UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549 Form 10-KSB (Mark One) x
ANNUAL REPORT UNDER
  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended: December 31, 2007o
TRANSITION REPORT UNDER 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.
(Name of small business issuer in its charter) Iowa
42-0895882(State or other
  jurisdiction of
(I.R.S. Employerincorporation or
  organization)
Identification No.)  112 East Main, P.O. Box 190, Breda, Iowa
51436(Address of
  principal executive offices)
(Zip Code)Registrants telephone number: (712) 673-2311  Securities registered under Section 12(b) of the Exchange
Act: NONE
Securities registered under Section 12(g) of the Exchange Act: Common Stock, no
par value
(Title of class) Check
whether the registrant is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. o Check
whether the registrant (1) filed all reports required to be filed by Section 13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x
   No o Check
if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. o Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes o
  No x State
registrants revenues for its most recent fiscal year: $10,482,625. State
the aggregate market value of the voting and non-voting common equity held by
non-affiliates: $13,913,822, as of March 1, 2008. The registrants stock is not
listed on any exchange or otherwise publicly traded, and the value of the
registrants stock for this purpose has been based upon the $457 per share
redemption price of the registrants stock as determined by its board of directors
and that was in effect on March 1, 2008. In determining this figure, the
registrant has assumed that all of its directors and officers and its chief
executive officer, chief operations officer and chief financial officer are
affiliates, but this assumption shall not apply to or be conclusive for any
other purpose. State
the number of shares outstanding of each of the registrants classes of common
equity, as of the latest practicable date: 30,856 shares of common stock, no
par value, at March 1, 2008. Transitional Small Business Disclosure Format (check one):
          Yes o
  No x    Cautionary Statement
on Forward Looking Statements.

Various
Items in this annual report, including Item 1 and Item 6, contain
forward-looking statements that involve and are subject to various risks,
uncertainties and assumptions. Forward looking statements include, but are not
limited to, statements with respect to financial results and condition;
anticipated future trends in business, revenues or net income; projections
concerning operations and cash flow; business, growth and acquisition opportunities
and strategies; managements plans and intentions for the future; competitive
position; and other forecasts, projections and statements of expectation. Words
such as expects, estimates, plans, will, anticipates,
contemplates,
forecasts, predicts, projects, prospects, possible, hopeful,
intends, believes, seeks, should, thinks, objectives and other
similar expressions or variations of those words or those types of words help
identify forward looking statements.

Forward
looking statements are made based on numerous and varied estimates,
projections, views, beliefs, strategies and assumptions made or existing at the
time of such statements and are not guarantees of future results or
performance. Breda disclaims any obligation to update or revise any
forward-looking statements based on the occurrence of future events, the
receipt of new information, or otherwise.

Actual
future performance, outcomes and results may differ materially from those expressed
in forward-looking statements as a result of numerous and varied factors, risks
and uncertainties, some that are known and some that are not, and nearly all of
which are beyond the control of Breda and its management. It is not possible to
predict or identify all such factors, risks and uncertainties, but some of the
factors, risks and uncertainties affecting forward looking statements include,
but are not limited to, the following:


adverse
 changes by the Federal Communications Commission, the Iowa Utilities Board or
 other regulatory authorities to the access charge rates that can be charged
 by Breda and its subsidiaries to long distance carriers or to the rules and
 other requirements regarding access charge rates or access charges, whether
 instituted by the regulatory authorities or at the request or by reason of
 court or other actions taken by long distance carriers or other interested
 persons;
technological
 advances in the telecommunications, cable and related industries, which are
 always occurring and at an ever increasing rate, and any one or more of which
 may replace or otherwise adversely affect in a material way the existing
 technologies utilized by Breda and its subsidiaries;
changes in
 employee relations, including the loss of a key employee or employees;(i)


industry
 conditions and occurrences, including bankruptcies and insolvencies of long
 distance carriers, and consolidations in the telecommunications and cable
 industries, which generally result in competitors which are larger and better
 financed and with greater geographic reach, allowing them to compete over
 broader areas and more effectively;
economic
 conditions at the national, regional and local levels, which are always
 somewhat uncertain given that many different tangible and intangible factors
 and occurrences can affect the economy;
political
 conditions and occurrences at the international, national, regional and local
 levels, including rumors about, or threats and/or acts of, terrorism or war;
the general
 emotions and psychology of the economy, the markets and consumers, which can
 at times seem to be totally unrelated to actual economic or market conditions
 or other more tangible factors;
litigation;
inaccurate
 assumptions or predictions by management;
the ability
 to enter into and maintain agreements which are necessary to provide
 services, and on terms which are favorable to Breda;
ever
 increasing costs and expenses which are necessary to Bredas and its
 subsidiaries businesses but which are outside of Bredas control, such as
 health and other insurance costs;
new third
 parties entering into Bredas or any of its subsidiaries marketing or
 service areas;
acts or
 omissions of existing and/or new competitors and other third parties,
 including offering lower prices or new or substitute products or services and
 their use of new marketing strategies and approaches;
the risks
 associated with technological requirements, technology substitution and
 changes and other technological developments;
changes in
 or more governmental laws, rules, regulations or policies;(ii)


reductions
 in or other changes to governmental programs assisting or affecting the
 telecommunications, cable and related industries, and in particular programs
 which aid providers of those services to rural areas;
the
 continued availability of financing, and on terms which are favorable to
 Breda, and the cost of financing and consequences of leverage; and
the effects
 of ever increasing and changing competition and relationships with other
 carriers and other parties, including competition or relationships which
 result in Breda or its subsidiaries having to develop new pricing for
 services, such as interexchange access charges and wireless access charges,
 or new marketing strategies or new product offerings, and the related risk
 that Breda or its subsidiaries will not be able to respond on a timely or
 profitable basis to competitive changes or pressures.[THE REST OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

(iii)

PART
I

Item 1.
Description of Business.General.Breda
 Telephone Corp. is an Iowa corporation with its principal offices in Breda,
 Iowa. Breda was incorporated in 1964 to provide local telephone services to
 Breda, Iowa and the surrounding rural area.Bredas
 principal business is still providing telephone services. Telephone services
 are also provided by three of Bredas wholly owned subsidiaries, Prairie
 Telephone Co., Inc., Westside Independent Telephone Company and BTC, Inc. A
 total of eight Iowa towns and their surrounding rural areas currently receive
 telephone services from Breda, Prairie Telephone, Westside Independent or
 BTC, Inc.Prairie
 Telephone is an Iowa corporation that was incorporated in 1968.Westside
 Independent is an Iowa corporation that was incorporated in 1957. Breda
 acquired the stock of Westside Independent in June 1998.BTC, Inc. is
 an Iowa corporation that was incorporated in 1997. BTC, Inc. has provided
 Internet access services in the Carroll, Iowa market area since 1997. BTC,
 Inc. also provides Internet access services to the customers of Breda,
 Prairie Telephone and Westside Independent who subscribe for Internet
 services. BTC, Inc. has provided long distance services in the Carroll, Iowa
 market area since July, 2000, and local telephone services since October,
 2003. BTC, Inc. also provides long distance services to the customers of
 Breda, Prairie Telephone and Westside Independent who subscribe for long
 distance services. BTC, Inc. is a wholly owned subsidiary of Prairie
 Telephone.Tele-Services,
 Ltd. is also a wholly owned subsidiary of Breda. Tele-Services provides cable
 television services to seventeen towns in Iowa and one town in Nebraska.
 Tele-Services provided cable television services to eighteen towns in Iowa
 until October 1, 2005, when it sold its Neola, Iowa cable system to Walnut
 Telephone Company. Tele-Services is an Iowa corporation that was incorporated
 in 1983.Bredas and
 its subsidiaries telephone, Internet services and cable television
 businesses are discussed in more detail below. Some of the other
 miscellaneous business operations of Breda and its subsidiaries are also
 discussed below.Local Exchange Carrier Services.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. provide telephone
 services to the following eight Iowa towns and their surrounding rural areas:1


Breda, Iowa
Lidderdale,
 Iowa
Macedonia,
 Iowa
Farragut,
 Iowa
Pacific
 Junction, Iowa
Yale, Iowa
Westside,
 Iowa
Carroll,
 IowaAll of the towns are in central and southern Iowa.Breda
 provides services to Breda, Lidderdale and Macedonia. Prairie Telephone
 provides services to Farragut, Pacific Junction and Yale. Westside
 Independent provides services to Westside, and BTC, Inc. provides services to
 Carroll. The surrounding rural areas that are served are those within
 approximately a ten-mile to fifteen-mile radius of each of the towns.The primary
 services of Breda, Prairie Telephone, Westside Independent and BTC, Inc. are
 providing their subscribers with basic local telephone service and access
 services for long distance calls outside the local calling area. As of
 December 31, 2007, they were serving approximately 3,400 telephone numbers
 and related access lines. Breda, Prairie Telephone and Westside Independent
 derive their principal revenues from providing those services.BTC, Inc.s
 principal revenue sources in 2007 were from providing Internet services,
 conference bridge services, long distance services, basic local telephone
 service and access services for long distance calls outside of BTC, Inc.s
 Carroll, Iowa local calling area. BTC, Inc. provides Internet services and
 long distance services for its own customers and for the customers of Breda,
 Prairie Telephone and Westside Independent.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. also provide other
 telephone related services. For example, they sell and lease telephone
 equipment to their subscribers, provide inside wiring and other installation,
 maintenance and repair services to their subscribers, and provide custom
 calling services to their subscribers. They also derive revenues from
 providing billing and collection services for some long distance carriers for
 the long distance calls made by their subscribers.Broadcast Services.Tele-Services
 owns and operates the cable television systems in the following seventeen
 Iowa towns:
Arcadia
Auburn
Bayard
Breda
Churdan
Farragut
Grand
 Junction
Hamburg
Lohrville
Malvern
Oakland
Riverton
Sidney
Tabor
Thurman
Treynor
Westside2

Tele-Services
 also owns and operates the cable television system for the town of Beaver
 Lake, Nebraska.Tele-Services,
 Ltd. provided cable television services to Neola, Iowa until October 1, 2005,
 when Tele-Services, Ltd. sold the Neola cable television system to Walnut
 Telephone Company.Tele-Services
 was providing cable television services to approximately 2,118 subscribers as
 of December 31, 2007.Tele-Services
 derives its principal revenues from the monthly fees which are charged to its
 cable subscribers for basic and premium cable services provided to those
 subscribers.Tele-Services
 provides cable services to each of the towns pursuant to franchises or
 agreements with each of those towns. Those various franchises or agreements
 will expire by their terms in the following months:
Arcadia -
 August, 2009
Auburn -
 January, 2009
Bayard -
 May, 2008
Beaver Lake
 - December, 2008
Breda -
 Year-to-Year Basis
Churdan -
 June, 2008
Farragut -
 January, 2009
Grand
 Junction - May, 2008
Hamburg -
 Year-to-year Basis
Lohrville -
 March, 2008
Malvern -
 October, 2016
Oakland -
 November, 2009
Riverton -
 June, 2013
Sidney -
 October, 2010
Tabor -
 September, 2016
Thurman -
 December, 2015
Treynor -
 October, 2020
Westside -
 June, 2009Internet Service Provider.BTC, Inc.
 provides dial-up and high speed Internet access services to its customers and
 to customers of Breda, Prairie Telephone and Westside Independent. BTC, Inc.
 was providing dial-up Internet access to approximately 719 subscribers as of
 December 31, 2007. Of that amount, approximately 429 were subscribers from
 BTC, Inc.s Carroll, Iowa market area. The area served by BTC is currently
 limited to Carroll, Iowa and various communities surrounding Carroll, Iowa.
 BTC, Inc. was providing satellite, wireless and DSL-related, high speed
 Internet to approximately 851 customers as of December 31, 2007.Miscellaneous Business.Breda and
 some of its subsidiaries are also engaged in other miscellaneous businesses.For example,
 in March of 1999 Prairie Telephone acquired spectrum for providing personal
 communications services in the Yale telephone exchange area. Spectrum is3

bandwidth
 allocated by the FCC which can be used in the transmission of voice, data and
 television communication. Prairie Telephone is also one of the members of
 Guthrie Group, L.L.C., and owned approximately 33% of the membership
 interests of Guthrie Group, L.L.C. as of December 31, 2007. Guthrie Group,
 L.L.C. has acquired spectrum for some telephone exchange areas located in
 Guthrie County, Iowa.Breda also
 acquired spectrum in 1999 for providing personal communications services in
 the Breda and Lidderdale exchange areas. Breda is a member of Carroll County
 Wireless, L.L.C., and Breda later sold that spectrum to Carroll County
 Wireless, L.L.C., at Bredas cost. The two other telephone companies who are
 members of Carroll County Wireless, L.L.C. also sold their respective
 personal communications services licenses to Carroll County Wireless, L.L.C.
 at their cost. Carroll County Wireless, L.L.C. also acquired other personal
 communications services licenses for various areas in Carroll County, Iowa,
 and Carroll County Wireless, L.L.C. currently holds personal communications
 services licenses for nearly all of Carroll County, Iowa. Breda owned
 approximately 33% of the membership interests of  Carroll County Wireless,
 L.L.C. as of December 31, 2007.Carroll
 County Wireless, L.L.C. turned up its tower to accept roaming traffic in
 January 2006. Guthrie Group, L.L.C. turned up its tower to receive roaming
 traffic on March 24, 2006. Breda, Prairie Telephone and the other member in
 these wireless investments continue to evaluate feasibility studies to determine
 future tower site build-out time frames. Carroll County Wireless, LLC.
 expects to have construction completed on two additional towers in Carroll,
 Iowa, and Glidden, Iowa, and to have the sites turned up by the end of second
 quarter 2008.Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. do not currently own spectrum
 for all of the telephone exchange service areas serviced by them, and there
 is no guarantee that they will be able to acquire spectrum for all of those
 areas. Breda, Prairie Telephone, Westside Independent and BTC, Inc. will also
 face competition in providing personal communications services because no
 exclusive rights can be acquired with respect to that technology.Prairie
 Telephone purchased 5,000 units of Bug Tussel Wireless, L.L.C. for $200,000
 in March 2005. Prairie Telephone purchased 2,462.264 additional units for
 $113,264.15 in July 2005, bringing Prairie Telephones total ownership to
 9.94% of the issued and outstanding units of Bug Tussel Wireless, L.L.C. Bug Tussel
 Wireless, L.L.C. is located in Green Bay, Wisconsin, and its operating plan
 involves erecting tower sites for wireless services. This investment is
 accounted for using the equity method of accounting.Revenues may
 also arise from investments in other entities which provide cellular phone
 services or which invest in other cellular phone or telecommunications
 ventures. For example, Prairie Telephone is an investor in RSA #1, Ltd. and
 RSA #7, Ltd. Those entities are Iowa limited partnerships which provide
 cellular services in rural areas in central and southern Iowa. Prairie
 Telephone owns a 10.32% interest in RSA #1, Ltd. and a 7.1% interest in RSA
 #7, Ltd.4

