $509 amount was determined based upon Bredas 2007 unaudited financial
 statements, and was announced in a letter to the shareholders dated April 1,
 2008, and became effective on March 12, 2008.There were
 no material changes during the period of April 1, 2008 through June 30, 2008
 to the procedures by which the shareholders of Breda may recommend nominees
 to Bredas board of directors.Item 6.
Exhibits.The
 following exhibits are filed as part of this quarterly report. Exhibits
 previously filed are incorporated by reference, as noted.Incorporated by ReferenceExhibit
 Number

Exhibit Description

Filed Herewith;
 Page Number

Form

Period
 Ending

Exhibit

Filing
 Date3.1

Articles of
 Restatement



10-QSB

3/31/07

3.1

5/14/073.2

Second
 Amended and
 Restated Bylaws



8-K




3.2

4/4/0710.1

Employment
 Agreement dated
 November 13, 2006
 with Jane Morlok



10-QSB

9/30/06

10.1

11/14/0610.2

Employment
 Agreement dated June
 14, 2006 with Steve
 Frickenstein



10-QSB

6/30/06

10.2

8/11/0643

10.3

Employment

10-QSB

6/30/06

10.3

8/11/06Agreement
 dated June14, 2006
 with CharlesDeisback31

Rule
 13a-14(a)Certifications31.1

Certification
 of
E-1Chief
 ExecutiveOfficer31.2

Certification
 of
E-3Chief
 FinancialOfficer32

Section 1350Certifications32.1

Certification
 of
E-5Chief
 ExecutiveOfficer32.2

Certification
 of
E-6Chief
 FinancialOfficer[THE REST OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

44

SIGNATURES

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

BREDA
 TELEPHONE CORP.August 14,
 2008
By:
/s/ Steve
 FrickensteinName: Steve
FrickensteinTitle: Chief
Executive OfficerAugust 14,
 2008
By:
/s/ Jane
 MorlokName: Jane
MorlokTitle: Chief
Financial Officer45

EXHIBIT INDEX

Exhibits Filed With Form 10-Q
of Breda Telephone Corp.
For the Quarter Ended June 30, 2008

Description of Exhibit.

Page3. Articles of Incorporation and Bylaws(a)
Articles of
 Restatement of Breda Telephone Corp. (Filed as Exhibit 3.1 to Bredas Form
 10-QSB for the quarterly period ended June 30, 2007, and filed May 14, 2007,
 and incorporated herein by this reference.)(b)
Second
 Amended and Restated Bylaws of Breda Telephone Corp. (Filed as Exhibit 3.2 to
 Bredas Form 8-K, filed April 4, 2007, and incorporated herein by this
 reference.)10. Material Contracts(a)
Employment
 Agreement dated November 13, 2006 between Breda and Jane Morlok. (Filed as
 Exhibit 10.1 to Bredas Form 10-QSB for the quarterly period ended September
 30, 2006 and filed November 14, 2006, and incorporated herein by this
 reference.)(b)
Employment
 Agreement dated June 14, 2006 between Breda and Steve Frickenstein. (Filed as
 Exhibit 10.2 to Bredas Form 10-QSB for the quarterly period ended June 30,
 2006 and filed August 11, 2006, and incorporated herein by this reference.)(c)
Employment
 Agreement dated June 14, 2006 between Breda and Charles Deisbeck. (Filed as
 Exhibit 10.3 to Bredas Form 10-QSB for the quarterly period ended June 30,
 2006 and filed August 11, 2006, and incorporated herein by this reference.)46

31.
Rule 13a-14(a) Certifications*31.1
Rule 13a-14(a) Certification of
 Chief Executive Officer
E-1*31.2
Rule 13a-14(a) Certification of
Chief
 Financial Officer
E-332.
Section 1350 Certifications*32.1
Section 1350 Certification of Chief
 Executive Officer
E-5*32.2
Section 1350 Certification of Chief
 Financial Officer
E-6*Included with this filing.

47