Prairie
 Telephone also owns .67% of Iowa Network Services outstanding stock. Westside
 Independent owns .45% of Iowa Network Services outstanding stock.Breda is an
 investor in RSA #9, Ltd. and West Iowa Cellular, Inc. Westside Independent is
 also an investor in West Iowa Cellular, Inc. West Iowa Cellular, Inc. and RSA
 #9, Ltd. provide cellular services in rural areas in southern and central
 Iowa.Breda also
 owns 17.4229% of the membership interests in Alpine Communications, L.C.,
 which provides telecommunications exchange and local access services, long
 distance service, and cable television service in service areas located
 primarily in Clayton County in northeastern Iowa.Bredas
 share of the earnings or losses of some of these investments is reported on
 Bredas income statement on the equity basis. Some of the investments may be
 a source of cash flow for Breda, Prairie Telephone and Westside Independent
 through distributions which may be made by the entities. Breda, Prairie
 Telephone and Westside Independent do not, however, control any distribution
 decisions for any of those entities, so no distributions are ever guaranteed,
 and the timing and amount of any distributions will likely vary greatly from
 year to year.Breda,
 Prairie Telephone and Westside Independent each own 10,000 shares of common
 stock in Solix, Inc. (formerly NECA Services, Inc.), which is a for-profit
 corporation organized in 2000 to carry on and expand various business
 opportunities which may from time to time be presented to the National
 Exchange Carrier Association, Inc. (NECA). The general business plan was
 that non-regulated business opportunities would be conducted by Solix, Inc.
 so that NECA could concentrate on its traditional core tariff and pooling
 services.Solix, Inc.
 has, however, attempted to diversity its business. For example, in addition
 to serving the telecommunication industry through contracts with the
 Universal Service Administrative Company for support of the federal schools
 and libraries and rural health care universal service programs, Solix, Inc.
 also now serves numerous agencies of both the state and federal governments,
 and more than half of Solix, Inc.s business involves the direct
 administration of government contracts.There is no
 assurance that any of Breda, Prairie Telephone or Westside Independent will
 ever receive any returns on or other value from their investment in Solix,
 Inc, whether by distributions or any sale of, or increases in the value of,
 Solix, Inc.s common stock. The board of directors of Solix, Inc. did,
 however, declare a $.75 per share dividend in 2004, a $1 per share dividend
 in 2005, a $1 per share dividend in 2006, and a $1.10 per share dividend in
 2007.The value of
 Bredas, Prairie Telephones and Westside Independents investments in the
 above entities and of their other investments may vary significantly from
 year to year. They may also face difficulties in realizing upon some of their
 investments because there5

is no public
 or other active market for those investments and because some of the entities
 in which they have invested have agreements in place which place limitations
 or restrictions on their ability to transfer their ownership interests in
 those entities to third parties. Some of those limitations and restrictions
 are in the form of a right of first refusal under which the entity is given
 the right to match any offer received by Breda, Prairie Telephone or Westside
 Independent.Prairie
 Telephone became a 10% owner of Desktop Media, L.L.C. on May 2, 2001. At that
 time, Breda received its help desk services for Bredas Internet customers
 from Desktop Media, L.L.C. Breda now uses Caleris, Inc. to provide its help
 desk services. Prairie Telephone also loaned $500,000 to Desktop Media,
 L.L.C. on May 2, 2001, and advanced an additional $45,307 on June 9, 2004 to
 fund operational expenses until service revenues were collected. On September
 17, 2003, Prairie Telephone signed a principal deferral agreement with
 Desktop Media, L.L.C. which deferred the principal payments due in the months
 of September through December 2003, and which also provided that Prairie
 Telephones ownership in Desktop Media, L.L.C. would be increased from 10% to
 17% if at any time in the year 2004 Desktop Media, L.L.C. was not able to
 generate a minimum sustainable monthly profit of $36,000, or was unable to
 make a regularly scheduled principal payment. Both of these stipulations were
 not met in the first quarter of 2004, and Prairie Telephone accordingly
 acquired an additional 7% ownership of Desktop Media, L.L.C.Desktop
 Media, L.L.C., Prairie Telephone and the other members of Desktop Media,
 L.L.C. signed a purchase agreement with Jaguar Communications, Inc. on June
 28, 2007. Upon the closing of this purchase agreement, Prairie Telephone
 surrendered its remaining $439,974 instrument of indebtedness in exchange for
 a 28% equity interest in Desktop Media, LLC. As noted previously, Prairie
 Telephone had held a 17% ownership interest. The sale of Desktop Media,
 L.L.C. to Jaguar Communications, Inc. was finalized on September 28, 2007.
 Prairie Telephone received cash of $63,000 and a short-term promissory note
 of $254,383 for its 28% ownership interest in Desktop Media, L.L.C. The
 promissory note accrues interest from September 28, 2007, at a rate of 4.81
 percent per annum until payment is made in full, which shall be on the
 earlier of (i) the twelve month anniversary of the date of the note or (ii)
 upon the payment to Jaguar of the initial Foundation for Rural Service
 disbursement with respect to Jaguars currently pending loan request with the
 Rural Utilities Service (RUS). At the time of the sale, Desktop Media
 L.L.C.s outstanding loan to Prairie Telephone was $220,283, after the
 deduction of allowances of $219,691. Breda reported a $97,100 gain on the
 sale of this investment on its financial statements for the year ended
 December 31, 2007.Prairie
 Telephone purchased a 35.29% interest in Spiralight Network, L.L.C. on
 December 28, 2006 for $960,000. On May 24, 2007, Prairie Telephone
 contributed its prorata share of a capital call by Spiralight Network, L.L.C.
 in the amount of $169,411. Spiralight Network, L.L.C. provides fiber
 transport services in Wisconsin, Illinois and Minnesota. Prairie Telephone
 originated a promissory note to its unconsolidated affiliate, Spiralight
 Network, L.L.C. on September 5, 2007. The amount of the note is $480,000 and
 accrues interest from September 5, 2007, at a rate of 8.5 percent per annum
 until6

payment is
 made in full, which is to occur on September 14, 2008.Breda,
 Prairie Telephone and Westside Independent were each owners of Class C stock
 in the Rural Telephone Bank, with Breda owning 596 shares, Prairie Telephone
 owning 700 shares, and Westside Independent owning 40 shares. All of Bredas,
 Prairie Telephones and Westside Independents shares were redeemed on April
 13, 2006 for an aggregate of $1,336,000. The shares were carried at cost, and
 the par value of the shares was $1,336,000. The net of tax gain on the
 redemption of the shares was approximately $698,946.Breda and
 its subsidiaries also have various other miscellaneous investments. Some of
 those investments are described in the financial statements included in Item
 7 of this annual report.Neither
 Breda nor any of its subsidiaries engage in any material research and development
 activities.Regulatory Requirements and Oversight.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. are all subject to
 regulation by the Iowa Utilities Board. They operate their telephone
 businesses pursuant to certificates and various rules and regulations
 promulgated by the IUB. Although not anticipated to occur, the IUB could
 terminate their right to provide services if they fail to comply with those
 rules and regulations.The material
 areas of regulation by the IUB are as follows:
Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. are treated as service
 regulated telephone companies by the IUB, which means that they must comply
 with the IUBs rules and regulations regarding the quality of the services
 and facilities provided to subscribers. The regulations establish minimum
 standards of quality for the services and facilities provided by Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. Their existing services
 and facilities meet those standards. The regulations also require them to
 maintain and repair their existing facilities as necessary in order to
 continue to meet at least those minimum standards. The regulations also
 establish time frames within which Breda, Prairie Telephone, Westside
 Independent and BTC, Inc. must respond to requests for services from their
 subscribers. The regulations can be amended to increase the minimum standards
 or to require that additional services be made available to subscribers. Past
 amendments have not, however, caused any material difficulties for Breda,
 Prairie Telephone, Westside Independent or BTC, Inc.
The IUB must
 approve of any expansion beyond the telephone service areas currently served
 by Breda, Prairie Telephone, Westside Independent and BTC, Inc. The primary
 factors that will be considered by the IUB in the event of a request for7

an expansion
 will be the managerial, financial and technical abilities of Breda, Prairie
 Telephone, Westside Independent or BTC, Inc., as the case may be. Although
 they do not anticipate material difficulties in the event of any proposed
 expansion, there is no assurance that any future proposed expansion in the
 service areas of Breda, Prairie Telephone, Westside Independent or BTC, Inc. would
 be approved by the IUB. (The approval of the Federal Communications
 Commission will also be necessary for any proposed expansion, as discussed
 below.)
The IUB has
 designated Breda, Prairie Telephone and Westside Independent as eligible telecommunications
 carriers. This designation allows them to receive the universal services
 funding component of the support payment funding program administered by the
 Federal Communications Commission. The 1996 Telecom Act mandated goals of
 universal service to promote the availability of quality services at just,
 reasonable, and affordable rates; increase access to advanced
 telecommunications services throughout the nation; and advance the
 availability of such services to all consumers, including those in low
 income, rural, insular, and high cost areas at rates that are reasonably
 comparable to those charged in urban areas. Four funding programs within
 universal services funding are broken out to meet these goals: High Cost;
 Schools and Libraries; Low Income; and Rural Healthcare. Breda, Prairie
 Telephone and Westside Independent were able to obtain the eligible
 telecommunications carrier designation because they are able to provide the
 services which are supported by the Universal Services Fund. Although not
 anticipated to occur, their designation as an eligible telecommunications
 carrier could be lost if they fail to provide the services supported by the
 universal services program, which would result in them no longer being able
 to receive universal services funding. Those services are, however, currently
 only the basic local telephone services provided by Breda, Prairie Telephone
 and Westside Independent. They received universal services funding of
 approximately $829,818 in the aggregate in 2005, $910,608 in the aggregate in
 2006, and $1,030,599 in the aggregate in 2007. Breda anticipates receiving
 High Costs program and Low Income program universal services funding in 2008
 in an amount comparable to that received in 2007.BTC, Inc.
 has been designated as an eligible telecommunications carrier by the IUB.
 Since BTC, Inc. is a competitive local exchange carrier in the Carroll, Iowa
 market, however, it is only eligible to receive High Cost universal service
 funds if the incumbent local exchange carrier receives those funds. The
 incumbent local exchange carrier is Qwest, and Qwest does not receive
 universal service funding for the Carroll, Iowa market. BTC, Inc. is
 therefore not eligible for the High Cost universal service funding program.
 BTC is, however, able to be reimbursed for the Low Income universal service
 funding program.
Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. are currently treated
 as rural telephone companies under the Telecommunications Act of 1996. This
 treatment may at times exempt them from some of the interconnection and other
 duties which are imposed on other telephone companies that might make it8

easier for
 potential competitors to compete with those companies. The IUB may withhold
 this exemption, however, if it finds that a request by a potential competitor
 for interconnection with Bredas, Prairie Telephones, Westside Independents
 or BTC, Inc.s networks is not unduly economically burdensome, is not
 technically unfeasible, and would not affect the provision of universal
 service. It is not possible to predict whether a competitor will ever request
 interconnection or whether the request would be granted by the IUB. If a
 request is made and the IUB withholds this exemption, however, Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. would face competition in
 providing telephone services that they have not faced in the past.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. are also subject to
 regulation by the Federal Communications Commission. The material areas of
 regulation by the FCC are as follows:
The FCC
 regulates the access charge rates that can be charged by Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. for interstate long distance
 calls. The National Exchange Carrier Association has been delegated some
 authority by the FCC regarding the regulation of access charge rates, but all
 changes proposed by the National Exchange Carrier Association must be
 approved by the FCC. The regulation of access charge rates is an area of
 particular concern to Breda, Prairie Telephone, Westside Independent and BTC,
 Inc., and is discussed below.
The FCC must
 approve of any expansion beyond the telephone service areas currently served
 by Breda, Prairie Telephone, Westside Independent and BTC, Inc. The primary
 factors that will be considered by the FCC in the event of a request for an
 expansion will be the managerial, financial and technical abilities of Breda,
 Prairie Telephone, Westside Independent or BTC, Inc., as the case may be, and
 the antitrust implications of the expansion. Although they do not anticipate
 any material difficulties in the event of any proposed expansion, there is no
 guarantee that any future proposed expansion in the service areas of Breda,
 Prairie Telephone, Westside Independent or BTC., Inc. would be approved by
 the FCC.
The FCC
 regulates the amount of support payment funding that will be received by
 Breda, Prairie Telephone and Westside Independent. A material risk to Breda
 arises from the regulation of support payment funding by the FCC since
 support payment funding constitutes a substantial part of Bredas revenues.
 The FCC regulates support payment funding primarily by targeting how the
 support payment funding received from the National Exchange Carriers
 Association and the Universal Service Administrative Company will be
 allocated among the various possible recipients of the funding. The
 allocation may vary from year to year depending on the FCCs determination,
 and it is not possible to predict how the FCC will allocate the support
 payment funding in any year. The amount of support payment funding received
 by Breda, Prairie Telephone and Westside Independent will therefore vary from
 year to year. For example, they received, in the aggregate, support payment
 funding of $1,646,878 in 2005, $1,830,898 in 20069

and
 $1,873,353 in 2007. Those amounts include the amount of the universal
 services funding component which is listed in the above discussion regarding
 the IUB. BTC, Inc. is not eligible to be a member of the National Exchange
 Carriers Association because, among other reasons, BTC, Inc. is not an
 incumbent local exchange carrier. BTC, Inc. therefore does not receive
 support payment funding from the National Exchange Carriers Association.The
 Communications Assistance For Law Enforcement Act (CALEA) was passed in 1994
 and sets forth the assistance capabilities that telecommunications carriers
 need to maintain so that they can support law enforcement in the conduct of
 lawfully authorized electronic surveillance. Breda, Prairie Telephone and
 Westside Independent had been granted various extensions from time to time
 for compliance with the various requirements of CALEA, with the most recent
 extension ending on June 30, 2006. Breda installed a soft switch in its CLEC
 exchange in the last quarter of 2005, and the technology in this switch
 allows for CALEA compliance in both its CLEC exchange of Carroll, Iowa, and
 its ILEC exchange in Breda, Iowa. Breda has begun working through an upgrade
 plan involving the purchase of switches and the completion of switch
 installations in its remaining, stand-alone switches in five small exchange
 locations throughout its service territory. Breda estimates that its final
 cost to upgrade the remaining switches could be close to $2,000,000.On May 12,
 2006, the FCC adopted an order whereby all broadband Internet and
 interconnected voice over Internet protocol (VoIP) providers must comply with
 CALEA surveillance regulations by May 14, 2007. The FCC declined to exclude
 any facilities-based broadband Internet access providers from CALEA, noting
 that Trusted Third Parties and service bureaus can assist small entities in
 processing surveillance orders in accordance with the system security
 requirements, thereby ameliorating burdens for these providers.The FCCs
 May 12, 2006 order also restricted the availability of compliance extensions
 to equipment, facilities and services deployed prior to October 25, 1998;
 required any provider with a pending compliance extension petition currently
 on file to file another letter by February 12, 2007 attesting that the
 petition exclusively concerns equipment, facilities or services installed or
 deployed prior to October 25, 1998; concluded that providers are responsible
 for the costs of complying with CALEA in most situations; permitted
 telecommunications carriers and broadband Internet access and interconnected
 VoIP providers the option of using Trusted Third Parties to assist in meeting
 the CALEA obligations to provide law enforcement agencies the electronic
 surveillance information they require in an acceptable format; required
 providers to file their security and integrity plans with the FCC by March
 12, 2007; and required all providers to submit interim reports to the FCC on
 CALEA compliance by February 12, 2007.For
 telephone companies with separate broadband and VoIP entities, these
 requirements are in addition to those for their carrier operations, and
 require separate reports to be filed for each operation. Breda has enlisted
 Iowa Network Services to be its Trusted Third10

Party
 resource in meeting the CALEA requirements. As of the date of this filing,
 Breda has filed all required CALEA reports.Beginning in
 late 2006, AT&T began withholding payment of access charges from many of
 the Iowa independent telephone companies (ILECs) that provided
 conference-bridging services because AT&T thought the ILEC and CLEC
 (competitive local exchange carrier such as BTC, Inc.) access charges and
 traffic volumes were too high. Within a matter of weeks, Qwest, Verizon,
 Sprint and AT&T Wireless also began to withhold payment of access
 charges. In response, and consistent with the FCCs explicit orders on this
 matter, seven of the Iowa ILECs filed a collection action in federal district
 court for collection of these charges.Breda is not
 a party to any of these lawsuits or collection actions, and was being paid
 for conference bridging services by most carriers. However, beginning in May
 2007, Verizon Business, who is now the payer of access charges for carriers
 previously identified as MCI and Wiltel, stopped payment of access charges
 for conference bridge traffic traversing MCI and Wiltel networks. On July 27,
 2007, BTC, Inc. received an e-mailed Dispute Notification from Verizon
 Business disputing interstate and intrastate switched access charges billed
 by BTC, Inc. to Verizon Business between October 1, 2006, and July 2007. BTC,
 Inc. continues to work with legal counsel in its collection actions against
 Verizon Business for the $1,240,980 in unpaid access charges. On October 29,
 2007, BTC, Inc. also received a dispute notification from Sprint indicating
 that their regulatory and legal teams were in the process of performing analysis
 of the BTC, Inc. traffic, and disputing some of the terminating usage. BTC,
 Inc. is owed $261,484 for unpaid Sprint access charges. In January 2008, BTC,
 Inc. also received a letter from AT&T dated January 29, 2008 disputing
 access charges billed to them by BTC, Inc. BTC, Inc. is presently in
 discussion with AT&T regarding these access charges. In addition to
 working with legal and industry consultants on actions against Verizon
 Business and Sprint, BTC, Inc. is also monitoring the outcome of the various
 court proceedings in Iowa, Minnesota, and New York as well as oral arguments
 and proceedings before the FCC and the Iowa Utilities Board. While BTC,
 Inc.s situation is not identical to these proceedings, some of the rulings
 will be applicable to BTC, Inc.s situation. The FCC has ruled in prior cases
 involving carrier non-payment of access charges that carriers could not take
 these kinds of self-help actions and could not block traffic traversing
 their networks.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 the11

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.Tele-Services
 is regulated by the FCC. The rules and regulations of the FCC primarily
 relate to general operational and technical issues, and they do not affect
 rates or expansions of service areas. Tele-Services cable services are also
 regulated in the sense that those services are provided pursuant to
 franchises or agreements with each of the towns in which Tele-Services
 currently provides cable services.Risks.The
 regulation of access charge rates is an area of particular concern to Breda
 because a substantial amount of Bredas total consolidated revenues are
 derived from access charge revenues. Breda, Prairie Telephone, Westside
 Independent and BTC, Inc. receive access charge revenues from long distance
 carriers (sometimes referred to in the telephone industry as inter-exchange
 carriers or IXCs) for providing intrastate and interstate exchange
 services to those long distance carriers. In more basic terms, they receive
 access charge revenues for originating and terminating long distance calls
 made and received by their subscribers. The FCC determines the access charge
 rate that can be charged for interstate long distance calls. The FCC can
 change those rates at any time, and the more recent changes have lowered
 access charge rates.The FCC
 currently has an open docket on inter-carrier compensation, which was
 initiated to identify a unified approach to intercarrier compensation. The
 current intercarrier compensation system distinguishes between different types
 of carriers and services, such as local and long-distance or wireless and
 wireline, and the FCC has indicated that the FCC plans to replace the current
 system with a unified intercarrier compensation system. The FCC initiated a
 rule making proceeding to consider this matter and the questions that the FCC
 are examining include the effect that any change in the compensation system
 will have on consumers and the universal service fund.Breda
 continues to work with two Iowa industry associations in reviewing and
 submitting comments on the Missoula Plan, which is now before the FCC. The
 Missoula Plan is a set of proposals put together by a coalition of telecom
 companies, including the Rural Alliance. The Rural Alliance is a combination
 of the Expanded Portland Group and the Alliance for Rational Intercarrier
 Compensation. The Missoula Plan grew out of a set of proposals to counter the
 big carriers and the original FCC plan to use bill and keep for
 intercarrier12

compensation.
 Bill and keep would have meant that a company such as Breda would bill its
 own customers and get no payments from any other carrier, such as AT&T or
 MCI, for the use of its networks to carry toll traffic.The FCC had
 sought initial comments on the Missoula Plan by October 25, 2006. In January
 2007, the supporters of the Missoula Plan filed an amendment intended to
 target new federal support to states that have already reduced intrastate
 access rates and the highest end-user rates. The Federal Benchmark
 mechanism would provide supplemental funding to ensure end-user rates remain
 within a national benchmark range when the Missoula Plan is implemented. The
 FCC released a Public Notice on February 16, 2007 seeking comments on the
 amendments to the Missoula Plan as filed in an ex parte letter filed January
 30, 2007, and corrected by another filing on February 5, 2007. Comments were
 due March 10, 2007 and reply comments were due April 3, 2007. Breda is not
 able to predict the outcome of these proceedings or estimate at this time the
 impact these proceedings could have on Breda.Breda
 believes that changes in access charges will likely occur, and that if any of
 the plans known today are adopted, as currently proposed, there will be
 substantial reductions in access revenues. Since access charge revenues
 constitute a substantial portion of Bredas total consolidated revenues, this
 is an area of material risk to Breda and its subsidiaries.Breda and
 its subsidiaries are also subject to risk regarding changes in intrastate
 access charge rates because concerns have been raised by the Iowa legislature
 and the IUB regarding intrastate rates, and whether alternative intrastate
 intercarrier compensation mechanisms should be investigated. Breda does not
 believe, however, that it is possible to predict at this time whether
 intrastate access rates will be lowered, or if intrastate access rates are
 lowered, the amount of the decrease in those rates. It is therefore uncertain
 at this time whether this issue will result in an adverse effect on Bredas
 operating income. Breda does, however, anticipate continuing pressure for the
 lowering of intrastate access charge rates.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, and13

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.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.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. State industry
 organizations have filed reply comments in the FCC docket relating to capping
 the funding received by competitive carriersOn January
 29, 2008, the FCC released three separate notices of proposed rulemaking regarding
 universal service. There will be a 30-day comment period once these notices
 are published in the Federal Register. The first comment proceeding deals
 with the Joint Board Recommendations, one of which is the establishing and
 capping of three funds for wireless, broadband, and providers of last resort.
 The second comment proceeding addresses the Identical Support Rule. The FCC
 is seeking comment on whether it should eliminate the identical support rule,
 provide support to CETCs based on their own costs of providing service, CETC
 support should be capped at the level of the ILEC support, and on the
 methodologies for determining CETCs relevant costs for universal service
 support purposes. The present rule stipulates that on a per-line basis,
 support for wireless is identical to wireline support, despite differences in
 costs between the two platforms. The third comment proceeding concerns
 Reverse Auctions. The FCC is seeking comment on the merits of using reverse
 auctions to determine the amount of high-cost universal service14

support
 provided to eligible telecommunications carriers serving rural, insular, and
 high-cost areas. Reverse auctions support would be determined by the lowest
 bid received to serve an auctioned area.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. each have agreements
 with Iowa Network Services. Under those agreements, Iowa Network Services
 provides Breda, Prairie Telephone, Westside Independent and BTC, Inc. with
 the lines and services necessary for them to provide their telephone
 subscribers with, among other things, caller ID services and what is
 sometimes referred to in the telephone industry as centralized equal
 access. As a practical matter, that access is what allows their subscribers
 to choose long distance carriers. Bredas, Prairie Telephones, Westside
 Independents and BTC, Inc.s telephone systems are tied into Iowa Network
 Services fiber optic network and switches. Although it is not anticipated to
 occur, if their agreements with Iowa Network Services were terminated, it
 would be difficult for them to find a replacement for Iowa Network Services,
 and it would be costly for them to internalize all of those services. Prairie
 Telephone and Westside Independent are each shareholders of Iowa Network
 Services. Prairie Telephone and Westside Independent each currently own less
 than 1% of Iowa Network Services outstanding stock.Telephone
 service providers like Breda, Prairie Telephone, Westside Independent and
 BTC, Inc. are subject to competition from other providers. As a result of the
 Telecommunications Act of 1996, telephone companies are no longer afforded
 exclusive franchise service areas. Under that Act, competitors can now offer
 telephone services to Bredas, Prairie Telephones, Westside Independents
 and BTC, Inc.s subscribers, and also request access to their lines and
 network facilities in order to offer any type of service that can be provided
 through those lines and facilities. The Act and the regulations promulgated
 by the FCC and state regulatory agencies to implement various parts of the
 Act could have a material adverse effect on Breda, Prairie Telephone,
 Westside Independent and BTC, Inc. because they open up Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. to potential competition that
 they were not subject to in the past.There are
 numerous telephone companies which have filed to provide telephone services
 throughout all of Iowa. To date, however, no company has chosen to compete in
 any of Bredas, Prairie Telephones or Westside Independents service areas.
 Breda does not know the plans of any companies, but Breda currently believes
 the possibility of any company entering any of those service areas in 2008 is
 small.BTC, Inc.
 provides telephone services in the Carroll, Iowa market area. There are
 various other companies providing telephone services in that area. For
 example, Mediacom, which is a large cable television operator in the United
 States and the local cable provider in the Carroll, Iowa market, has a phone
 service offering in the Carroll market through Mediacoms partnership with
 Sprint. Mediacoms offering includes a triple play option where a
 subscriber can receive phone, cable and Internet services through Mediacom.
 The incumbent local exchange carrier, Qwest, is also marketing a triple play
 offering through its agreement with DirecTV which allows it to provide a
 satellite television offering along with Qwests phone service and high speed
 Internet offerings.15

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.Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. also experience competition in
 providing access services and other services to long distance carriers. For
 example, they experience competition in providing access services for long
 distance when their subscribers use private line transport, switched voice
 and data services, microwave, or cellular or personal communications service.
 In those cases, the subscriber is not using Bredas, Prairie Telephones,
 Westside Independents or BTC, Inc.s networks or switches, so they cannot
 charge access charges to the long distance carrier. Various other competitors
 and forms of competition are also likely to arise in the future as
 technological advances continue to occur in the telecommunications and cable
 industries.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. continue to face
 ever-increasing competition in providing dial-up and high speed Internet
 access. BTC, Inc. is experiencing intense pricing and free services
 competition in providing Internet access in its Carroll, Iowa market. There
 are at least five competitors in this relatively small market area, and BTC,
 Inc. has experienced declines in its dial-up customer base due to
 competition. Many of Bredas former dial-up customers are, however, simply
 exchanging Bredas dial-up Internet service for one of Bredas high speed
 Internet offerings.Breda began
 to offer high speed Internet services to its customers in its rural telephone
 exchanges of Lidderdale,Macedonia,
 Farragut, Yale and Pacific Junction, Iowa during the last quarter of 2006.
 Breda was able to provide high speed Internet service to these previously
 unserved areas because of new technology which allowed Breda to provide
 service to customers residing at a great distance from the central office.
 Breda has had excellent response to its high speed Internet service offering
 in those service areas, having added 95 high speed Internet customers in the
 last quarter of 2006 and 204 high speed Internet customers during 2007 from
 those service areas.Breda
 continues to investigate new technology and product offerings in the Internet
 field that it can provide to its customers, or that could be considered
 value-added features to its already existing product. As of May 1, 2007,
 Breda began offering a 256 Mbps high speed Internet service option with a
 reduced price to its customers. This service has been extremely well received
 by Bredas customers and many of its dial-up customers are converting to this
 high speed Internet offering. Breda successfully tested and launched a
 wireless Internet product in order to offer high speed Internet services to
 neighboring communities that Breda cannot reach through its other long-reach
 products. Breda anticipates that this wireless high speed Internet service
 will continue to draw customers in 2008.16

Breda added
 a service called SecureIt to its Internet service offerings in June 2005.
 This service takes the place of specific products like Spybot or Adaware, or
 anti-virus products, all of which need customer interaction on a regular
 basis to download the newest protections. The SecureIt service manages the
 updating and maintenance functions associated with patches, anti-virus and
 spyware, and the service takes the place of having to purchase, install and
 maintain individual security products. The SecureIt service has been well
 received by both Bredas Internet customers and customers receiving their
 Internet service from other providers.Breda
 entered into a marketing and distribution agreement with the National Rural
 Telecommunications Cooperative (NRTC) on May 13, 2004, for the distribution
 of satellite and high speed Internet service. One reason Breda entered into
 this agreement was to provide Breda with a means to provide high speed Internet
 service to its rural customers who could not obtain high speed Internet
 service through existing broadband options, such as cable modem, DSL, and
 wireless, because of distance and location factors. NRTC has a master
 distribution agreement with WildBlue Communications, Inc., through which NRTC
 has obtained rights to market, promote, sell and distribute satellite-based
 Internet access services and related products to end users in the continental
 United States, including through NRTCs eligible members such as Breda.Breda began
 offering Wild Blue satellite Internet service in September 2005. The overall
 response to the service was excellent not only in the satellite beam where
 Breda was marketing the services, but in all of the beams across the United
 States and Canada. The beam in which Breda was providing service, however,
 reached its maximum capacity level in the latter part of March 2006, and
 Breda stopped marketing this service around that time because it would not be
 able to add customers until a new satellite was launched that could increase
 the capacity in Bredas service area. NRTC and Wild Blue were able to
 generate the funding for a new satellite, and a new satellite was launched in
 the first quarter of 2007. Breda has not, however, recommenced marketing the
 Wild Blue service because Breda is now able to serve its customers with its
 own high speed Internet, long-reach products.Breda
 believes that it will need to continue to pursue new Internet 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 rates and to provide higher speed Internet access. Breda continues to
 evaluate and offer special promotions on its high speed Internet service
 offerings and to review adjustments in pricing and Internet service options.Breda
 expects the overall potential customer base for Internet access to continue
 to increase, but it is becoming more difficult to predict if Breda or its
 subsidiaries will experience any increases in their Internet customer base
 given the increasingly competitive pressures in this area. It is also
 possible that Breda and its subsidiaries might continue to experience
 declines in their Internet customer base. Also, competitive pressures
 regarding pricing may lead to little or no growth, or even declines, in
 Internet service revenues, even if Breda is successful in increasing its
 Internet customer base.17

Some of the
 cellular ventures in which Breda, Prairie Telephone and Westside Independent
 have invested provide cellular services in the telephone exchange areas
 serviced by them and by BTC, Inc. Cellular services are competitive with the
 telephone services provided by Breda, Prairie Telephone, Westside Independent
 and BTC, Inc. Breda does not believe, however, that investments in cellular
 ventures are inconsistent or in conflict with Bredas, Prairie Telephones,
 Westside Independents or BTC, Inc.s overall business, in particular because
 those investments are one method of attempting to diversify across the
 various telecommunications technologies which were available at the time of
 the preparation of this annual report.The cellular
 ventures in which Breda, Prairie Telephone and Westside Independent have invested
 continue to face ever increasing and changing competition in providing
 cellular services and equipment from the various competitors offering
 cellular and personal communication services.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.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. also sell and lease
 telephone, cellular and related equipment. They face strong competition in
 this area because there are numerous competitors who sell and lease that
 equipment.The
 competition in most of the areas mentioned in the preceding paragraphs
 centers primarily around cost, service and experience.Tele-Services
 franchises or agreements with the towns do not grant Tele-Services the
 exclusive right to provide cable services in the towns, so other cable
 service providers could provide cable services in the towns. There currently
 are not, however, any other cable service providers in any of the towns.
 Although difficult to predict, Tele-Services currently18

does not
 contemplate any cable services competitor coming into the towns given, among
 other things, the smaller size of the towns.Tele-Services
 does not anticipate that any of its franchises or agreements will be
 terminated before the stated expiration dates. Tele-Services also hopes to be
 able to renew or extend the franchises or agreements before they expire, but
 no assurance can be given that any franchises or agreements can or will be
 renewed or extended.The
 termination of a franchise or agreement would allow that town to deny
 Tele-Services access to its cables for maintenance and services purposes. The
 loss of that access would create difficulties for Tele-Services in properly
 serving its subscribers and providing cable services to that town.The
 franchises or agreements with the towns require the giving of notice to the
 towns before Tele-Services can change their cable services rates, and some of
 those franchises or agreements may require the approval of the town for any
 increases in those rates. Although Tele-Services does not anticipate any
 material difficulties with any future proposed rate increases, there is no
 guarantee that any future rate increases will be able to be implemented in
 any of the towns.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.Another
 issue faced by Tele-Services is the declining population base in the small
 rural communities served by Tele-Services, which results in a lower potential
 customer base for Tele-Services.Tele-Services
 is also faced with the need to upgrade its plant, equipment and cables in
 order to add more channel lineups so that it can stay competitive and
 continue to be able to obtain programming licenses. Tele-Services added
 additional channels to its line-up in 2004 and 2005, which required
 Tele-Services to upgrade some of its cable TV systems and install additional
 equipment and electronics. Tele-Services also combined the head-ends on two
 of its systems into one head-end during the first quarter of 2004, which
 allowed three19

communities
 to be served by one head-end, and for those three communities to receive
 local channel services. Tele-Services also combined the headends on two of
 its systems into one head-end during the third quarter of 2005, which allowed
 three communities to be serviced by one head-end, and for those three
 communities to receive local channel services. In June 2006, Tele-Services
 added one community served by a stand-alone headend to its headend that had
 already consolidated three other communities. Tele-Services is continuing to
 evaluate the possibility of other head-end combinations. The primary goal of
 Tele-Services in consolidating its head-end equipment is for the equipment to
 be able to serve two or more communities, instead of just one community, with
 the intended result of lower maintenance costs for the equipment.
 Tele-Services continues to explore its options especially with its cable TV
 communities not associated with its local telephone services communities.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.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 eliminated20

and cities
 maintain control over rights-of-way. Tele-Services does not believe the new
 legislation will have an effect on its operations.Service Marks.Breda has
 registered the mark W.I.N. Western Iowa Networks with the United States Patent
 and Trademark Office, and Breda and its subsidiaries have all conducted their
 businesses under the names W.I.N. or Western Iowa Networks since the
 second quarter of 2001. Bredas use of the mark and related logos is intended
 to create an integrated, unified marketing approach for all of the products
 and services of Breda and its subsidiaries and to increase awareness of those
 products and services.Employees.As of
 December 31, 2007, Breda had 33 full time employees and 2 part time employees.
 Breda employs all of those employees, but those employees also provide the
 labor and services for Prairie Telephone, Westside Independent, Tele-Services
 and BTC, Inc. The salaries and other costs and expenses of the employees are
 allocated among Breda and its subsidiaries based on time sheet allocations.
 There currently are not any collective bargaining or other labor agreements
 with any of Bredas employees, and only three of Bredas employees have
 written employment agreements. Those employment agreements were with the
 chief executive officer, the chief operations officer and the chief financial
 officer of Breda. Breda may utilize part-time employees on an as needed
 basis.Item 2.
Description of Property.Breda and
 some of its subsidiaries own or lease various real estate. The following
 paragraphs briefly describe that real estate and how the real estate is
 currently used.Breda owns or leases the following real estate:
Bredas
 corporate offices are located at 112 East Main, Breda, Iowa. The building has
 approximately 7,680 square feet, and is utilized by Breda, Tele-Services,
 Prairie Telephone, Westside Independent and BTC, Inc.
There is a
 building attached to Bredas corporate office building which serves as
 Bredas central office building. The building houses equipment used to
 switch, record and transmit telephone calls. This type of equipment is
 sometimes referred to in the industry as central office equipment. The
 equipment is used in providing telephone services to Breda and the
 surrounding rural area. The building has approximately 960 square feet. As
 noted, Bredas corporate office building is also located on a portion of this
 real estate.
Breda owns
 certain real estate and a warehouse which is also located at 112 East Main,
 Breda, Iowa. The warehouse has approximately 6,720 square feet, and is used
 primarily for storage of inventory and various equipment (trucks,21

generators,
 trailers, plows, etc.).
Breda owns
 the real estate and building located at 109 West Second Street, Lidderdale,
 Iowa. The building houses equipment used to switch, record and transmit
 telephone calls. The equipment is used in providing telephone services to
 Lidderdale and the surrounding rural area. The building has approximately 600
 square feet.
Breda owns
 the real estate and building located at 310 Main Street, Macedonia, Iowa. The
 building houses equipment used to switch, record and transmit telephone
 calls. The equipment is used in providing telephone services to Macedonia and
 the surrounding rural area. The building has approximately 600 square feet.
Breda leases
 a portion of the building owned by BTC, Inc. at 603 N. Adams, Carroll, Iowa.
 Breda utilizes its portion of the building as a retail store for the sale and
 lease of telephone, cellular and related equipment and merchandise.Prairie
 Telephone owns or leases the following real estate:
Prairie
 Telephones corporate offices are located in Bredas corporate office
 building at 112 East Main, Breda, Iowa.
Prairie
 Telephone owns the real estate and building located at 508 Dupont Street,
 Farragut, Iowa. The building houses equipment used to switch, record and
 transmit telephone calls. The equipment is used in providing telephone
 services to Farragut and the surrounding rural area. The building has
 approximately 2,400 square feet.
Prairie
 Telephone owns a warehouse which is also located at 508 Dupont Street,
 Farragut, Iowa. The warehouse has approximately 2,600 square feet, and is
 used for storage of inventory and equipment (trucks, generators, trailers,
 plows, etc.).
Prairie
 Telephone owned the real estate and building located at 707 Phillips Street,
 Farragut, Iowa until July 2007 when this building was sold. The building was
 formerly used to house equipment used in providing telephone services, but
 had been vacant for many years.
Prairie
 Telephone owns the real estate and building located at 804 Washington Avenue,
 Pacific Junction, Iowa. The building houses equipment used to switch, record
 and transmit telephone calls. The equipment is used in providing telephone
 services to Pacific Junction and the surrounding rural area. The building has
 approximately 2,000 square feet.
Prairie
 Telephone owns the real estate and building located at 600 Washington22

Street,
 Pacific Junction, Iowa. The building was formerly used to house equipment
 used in providing telephone services, but is currently vacant.
Prairie
 Telephone owns the real estate and building located at 226 Main, Yale, Iowa.
 The building houses equipment used to switch, record and transmit telephone
 calls. The equipment is used in providing telephone services to Yale and the
 surrounding rural area. The building has approximately 1,125 square feet.BTC, Inc.
 owns the real estate and building located at 603 N. Adams, Carroll, Iowa. The
 building has approximately 4,450 square feet. The building is used as a
 satellite administrative office housing sales and marketing staff and customer
 service representatives. The building is the main location for walk-in,
 customer traffic for telephone and Internet services in the Carroll market
 area. Breda leases a portion of the building for use as a retail store for
 the sale of cellular and related equipment and merchandise.BTC, Inc.
 owns a second building located at 603 N. Adams, Carroll, Iowa. The building
 houses equipment used by BTC, Inc. in providing telephone services and
 Internet access services. The building has approximately 280 square feet.BTC, Inc.
 owned the real estate and building located at 526 N. Carroll Street, Carroll,
 Iowa until the property was sold on May 1, 2006. The building had
 approximately 1,804 square feet. BTC, Inc. and Breda previously used the
 building for their Carroll, Iowa operations, but all equipment housed in the
 building and all services provided out of the building were moved to 603 N.
 Adams, Carroll, Iowa, in October, 2003.Westside
 Independent owns the real estate and building located at 131 South Main
 Street, Westside, Iowa. The building houses equipment used to switch, record
 and transmit telephone calls. The equipment is used in providing telephone
 services to Westside and the surrounding rural area. The building also houses
 some equipment used by Tele-Services in its cable business. The building has
 also been used as the city offices for Westside, Iowa, since approximately
 April 1, 2003. Breda does not charge any rent to the city of Westside for its
 use of the building. The building was also previously used for Westside
 Independents corporate offices. The building has approximately 1,600 square
 feet.Tele-Services
 owns buildings located in eighteen different towns which house some equipment
 used to receive, descramble and transmit television signals. The equipment is
 sometimes referred to in the cable industry as head-end equipment. The
 buildings each have approximately 150 square feet. Tele-Services purchased
 the real estate which houses its building in Malvern, Iowa, on January 1, 2006
 for $5,000. Tele-Services previously leased that real estate. The rest of
 Tele-Services buildings are located on real estate in each of the towns,
 which is generally made available to Tele-Services under its franchise or
 other agreement with those towns, but Tele-Services use of some of the real
 estate is pursuant to an oral agreement. Some of the real estate is owned by
 the towns. Tele-23

Services
 pays a very nominal consideration for the use of some of the real estate, but
 in some cases Tele-Services is not required to pay any consideration.
 Tele-Services does not believe it will be difficult or cost prohibitive to
 obtain other real estate for the buildings or the equipment, if that becomes
 necessary for some reason.Breda,
 Prairie Telephone, Westside Independent and BTC, Inc. also each own various
 equipment used to switch, record and transmit telephone calls in the areas
 serviced by them. The equipment is all housed in buildings owned or leased by
 them, as discussed above. Breda believes that the normal and ordinary useful
 life of this type of equipment is from between approximately 5-12 years. The
 current equipment was purchased at various times over the period of 1998 to
 2007. Breda believes the
 equipment is now in good operating condition and repair, considering ordinary
 wear and tear and depreciation. Breda, Prairie Telephone, Westside
 Independent and BTC, Inc. also own miscellaneous lines, cables and other
 equipment used to provide telephone services and Internet access.Tele-Services
 owns various equipment used to receive, descramble and transmit cable
 signals, including various electronic receiving equipment and electronic
 conductors and devices. The equipment is sometimes called head end
 equipment. Breda believes that the normal and ordinary useful life of this
 type of equipment is approximately 10 years. The equipment is located in
 various towns as discussed above. Tele-Services also owns other miscellaneous
 cables and equipment used in its business.Breda,
 Prairie Telephone, Westside Independent, Tele-Services, and BTC, Inc. also
 hold various easements for their various telephone and cable lines and other
 property. Some of those easements are on or across real estate of the cities,
 while others are on or across private property.All of the
 real estate and substantially all of the other assets of Breda, Prairie
 Telephone, Westside Independent and Tele-Services are subject to mortgages
 and security agreements given by those corporations to the Rural Telephone
 Finance Cooperative to stand as security and collateral for loans from the
 Rural Telephone Finance Cooperative.Item 3.
Legal Proceedings.As of the
 date of this annual report, Breda was not aware of any pending legal
 proceeding to which Breda was a party or to which any of Bredas property was
 subject, other than for any routine litigation, if any, that was incidental
 to its business. As of the date of this annual report, Breda was not aware
 that any governmental authority was contemplating any proceeding against
 Breda or any of its property.Item 4.
Submission of Matters to a Vote of Security Holders.No matters
 were submitted to a vote of the shareholders of Breda, through the
 solicitation of proxies or otherwise, during the period of October 1, 2007
 through December 31, 2007.24

PART II

Item 5.
Market for Common Equity, Related Stockholder Matters and Small
 Business Issuer Purchases of Equity Securities.Bredas
 authorized stock consists of 5,000,000 shares of Class A Common Stock, no par
 value, and 5,000,000 shares of Class B Common Stock, no par value. The Class
 A Common Stock is comprised of three series, consisting of 4,968,984 shares
 of Series 1 Class A Common Stock, 30,959 shares of Series 2 Class A Common
 Stock, and 57 shares of Series 3 Class A Common Stock. As of December 31,
 2007, Breda had the following outstanding shares of stock: (i) 1,226 shares
 of the Series 1 Class A Common Stock, which were held by 35 different
 shareholders; (ii) 27,647 shares of the Series 2 Class A Common Stock, which
 were held by 568 different shareholders; (iii) 50 shares of the Series 3
 Class A Common Stock, which were held by 20 different shareholders; and (iv)
 2,013 shares of Class B Common Stock, which were held by 48 different
 shareholders.Breda had a
 total of 631 shareholders as of December 31, 2007. Some of the shareholders
 own shares of more than one of the series of the Class A Common Stock,
 however, and that is why the total number of shareholders noted in the
 preceding paragraph exceeds 631.Bredas
 common stock is not listed on any exchange, and there is no public trading
 market for Bredas common stock. Breda has not agreed to register any shares
 of its common stock under any federal or state securities laws. An investment
 in Bredas common stock is also not a liquid investment because the Articles
 of Restatement of Breda establish various restrictions and conditions on the
 issuance and ownership of, and on the transfer of, shares of its stock.For example,
 Breda has the first right and option to purchase any or all of the shares of
 the Class A Common Stock or the Class B Common Stock of any shareholder which
 are the subject of any assignment. An assignment for this purpose means any
 sale, transfer, assignment, gift, bequest or other disposition or conveyance
 of any shares of stock, whether voluntarily or involuntarily or by operation
 of any process of law, or otherwise, and whether or not for any value or
 consideration. An assignment includes, for example, an assignment occurring
 in connection with the death of a shareholder who is an individual, the
 dissolution of a shareholder which is an entity, the bankruptcy or insolvency
 of a shareholder, or the exercise of any rights by any creditor of a
 shareholder. The purchase price payable by Breda if Breda determines to
 exercise its right to purchase any shares of the Class A Common Stock or the
 Class B Common Stock in connection with any assignment other than a voluntary
 sale of shares is the fair value of the shares as determined by the board of
 directors, in its sole discretion.. The purchase price payable by Breda if
 the assignment is a voluntary sale of the shares by a shareholder for value
 will be the amount of the purchase price payable by the proposed transferee in
 the sale. Breda25

also has the
 right and option to purchase any or all of the shares of the Series 1 Class A
 Common Stock if the holder of the shares ceases to be an eligible telephone
 subscriber. The purchase price in this circumstance is the fair value of the
 shares as determined by the board of directors, in its sole discretion. Breda
 will pay the purchase price for any shares purchased by Breda within 90 days
 of the date of Bredas written notice to the shareholder of Bredas exercise
 of its right and option to purchase the shares.The board of
 directors had historically established the purchase price at approximately
 75% of the book value of Breda, but the board began to establish the purchase
 price at approximately 70% of the book value of Breda in 2002.The board of
 directors has historically made this determination once per year, in March,
 April or May, based upon Bredas then most recent year-end financial
 statements. Bredas fiscal year ends on December 31. The price is then generally
 announced and becomes effective at the annual shareholders meeting for that
 year. The purchase price then generally applies until the board of directors
 makes a new determination and announces the new purchase price at the next
 annual shareholders meeting. The board of directors has, however, departed
 from its historical practice on a couple of occasions, primarily in
 connection with the sale of assets in a transaction which was material to
 Breda.Under this
 approach, the issuance price and redemption price in 1995, 1996, 1997, 1998
 and 1999 was, respectively, $27, $31, $41, $64 and $82.The board of
 directors departed from its historical practice on November 2, 1999, by
 adopting a resolution fixing the purchase price at $149 per share. The $149
 amount was not based on Bredas book value, but rather was roughly based upon
 the average sales price of $150.58 per share in the auction that was held in
 October of 1999. The auction is discussed below. The board of directors took
 that action because it believed the referenced auction provided it with a
 basis to make a more current determination on this issue. The board of
 directors also believed that it was appropriate to make a new determination
 of the purchase price given the sale of Bredas direct broadcast satellite
 operation on January 11, 1999. The sale of that operation resulted in a
 pre-tax gain of $7,436,415. The sale was not included in Bredas books until
 the first quarter of 1999, and was therefore not included in the 1998
 year-end financial statements which had been utilized by the board of
 directors in establishing the $82 purchase price in early 1999.The board of
 directors returned to its historical practices at its meeting on March 13,
 2000, at which time the board of directors adopted a resolution fixing the
 purchase price at $180 per share. The $180 amount was determined based upon
 Bredas 1999 audited financial statements, and was announced at, and became
 effective at, the May 17, 2000 annual meeting of the shareholders of Breda.
 If the above described historical practices were followed, the $180 per share
 amount would have continued until the next annual determination was made by
 the board of directors and announced at the annual shareholders meeting for
 2001.26

The board of
 directors determined to again depart from its historical practices on this
 issue, however, at a meeting of the board of directors held on June 12, 2000.
 At that meeting, the directors adopted a resolution fixing Bredas purchase
 price for shares of its common stock at $235 per share. The board of
 directors took this action because it believed that it was appropriate to
 make a new determination of the purchase price to reflect the receipt by
 Prairie Telephone of most of the net after-tax proceeds of the sale by
 Prairie Telephone of its shares of stock in Central Iowa Cellular, Inc. The
 $235 per share amount was determined by taking approximately 75% of the then
 net after-tax proceeds of the sale on a per share basis and adding that
 figure to the last determined purchase price of $180 per share. The
 shareholders of Breda were notified of the increase in the purchase price
 from $180 to $235 per share by letter dated June 14, 2000.At the time
 the board made its determination on June 12, 2000, Prairie Telephone had
 received approximately $5,108,280, before taxes, and it was estimated that
 Prairie Telephone would retain approximately $3,147,676 of that amount, after
 taxes. For purposes of determining the new purchase price discussed above,
 Prairie Telephones basis in its 3,000 shares of common stock of Central Iowa
 Cellular, Inc. of approximately $206,770 was deducted from the after-tax
 amount of $3,147,676.The board of
 directors has followed Bredas historical practices since that time, by
 announcing a new purchase price of:
$258 per share at the May 16, 2001 annual meeting of the
 shareholders,
$280 per share at the May 21, 2002 annual meeting of the
 shareholders,
$303.00 per share at the May 20, 2003 annual meeting of the
 shareholders,
$326 per share at the May 18, 2004 annual meeting of the
 shareholders,
$357 per share at the May 17, 2005 annual meeting of the
 shareholders,
$394 per share, by letter to the shareholders dated July 12,
 2006,
$457 per share, by letter to the shareholders dated April 2,
 2007, and
$509 per share, by letter to the shareholders to be sent in
 early April, 2008.The per
 share amount was established based upon Bredas book value as reflected in
 its most recent year-end financial statements, consistent with Bredas
 historical practices, except that, since 2002, the purchase price has been
 set at approximately 70% of the book value.The per
 share amounts that were announced by the letters to the shareholders were
 announced by those letters instead of at the annual meeting of the
 shareholders, given delays that were experienced by Breda in holding those
 annual meetings.27

The increase
 in the purchase price from $394 per share to $457 per share which was
 announced by the April 2, 2007 letter to the shareholders was primarily the
 result of Bredas receipt of $1,336,000 for the redemption of its 1,336
 shares of Class C stock in the Rural Telephone Bank. Bredas pre-tax gain was
 approximately $1,170,211 and its after tax gain was approximately $698,946.The board of
 directors currently intends to continue to address this issue on an annual
 basis consistent with the above described historical practices, except that
 the board of directors may determine to depart from those historical
 practices again in the future in the event of the occurrence of what the
 board of directors believes are material or significant events.The purchase
 price as determined by the board of directors has increased from $27 per
 share in 1995 to the current $509 per share amount described above. Breda
 does not believe that the amount of this increase is indicative of potential
 future increases, however, in particular given that:
The
 referenced increase was due primarily to three one-time material events,
 and
Breda does
 not currently foresee any material increase in revenues from its or any of
 its subsidiaries normal and ordinary course business operations, and, in
 fact, sees continuing downside pressure on those revenues.Since there
 is no public trading market or any other principal market for Bredas common
 stock, sales of common stock to other shareholders and repurchases of common
 stock by Breda currently are the primary methods for a shareholder to be able
 to sell the shareholders shares. Bredas repurchases of its common stock are
 discussed below in this Item.An auction
 was held in October, 1999, at which shareholders desiring to sell their
 shares of Bredas common stock were given the opportunity to sell those
 shares to other Breda shareholders. There are no current plans to arrange any
 other auctions in the future.Breda
 maintains a list of shareholders desiring to sell their shares, and of other
 shareholders desiring to purchase those shares, as discussed below.The
 following table provides information regarding Bredas purchases of its
 common stock from shareholders during the period of October 1, 2007 through
 December 31, 2007.28

SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

Period

Total Number
 of Shares
 Purchased1

Average Price
 Paid per
 Share2

Total Number
 of Shares Purchased as
 Part of
 Publicly
 Announced
 Plans or
 Programs1

Maximum
 Number (or
 Approximate Dollar Value)
 of Shares that
 May Yet Be
 Purchased
 Under the Plans
 or Programs1Month #1
 (October 1,
 2007-October
 31, 2007

-0-

N/A

-0-

-0-Month #2
 (November 1,
 2007-November
 30, 2007)

80

$457 per Share

-0-

-0-Month #3
 (December 1,
 2007-December
 31, 2007)

-0-

N/A

-0-

-0-Total

80

$457

-0-

-0-1
All of the shares of
 common stock were purchased by Breda pursuant to the redemption right or the
 right of first refusal granted to Breda in its Articles of Restatement, which
 rights are discussed above in this Item, or pursuant to the unsolicited
 request of the shareholder in question. Breda does not have any publicly
 announced plans or programs with respect to purchases of its common stock.2
All of the shares of
 common stock were purchased by Breda at the $457 redemption price that was
 established by the board of directors and which became effective pursuant to
 a letter to the shareholders dated April 2, 2007.Given that
 repurchases of common stock by Breda is currently one of the primary methods
 for a shareholder to be able to sell the shareholders shares, the following
 paragraphs provide additional information on Bredas purchases of its common
 stock from its shareholders from 2000 through 2006.During 2000,
 Breda repurchased 441 shares of its common stock from 14 different
 shareholders, at a purchase price of $235 per share.During 2001,
 Breda repurchased a total of 2,216 shares of its common stock from 26
 different shareholders. Two hundred twenty of those shares were purchased at
 $235 per share, and the rest of those shares (1,996) were purchased at $258
 per share.Breda
 repurchased a total of 2,025 shares of its common stock during 2002 from 32
 different shareholders. Two hundred eighty-seven of those shares were
 purchased for $258 per share. The rest of those shares (1,738) were purchased
 for $280 per share.29

Breda
 repurchased a total of 1,306 shares of its common stock during 2003 from 23
 different shareholders. One hundred eighty-eight of those shares were
 purchased at $280 per share, and the rest of those shares (1,118) were
 purchased for $303 per share.During 2004,
 Breda repurchased a total of 524 shares of its common stock from 13 different
 shareholders. Two hundred three of those shares were purchased at $303 per
 share. The rest of those shares (321) were purchased for $326 per share.Breda
 repurchased a total of 147 shares of its common stock during 2005 from 8
 different shareholders. All of those shares were purchased at $357 per share.Breda
 repurchased a total of 7 shares of its common stock during 2006 from 1
 shareholder, at a purchase price of $394 per share.There may
 have been transfers among the shareholders of Breda during some of the above
 periods for which Breda did not exercise its right of first refusal. Some of
 those transfers are noted below.Bredas
 ability to repurchase any of its shares is subject to certain restrictions in
 its loan agreements with the RTFC. Those restrictions are discussed below in
 this Item.Breda has no
 plans to and has not agreed to register any of its shares of common stock
 under any federal or state securities laws. Since Breda has been subject to
 the reporting requirements of the Securities Exchange Act of 1934 for a
 period of over ninety days, Rule 144 under the Securities Act of 1933 would
 be available to permit the resale of shares of common stock by shareholders,
 subject to certain restrictions contained in Rule 144, including the
 requirement that the shareholder has held his or her shares for a period of
 at least six months prior to the date of resale. Once a shareholder (other
 than a shareholder who is an officer or director of Breda) has held his or
 her shares of common stock for a period of two years, the shareholder would
 be able to resell the shares without restriction under Rule 144. As also
 noted above, however, the governing documents of Breda impose restrictions
 and conditions on a shareholders ability to sell or transfer any shares of
 Bredas common stock.The board of
 directors determined in late 1999 to allow shareholders to advise Breda of
 the fact that they desire to sell any or all of their shares of Bredas common
 stock, and to allow persons to advise Breda of the fact that they desire to
 purchase shares of Bredas common stock. Breda keeps a list of those
 shareholders and buyers, and will make the list available to all of the
 shareholders and buyers on the list. The terms of any sale between a
 shareholder and a buyer will be negotiated by them, and no one is required to
 sell or buy any shares because their name is on the list. Breda also retains
 its right to purchase any shares which are intended to be sold by any
 shareholder to any buyer under the right of first refusal granted to Breda in
 its Articles of Restatement.During the
 calendar year 2000, 5 separate sales of shares occurred between shareholders
 on the list. Two sales each involved 2 shares, which were sold for $235 per
 share. One30

sale
 involved 53 shares, which were sold for $235 per share. One sale involved 31
 shares, which were sold for $155 per share. One sale involved 2 shares, which
 were sold for $149 per share. Breda elected not to exercise its right of
 first refusal on any of these shares.During the
 calendar year 2001, 3 separate sales of shares occurred between shareholders
 on the list. Two sales each involved 7 shares, which were sold for $258 per
 share. The other sale involved 43 shares, which were also sold for $258 per
 share. Breda elected not to exercise its right of first refusal on any of
 these shares.During the
 calendar year 2002, 3 separate sales of shares occurred between shareholders
 on the list. Two sales involved 2 shares which were sold for $258 per share.
 The other sale involved 3 shares which were also sold for $258 per share.
 Breda elected not to exercise its right of first refusal on any of these
 shares.During the
 calendar year 2003, 1 sale of shares occurred between shareholders on the
 list. The sale involved 2 shares, which were sold for $280 per share.There were
 no sales of shares between shareholders on the list during the calendar year
 2004.During the
 calendar year 2005, 6 separate sales of shares occurred between shareholders
 on the list. One sale involved 12 shares which were sold for $326 per share.
 One sale involved 28 shares which were sold for $357 per share. Two sales
 involved 2 shares each which were sold for $357 per share. One sale involved
 16 shares which were sold for $367 per share. The last sale involved 21
 shares which were sold for $357 per share. Breda elected not to exercise its
 right of first refusal on any of these shares.During the
 calendar year 2006, 6 separate sales of shares occurred between shareholders
 on the list or among family members. One sale involved 80 shares, which were
 sold for $400 per share. One sale involved 1 share which was sold for $357.
 Another sale involved 10 shares which were sold for $410 per share. Two sales
 involved 40 shares, which were sold for $400 per share. Another sale involved
 2 shares, which were sold for $394 per share. Breda elected not to exercise
 its right of first refusal with respect to any of these shares.There were
 21 separate transfers of shares during the calendar year 2007 between
 shareholders on the list or among family members. A summary of those
 transfers is as follows:1.
Two shares
 were sold for $394 per share.2.
Forty-five
 shares were sold for $394 per share.3.
Two shares
 were sold for $400 per share.4.
Eleven share
 were sold for $457 per share.5.
Two shares
 were sold for $457 per share.6.
Ten shares
 were sold for $460 per share.7.
Two shares
 were sold for $457 per share.31

8.
Eight shares
 were sold for $450 per share.9.
Thirty
 shares were sold for $457 per share.10.
Two shares
 were sold for $457 per share.11.
Ten shares
 were sold for $457 per share.12.
Thirty
 shares were sold for $457 per share.13.
Ten shares
 were sold for $457 per share.14.
One hundred
 twenty shares were sold for $457 per share.15.
Fifty-three
 shares were sold for $457 per share.16.
One hundred
 ten shares were sold for $457 per share.17.
Nine shares
 were sold for $457 per share.18.
Eighty-three
 shares were sold for $457 per share.19.
Forty-seven
 shares were sold for $457 per share.20.
Two hundred
 forty two shares were sold to four employees for fair market value as
 determined by the employer.21.
Ten shares
 were sold for $480 per share.Breda does
 not participate in, and has no responsibility for, negotiating the terms and
 conditions of any sale of shares between anyone on the list.Breda has
 declared and paid 10 dividends to its shareholders since Breda was
 incorporated in 1964. The dividends were declared in March or April of each
 of 1999 through 2008. The first six dividends were in the amount of $3.00 per
 share, the 2005, 2006 and 2007 dividends were in the amount of $7.00 per
 share, and the 2008 dividend was in the amount of $8.00 per share. The
 aggregate dividend paid was, respectively, $113,166, $113,046, $111,087,
 $104,214, $98,436, $94,479, $218,190, $217,161, $217,112, and $246,808.Payment of
 dividends is within the discretion of Bredas board of directors, and out of
 funds legally available therefor as provided in the Iowa Business Corporation
 Act. Bredas ability to declare and pay dividends is also restricted by some
 of the covenants in its loan agreements with the RTFC. Under those
 agreements, Breda may not pay any dividends without the prior written
 approval of the RTFC unless, after the payment, Breda is in compliance with
 the various ratios, net worth and margin requirements set forth in the loan
 agreements. Breda also may not pay any dividends if Breda is in default under
 the loan agreements or if the payment of the dividends would cause Breda to
 be in breach of the loan agreements.The
 restrictions in the RTFC loan agreements also apply to Bredas purchase or
 redemption of any of its stock and to any other distributions to its
 shareholders, so the restrictions may also preclude Breda from being able to
 repurchase its shares of stock as otherwise discussed above.Breda does
 not currently believe, however, that the restrictions in the RTFC loan
 agreements will preclude Breda from paying any dividends or distributions or
 from repurchasing any of its shares of common stock during 2008, should Breda
 otherwise determine to do so.32

No shares of
  stock were issued by Breda in 2007. There are currently no outstanding
  warrants, options or other rights to purchase any shares of common stock of
  Breda, and there are also currently no outstanding securities which are
  convertible or exchangeable into or for common stock of Breda. Bredas shares
  of common stock are not convertible into any other securities.Item 6.
Managements Discussion and Analysis or Plan of Operations.Overview.This Item
  should be read in conjunction with Item 1 of this annual report and with the
  financial statements and related notes included in Item 7 of this annual
  report.GeneralBreda is a
  small provider of telecommunication services to residential and business
  customers in the west central region and the southwest region of rural Iowa.
  Breda and its subsidiaries, Prairie Telephone Co., Inc., Westside Independent
  Telephone Company, Tele-Services, Ltd. and BTC, Inc., all conduct business
  under the names W.I.N. or Western Iowa Networks.Breda and
  its subsidiaries operate seven telephone exchanges as the incumbent or
  historical local exchange carrier (ILEC) and one telephone exchange as a
  competitive local exchange carrier (CLEC) in Carroll, Iowa, where Qwest is
  the incumbent local exchange carrier. Other telecommunications services
  provided include long distance services, dial-up and high speed Internet
  services, satellite Internet services, and cable TV services.Operating SegmentsBreda
  organizes its business into three reportable segments. Those segments are
  local exchange carrier services, broadcast services, and Internet service
  provider services. Breda has organized its business into those segments
  because the segments are each strategic business units that are managed
  separately and that offer different products and services in different
  regulatory environments.Local Exchange Carrier Services.This
  segment provides telephone, data services, and other services to customers in
  the local exchanges served by Breda and its telephone subsidiaries. Breda
  also provides long distance services to its customers in its seven ILEC
  exchanges and its CLEC exchange and the 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 Internet33

services are
  provided through BTC, Inc.The segments
  in which Breda and its subsidiaries operate are as follows:Local
  Exchange CarrierBredaPrairie
  Telephone Co., Inc.Westside
  Independent Telephone CompanyBTC, Inc.
  (competitive local exchange carrier)Broadcast
  ServicesTele-Services,
  Ltd.Internet
  Service ProviderBTC, Inc.BTC, Inc. is
  a subsidiary of Prairie Telephone. BTC, Inc. provides Internet services to
  its customers and to the customers of Breda, Prairie Telephone and Westside
  Independent who subscribe for Internet services. BTC, Inc. is also a CLEC
  providing local and long distance telephone services to customers in the
  Carroll, Iowa market area, where Qwest is the incumbent local exchange carrier.Bredas
  primary source of consolidated revenues is from the telephone services
  provided by Breda, Prairie Telephone, Westside Independent and BTC, Inc. The
  operating revenues from telephone services are primarily derived from the
  following types of fees and charges:


Flat monthly
  fees charged to subscribers for basic local telephone services. As of March
  1, 2008, those fees varied from approximately $11.50 to $35 per month. The
  monthly fee is higher for subscribers who elect to have additional services
  and features, such as custom features.
Access
  charge revenues payable by long distance carriers for intrastate and
  interstate exchange services provided to those long distance carriers. Access
  charge rates may be at a flat rate or may depend upon usage. As discussed in
  Item 1 of this annual report, interstate and intrastate access charge rates
  are subject to regulation by various governmental authorities. Access charge
  revenues constitute a substantial part of Bredas consolidated revenues, and
  a material risk to Breda arises from the regulation of access charge rates by
  those authorities. As discussed in Item 1 of this annual report, the FCC
  continues to review proposed plans addressing access charge rates, and Breda
  believes there will be changes made to the current access charge rate system.
  Breda also believes that if any of the proposed plans are adopted in their
  current form, they will likely result in substantial reductions in Bredas
  access revenues.The access
  charge rate payable to telephone companies like Breda, Prairie34

Telephone,
  Westside Independent and BTC, Inc. which utilize the average schedule basis
  for receiving inter-state access charge revenues, is currently based on,
  among other things, the quantity of minutes of use and the number of miles of
  their cable over which they transfer long distance calls made by their
  subscribers. Bredas total access charge revenues have been increasing over
  the past three years, and that trend continued in 2007 due mainly to
  additional traffic on BTC, Inc.s network which began with the installation
  of conference bridging services in July, 2006. Breda believes that its access
  charge revenues are also still benefiting from the fact that BTC, Inc. began
  to offer local phone service in the Carroll, Iowa market in October 2003.
  Customers that move their local phone service from the incumbent local
  carrier to BTC, Inc. also usually select Bredas long distance service, which
  has increased the overall number of customers utilizing Bredas network to
  make long distance calls. The increased customer count has increased the overall minutes of use
  for long distance calls, which has increased Bredas access revenue. Breda
  has, however, seen some decrease in minutes of use because of competition
  from wireless carriers offering calling plans with features such as unlimited
  nights and weekend calls. Those types of features lead customers having both
  wireless and wireline service to use their wireless calling plans to make long
  distance calls, which results in less traffic being carried over the wireline
  networks. The Iowa Utilities Board ruled in 2004 that some intrastate
  wireless traffic is considered local traffic, and since that time the
  wireless carriers have had to renegotiate interconnection agreements with the
  wireline carriers for use of their networks. The wireline carriers,
  such as Breda, accordingly receive less traffic over their networks. Breda
  has also received less payment for the traffic that the wireless carriers do
  route over the wireline networks since May 2004 when Breda negotiated
  reciprocal transport and termination agreements with some of the wireless
  carriers at substantially reduced rates.As indicated
  above, Breda, Prairie Telephone and Westside Independent utilize the average
  schedule basis for receiving inter-state access charge revenues. This is the
  approach taken by most smaller telephone companies. Another approach
  available for receiving access charge revenues is the cost approach. Telephone
  companies make filings with the FCC, which set forth their costs of providing
  long distance services. Under the average schedule approach, access charge
  rates are based upon, in general, the average of all of those costs across a
  sample of telephone companies and certain other factors intended to take into
  account the size of the particular telephone company in question.The National
  Exchange Carrier Association (NECA) has been delegated some authority by the
  FCC regarding the regulation of interstate access charge rates. In a letter
  dated January 15, 2007, NECA notified Breda that beginning July 1, 2007 most
  carriers could expect an overall average cost settlement decrease of 7.27% as
  a result of the new settlement formulas filed by NECA with the FCC in
  December 2006. NECA projected that the majority of companies settlements
  would 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 a35

proposed
  24-month transition plan to help companies adjust to the reduced settlements.During the
  six-month period from July 1, 2007 through December 31, 2007, 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.Concerns
  have also been raised on the state level by the Iowa Legislature and the Iowa
  Utilities Board regarding intra-state rates, and whether alternative
  intrastate inter-carrier compensation mechanisms should be investigated.
  While various industry organizations have compiled data and worked on this
  issue since 2003, no final plan has been adopted on a statewide level. Since
  access charge revenues constitute a substantial portion of Bredas total
  consolidated revenues, this is an area of material risk to Breda and its
  subsidiaries.Breda
  believes that any increase in intra-state access rates is extremely unlikely
  and that, at best, intra-state access rates will stay the same. It is also
  possible, however, that intra-state access rates will be lowered, and if that
  occurs, it will have a negative impact on Bredas operating income. Breda
  does not believe, however, that it is possible to predict at this time
  whether intra-state access rates will be lowered, or if intrastate access
  rates are lowered, the amount of the decrease in those rates. It is therefore
  uncertain at this time whether this issue will result in an adverse effect on
  Bredas operating income. Breda does, however, anticipate continuing pressure
  for the lowering of both state and federal access charge rates.
Another
  access revenue challenge faced by Breda and its counterparts in the industry
  has been the amount of traffic coming over Qwests facilities which is
  considered unbillable.Breda and
  other Iowa ILECs received a letter from Qwest dated February 9, 2007
  outlining a change in its billing systems effective April 1, 2007. Under the
  new billing system, Qwest will pay terminating charges to ILECs and Iowa
  Network Services for Qwests own intraLATA retail toll, but will dispute any
  billings for all other traffic. Qwest will make payment based on Qwests toll
  call detail. Iowa Network Services will receive the new Qwest toll records
  for all of the independent telephone companies utilizing Iowa Network Services.
  Qwest will also provide the Iowa Telecommunications Associations Qwest
  Traffic committee with reports for analysis to attempt to identify carriers
  which are delivering traffic through Qwest but for which Qwest is refusing to
  pay terminating charges to the ILEC. Qwest has implemented this process and
  continues to dispute any billings for traffic that traverses their facilities
  but is not identifiable to the ILECs.36


Revenue from
  the sale and lease of customer premises telephone equipment and other similar
  items and other miscellaneous customer services, such as custom calling
  services. Since the completion of the upgrading of their telephone switches
  in 1998 and 1999, Breda, Prairie Telephone and Westside Independent have had
  the capability and are offering many more custom calling features to their
  subscribers. BTC, Inc. also offers custom calling features to its
  subscribers. Revenues from custom calling features are not, however, a
  material source of revenue.
Fees from
  long distance providers for billing and collection services for long distance
  calls made by subscribers. Breda, Prairie Telephone and Westside Independent
  have been experiencing increased competition in this area over the past
  several years. The competitors include other third parties providing these
  services, and the long distance providers themselves since some providers
  have decided to handle their own billing and collection. Breda may at some
  point make a determination to stop providing billing and collection services
  for other carriers.
Fees from
  per minute rate plans and calling plan fees on long distance calls made by
  subscribers of Breda, Prairie Telephone, Westside Independent and BTC, Inc.
  Breda experienced an 11.3% increase in its long distance customer base from
  December 2006 to December 2007. Breda had experienced a 16.2% increase in its
  long distance customer base from December 2005 to December 2006.
Breda,
  Prairie Telephone, Westside Independent and BTC, Inc. each generate revenues from
  providing Internet access and from sales and leases of other equipment and
  facilities for private line data transmission, such as local area networks,
  virtual private networks and wide area networks. As noted in Item 1, they are
  experiencing intense services and pricing competition in providing Internet
  access.Bredas
  other primary source of consolidated revenue is generated from Tele-Services
  cable business. Tele-Services operating revenues are generated primarily
  from monthly fees for basic and premium cable services provided to its cable
  subscribers. Tele-Services main competition at the time of the preparation
  of this annual report was from satellite dish providers. The FCC has allowed
  satellite dish providers to provide local channels since 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 result in further adverse
  effects on Tele-Services business. The telecommunications and cable
  industries are also continually changing, and technological advances may
  provide Tele-Services subscribers with other options which could have
  material adverse effects on Tele-Services. Tele-Services is also faced with a
  declining population base in its service areas, which results in a lower potential
  customer base.Tele-Services
  implemented a rate increase in 2005 for its Sidney community when three37

channels
  were added to its line-up. The channel additions were completed by September
  13, 2005, after head-end consolidations had taken place for Sidney, Riverton
  and Farragut. The rate increase was implemented on November 1, 2005.Tele-Services
  combined the head end for its Auburn community with three of its other
  communities in June 2006. A rate increase was implemented in Auburn, Iowa on
  August 1, 2006 when that community was able to receive additional channels
  because of the head end consolidation.Tele-Services
  added the HBO premium channel to its Farragut, Riverton, Hamburg and Sidney
  communities on February 1, 2007. Rate increases became effective March 1,
  2007 for premium channels in the Beaver Lake and Hamburg communities; for
  basic channels only in the Auburn, Churdan, Lohrville and Grand Junction
  communities, and for both basic and premium channels in the Breda, Westside,
  Arcadia, Farragut, Riverton, and Sidney communities.Another
  issue faced by Tele-Services is that the companies which provide programming
  licensing to cable services providers are requiring the cable services
  providers to include particular channels on their systems as a condition of
  receiving a programming license. Tele-Services anticipates that it will
  continue to need to upgrade its plant, equipment and cables in order to add
  more channel line-ups so that it will continue to be able to obtain
  programming licenses and in order to stay competitive.The Deficit
  Reduction Omnibus Reconciliation Act of 2005 included the digital television
  transition legislation. The Act establishes February 17, 2009 as the deadline
  for broadcasters to transition from analog to digital spectrum. All of
  Tele-Services cable service systems are analog systems. Tele-Services has
  not finalized its estimates for the costs to upgrade all of its transmission
  equipment from analog to digital, but the Act will require significant
  upgrades to Tele-Services plant, equipment, and cables in order to provide
  digital transmission of all programming.Other
  miscellaneous sources of revenue are discussed in the financial statements
  included in Section 7 of this annual report.The
  following table reflects, on a consolidated basis for Breda and its
  subsidiaries, the approximate percentage of Bredas and its subsidiaries
  aggregate revenue which was derived from the three segments described above
  and from investments as of the close of each of the past two fiscal years:2007


2006Local
  exchange carrier (1)


86.9

%

84.4

%Broadcast
  (2)


6.8

%

8.4

%Internet
  service provider (3)


6.3

%

7.2

%100.0

%

100.0

%38

(1)
This segment
  includes (i) flat monthly fees charged to subscribers by Breda, Prairie
  Telephone, Westside Independent and BTC, Inc. for basic local telephone
  services, (ii) universal services funding amounts and access charges payable
  by long distance carriers for intrastate and interstate exchange services
  provided to those long distance carriers, (iii) fees from long distance
  providers for billing and collection services for long distance calls made by
  subscribers, (iv) per minute rates and calling plans rates for long distance
  services, and (v) monthly cellular commissions, advertising fees, and
  miscellaneous revenues.(2)
This segment
  includes monthly fees charged for basic and premium cable services.(3)
This segment
  includes monthly fees charged for Internet services.Twelve months ended December 31, 2007 Compared to Twelve months ended
  December 31, 2006The table
  below sets forth the components of Bredas revenues for the twelve months
  ended December 31, 2007, compared to the same period in 2006.Years Ended 
  December 31,

Change2007

2006

Amount

PercentOPERATING REVENUESLocal Exchange
CarrierLocal network
services

$
917,101

$
906,612

$
10,489


1.2
%Network access
services


6,428,950


4,425,849


2,003,101


45.3
%Long distance
services


318,452


317,227


1,225


0.4
%Cellular
services


1,561,915


1,523,482


38,433


2.5
%Billing and
collection services


11,284


15,387


(4,103
)

-26.7
%Miscellaneous


(125,191
)

126,511


(251,702
)

-199.0
%$
9,112,511

$
7,315,068

$
1,797,443


24.6
%Broadcast Services

$
711,461

$
724,957

$
(13,496
)

-1.9
%Internet services

$
658,653

$
627,028

$
31,625


5.0
%$
10,482,625

$
8,667,053

$
1,815,572


20.9
%There was an
  increase in total operating revenues for the twelve-month period ended
  December 31, 2007 (when compared to the twelve-month period ended December
  31, 2006) of $1,815,572, or 20.9%.Local Exchange Carrier Services - $1,797,443Local
  exchange carrier services revenues accounted for 86.9% of all operating
  revenue in the twelve-month period ended December 31, 2007. There was a
  $1,797,443, or 24.6%, increase in local exchange carrier services revenues
  for the twelve-month period ended December 31, 2007, when compared to the
  twelve-month period ended December 31, 2006.39

Local network services revenues increased $10,489,
  or 1.2%, for the twelve months ended December 31, 2007, as compared to the
  same period in 2006, primarily because of the increased number of customers
  taking phone service from Breda in its CLEC town of Carroll, Iowa. Bredas
  long distance services revenue also increased $1,225, or 0.4%, for the twelve
  months ended December 31, 2007, as compared to the twelve-month period ended
  December 31, 2006, for the same reason. Breda has received a good response to
  its package offerings that include local and long distance service from both
  residential and business customers.Network access services increased $2,003,101, or
  45.3%, for the twelve-month period ended December 31, 2007, when compared to
  the twelve-month period ended December 31, 2006. This increase mainly
  resulted from increased terminating access revenues generated from traffic
  delivered to Bredas conference bridges in Carroll, Iowa. Breda has
  contracted with conference bridge vendors for the transport of long distance
  calls over Bredas networks. Breda began billing for these services in
  September 2006, and began billing for additional conference bridge services
  in March 2007. Bredas conference bridge services generated approximately
  $3,055,159 of access revenue for the twelve-month period ending December 31,
  2007, compared to approximately $320,748 for the twelve-month period ending
  December 31, 2006. Network access services revenue includes originating and
  terminating access revenues received on toll traffic generated by Bredas
  Internet service subscribers in Bredas southern Iowa exchanges to reach
  Bredas Internet service equipment in Breda, Iowa. This method of
  provisioning generated approximately $230,762 of access revenue during the
  twelve-month period ended December 31, 2007, compared to $450,983 for the
  same period in 2006, and allows Breda to offer its own Internet services to
  these customers instead of reselling the Iowa Network Services Internet
  product. During 2007 Breda was able to offer high speed Internet services to
  most of its dial-up customers. Many customers switched to Bredas high speed
  Internet services, which is not provisioned with the use of the toll traffic
  network, so while Breda experienced an increase in its Internet service
  revenues, it did cause a decrease in Bredas network access services revenue.
  Bredas access revenue has also increased because of its increased customer
  base, and particularly the Carroll, Iowa, CLEC customer base, taking its long
  distance services. These customers generate access revenue when they use
  Bredas networks to make long distance calls. Bredas access revenue has also
  increased because BTC, Inc. implemented new switching capabilities in July
  2006 in its Carroll, Iowa location, and is now able to receive some tandem
  switching rate element payments for consolidating and switching its traffic
  from three of Bredas own seven telephone exchanges. The twelve-month period
  ended December 31, 2007 includes twelve months of the tandem switching rate
  element revenue compared to the twelve-month period ended December 31, 2006
  which included one month of tandem switching rate element revenue.Cellular services increased $38,433, or 2.5%, for
  the twelve-month period ended December 31, 2007, when compared to the
  twelve-month period ended December 31, 2006. While the overall number of
  customers served between the two years was very similar, there was an
  increase in the amount of commissions received on the cellular40

services sold and an increase in cellular equipment
  sales for the twelve-month period ended December 31, 2007, when compared to
  the twelve-month period ended December 31, 2006.Miscellaneous revenue decreased $251,702, or 199.0%,
  for the twelve-month period ended December 31, 2007, when compared to the
  twelve-month period ended December 2006. The decrease is mainly attributable
  to a $325,781 allowance for doubtful interexchange carrier accounts taken by
  Breda for estimated uncollectible conference bridge network access revenue.
  Breda is not a party to any legal action with any carriers but Breda is
  working to receive payment on some of its conference bridge access minutes.
  Breda set up the allowance because historically carriers have received
  concessions in payment disputes, which allow them to pay only a portion of
  what they owe to telephone companies. The other main components of
  miscellaneous revenue were the receipt of rent from other telephone companies
  or industry carriers for the lease of capacity over fiber optic rings owned
  by Breda, or owned jointly with neighboring telephone companies, and the
  receipt of switching services revenue. Billing and collection revenue
  continues to decrease since most carriers now bill for their own long
  distance services instead of paying a carrier, such as Breda, to bill these
  services for them. Industry guidelines no longer allow payment for the
  provisioning of tandem services to neighboring telephone companies so these
  companies rerouted traffic that was previously tandemed by Breda. Effective
  August 15, 2007, Breda no longer provided and received payment for these
  services which resulted in a decrease in revenue. The miscellaneous revenue
  for the twelve-month period ended December 31, 2007, when compared to the
  twelve-month period ended December 30, 2006, also decreased because Breda
  sold fewer key systems during the current twelve-month period. During the
  twelve-month period ended December 31, 2006, a one-time payment in the amount
  of $142,936 was made to a partner of a jointly-owned ring after a true-up of
  fiber optic revenue proceeds had been jointly undertaken.Broadcast Services  ($13,496)Broadcast services decreased $13,496, or 1.9%, for
  the twelve-month period ended December 31, 2007, when compared to the
  twelve-month period ended December 31, 2006. Bredas subsidiary,
  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 able to also include local channels in their
  package offerings. Another factor faced by Tele-Services is the declining
  population base in the small rural communities served by Tele-Services. In
  June 2006, Tele-Services combined the head end for its Auburn, Iowa community
  with three of its other communities. Breda continues to explore other
  consolidation opportunities in its cable TV communities in order to reduce
  its operating costs through consolidation of equipment and maintenance costs.
  A rate increase was implemented in Auburn, Iowa on August 1, 2006 when that
  community was able to receive additional channels because of the head end
  consolidation. Tele-Services added the HBO premium channel in Farragut,
  Riverton and Sidney on February 1, 2007. Rate increases were implemented for
  the basic service package in ten of its cable41

communities
  on March 1, 2007. Premium channel increases were also implemented in eight of
  its cable communities on March 1, 2007.Internet Services  $31,625Internet services revenue increased $31,625, or
  5.0%, for the twelve-month period ended December 31, 2007, when compared to
  the twelve-month period ended December 31, 2006. Breda has seen an increase
  in its high speed Internet customer base when comparing the two periods,
  which has offset the decrease in Bredas dialup Internet customer base. The
  decrease in dialup Internet customers is the result of the intense
  competition by multiple suppliers in the Carroll, Iowa market area, and the
  migration of customers to high speed Internet because of an overall decrease
  in the price for high speed Internet. Breda is gaining high speed Internet
  customers in the Carroll, Iowa area because BTC, Inc. is offering bundled
  services packages that include Internet services, as well as local telephone
  and other communication services. 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
  twelve-month period ended December 31, 2007. Also, with the advent of newer
  technologies that expand the range for high speed Internet services from
  Bredas central office, Breda began offering new longer-reach, high speed
  Internet services in its remaining five outlying ILEC communities that previously
  were not able to receive those services from Breda. 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 at a great distance from the central
  office. These service offerings were implemented 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 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 twelve months ended December 31, 2007, compared to
  the same period in 2006.Years
  Ended 
  December 31,

Change2007

2006

Amount

PercentOPERATING EXPENSESCost of services

$
5,274,092

$
4,109,781

$
1,164,311


28.3
%Depreciation and amortization


1,016,247


960,685


55,562


5.8
%Selling, general and administration


2,227,901


2,181,342


46,559


2.1
%$
8,518,240

$
7,251,808

$
1,266,432


17.5
%42

Cost of Services - $1,164,311Cost of services increased $1,164,311, or 28.3%, for
  the twelve-month period ended December 31, 2007, when compared to the twelve-month
  period ended December 31, 2006. Most all of the $1,164,311 increased costs
  were incurred for the provisioning of the conference bridge services, which
  began in July 2006. Conference bridge fees for the year ended December 31,
  2007 totaled 1,414,935, compared to $151,548 for the same period in 2006.
  Some additional increased costs arose from labor rate increases implemented
  in 2007 when comparing the two twelve-month periods. There was a $76,440, or
  27.8%, decrease in long distance provisioning costs; a $29,975, or 2.5%,
  decrease in cellular service provisioning costs and a $109,935, or 15%,
  decrease in Internet provisioning costs when comparing the twelve-month
  period ended December 31, 2007 to the twelve-month period ended December 31,
  2006.Although a greater number of customers continue to
  use Bredas long distance services, their average minutes of use per month
  are decreasing. The decreased minutes of use, along with Bredas switch to a
  new underlying carrier on August 20, 2006, which had lower rates, have
  contributed to a decrease in Bredas overall cost to provide long distance
  service. Breda had an 11.3% increase in customers subscribing to Bredas long
  distance services for the twelve-month period ended December 31, 2007, when
  compared to the twelve-month period ended December 31, 2006. Bredas decrease
  in cellular service provisioning costs was directly tied to the slight
  decrease in cellular customers during the twelve-month period ended December
  31, 2007. Bredas decrease in Internet provisioning costs resulted mainly
  from the migration of many of its dial-up customers in its southern Iowa
  exchanges to high speed Internet services where provisioning could be
  consolidated for both new and present high speed Internet customers and which
  resulted in less toll minute provisioning costs for dial-up customers.While Tele-Services overall customer growth for
  Tele-Services cable TV services continued to decline, its programming fees
  increased $63,852, or 17.6%, for the twelve-month period ended December 31,
  2007, when compared to the twelve-month period ended December 31, 2006. Even
  though Tele-Services is a member of an industry programming purchasing group,
  it continues to see significant increases in the programming rates paid by
  Tele-Services in order to offer its cable TV offerings.Depreciation and Amortization 
  $55,562Depreciation and amortization expense increased
  $55,562, or 5.8%, for the twelve-month period ended December 31, 2007, when
  compared to the twelve-month period ended December 31, 2006. In 2006, Breda
  began depreciating over $1,000,000 in new plant assets for a switch in its
  CLEC operations and for Emergency Alert Equipment in its cable TV operations.
  In 2007, Breda began depreciating a new operating software support system,
  network upgrades, and new and upgraded Internet service facilities.Selling, General and
  Administration  $46,559Selling, general and administration expenses
  increased $46,559, or 2.1%, for the twelve-month period ended December 31,
  2007, when compared to the twelve-month period43

ended December 31, 2006. Property and general taxes
  increased $15,755, or 7.9%, for the twelve-month period ended December 31,
  2007, when compared to the twelve-month period ended December 31, 2006. Corporate
  operations decreased $47,250, or 3.9%, during the twelve-month period ended
  December 31, 2007, when compared to the same period in 2006, because in 2006
  Breda had consulting fees associated with Bredas SEC compliance work, the
  recruitment and hiring of a new Chief Executive Officer and a new Chief
  Operating Officer, and the strategic planning of its CLEC operations. There
  was also preparation and SEC compliance work in 2006 for proxy solicitations,
  proxies and other information for consideration by Bredas shareholders at a
  special meeting held on March 28, 2007 in connection with the approval and
  adoption of restated articles of incorporation for Breda and for which there
  were no corresponding services in 2007. Customer operations increased $78,054,
  or 10.3%, for the twelve-month period ended December 31, 2007, when compared
  to the twelve-month period ended December 31, 2006, and mainly resulted from
  increased wages and benefits effective during 2007, and the increased
  advertising expenses for the roll-out and upgrade of Bredas Internet and
  other service offerings.OTHER INCOME (EXPENSE)The table below sets forth the components of other
  income (expense) for the twelve-month period ended December 31, 2007,
  compared to the same period in 2006.Years
  Ended 
  December 31,

Change2007

2006

Amount

PercentOTHER INCOME (EXPENSE)Interest and dividend income

$
486,217

$
391,562

$
94,655


24.2
%Gain or (Loss) on sale of investments


68,058


1,165,392


(1,097,334
)

-94.2
%Gain or (Loss) on disposal of assets


13,958


(21,714
)

35,672


164.3
%Interest expense


(91,871
)

(108,774
)

16,903


-15.5
%Income from equity investments


1,447,477


1,872,028


(424,551
)

-22.7
%Other, net


(43,964
)

5,770


(49,734
)

-861.9
%$
1,879,875

$
3,304,264

$
(1,424,389
)

-43.1
%Interest and Dividend Income.Interest
  and dividend income increased $94,655, or 24.2%, for the twelve-month period
  ended December 31, 2007, when compared to the twelve-month period ended
  December 31, 2006. This increase in interest and dividend income was due to
  the increased investments in both temporary investments and marketable
  securities on which Breda generates interest income. Two of Bredas
  subsidiaries, Prairie Telephone and Westside Independent, received dividends
  totaling $44,740 from their investment in Iowa Network Services during the
  twelve-month period ending December 31, 2007, and for which the corresponding
  income during the twelve-month period ended December 31, 2006 was $8,947.
  Breda also generates interest income on its outstanding notes receivable.Gain or (loss) on sale of
  investments.The $68,058 gain on sale of investments for
  the twelve-month period ended December 31, 2007, is a combination of a
  $97,100 gain on the sale of Prairie Telephones investment in Desktop Media,
  LLP and the net gains and44

losses on the redemption of temporary investments.
  The $1,165,392 gain on sale of investments for the twelve-month period ended
  December 31, 2006, is a combination of a $1,170,211 gain from the redemption
  of the Rural Telephone Bank stock in April 2006, and the net gains and losses
  on the redemption of temporary investments. There is no corresponding entry
  to the Rural Telephone Bank stock redemption for the twelve-month period
  ended December 31, 2007.Gain or (loss) on disposal of
  assets.The $13,958 gain on disposal of assets for the
  twelve-month period ended December 31, 2007 represents the gain from the sale
  or trade-in of service vehicles, and the gain on the sale of a small parcel
  of land, and a small central office building, in Farragut, Iowa, for which
  there is no corresponding entry in the same twelve-month period in 2006. The
  $21,714 loss on disposal of assets for the twelve-month period ended December
  31, 2006 represents the loss from the sale of a building at 526 N. Carroll
  Street, Carroll, Iowa.Interest Expense.The
  $16,903, or 15.5%, decrease in interest expense for the twelve-month period
  ended December 31, 2007, when compared to the twelve-month period ended
  December 31, 2006, is the result of the reduction of the Rural Telephone
  Finance Cooperative loan balance on which interest is calculated because of
  the payment of the scheduled principal payments on the loan. There has been
  no change in interest rate and no additional loan proceeds have been borrowed.Income from Equity Investments.Income
  from equity investments decreased $425,551, or 22.7%, for the twelve-month
  period ended December 31, 2007, when compared to the twelve-month period
  ended December 31, 2006. The equity investments income shown on Bredas
  financial statements is Bredas pro-rata share of the net income or net loss
  of each equity investment, based on Bredas percentage of ownership in each
  equity investment. The decrease in equity investments income reported on
  Bredas income statement for the twelve-month period ended December 31, 2007
  is a reflection of the net increases and decreases in the net income of
  Bredas equity investments. Most of Bredas equity investments are in
  cellular partnerships. Some of these cellular investments now receive
  universal service funding which has increased their overall operating
  revenue. An additional source of income from equity investments arises from
  Bredas ownership interest in Alpine Communications, L.C., an operating
  telephone company in northeastern Iowa, and in Bug Tussel, LLC, a wireless
  cell site provider, and in Spiralight Network, LLC, a fiber optic network
  provider in rural areas of Wisconsin and Illinois.Other, net.The
  $49,734, or 861.9%, decrease in other net income for the twelve-month period
  ended December 31, 2007, when compared to the twelve-month period ended
  December 31, 2006, is mainly attributable to increased partnership-related
  costs. The increase in partnership-related costs was offset by $10,275 of
  revenue in April 2007 related to construction work done by Breda for a
  wireless carrier, and for which there was no corresponding revenue in 2006.Income Tax Expense.Income
  taxes decreased $534,702, or 28.1%, for the twelve-month period ended
  December 31, 2007, when compared to the same period in 2006. The decrease in
  income tax expense is a direct correlation to the $1,097,334 decrease in the45

sale of investments because there was no
  corresponding gain on the sale of investments during the twelve-month period
  ended December 31, 2007, to compare with the redemption of the Rural
  Telephone Bank stock that occurred during the twelve-month period ended
  December 31, 2006. The effective tax rate in 2007 is 35.5%, compared to a
  40.3% tax rate in 2006. The effective tax rate differs from the U.S.
  statutory rate due to state income taxes, and the proportion of income from
  investments, which are exempt from income tax.Net Income.Net
  income increased $340,547, or 12.1%, for the twelve-month period ended
  December 31, 2007, when compared to the same period in 2006.Liquidity and Capital Resources at
  Twelve Months Ended December 31, 2007.Bredas short-term and long-term liquidity
  requirements arise primarily from: 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 twelve months ended December 31, 2007 and 2006, cash
  provided by operating activities was $3,099,063 and $1,740,959, respectively.To fund any significant future acquisitions or
  investments, Breda would consider the redemption of its short-term and
  long-term marketable securities investments; the use of its revolving lines
  of credit with the Rural Telephone Finance Cooperative; or the addition of
  long-term debt from industry lenders. Breda presently has an unused line of
  credit with the Rural Telephone Finance Cooperative of $1,500,000, and
  Prairie Telephone has an unused line of credit with the Rural Telephone
  Finance Cooperative of $500,000. Bredas 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 December 31,
  2007, and December 31, 2006.46

As ofDecember 31,
 2007

December 31,
 2006Short-Term LiquidityCurrent
Assets

$
4,342,424

$
2,930,602Current
Liabilities


1,544,835


540,778Net Working
Capital

$
2,797,589

$
2,389,824Cash and Cash
Equivalents

$
1,104,327

$
777,708Short Term
Marketable Securities

$
480,311

$
643,119Available on
Line of Credit

$
2,000,000

$
2,000,000Current
 assets increased $1,411,822, or 48.2%, for the year ended December 31, 2007,
 when compared to the year ended December 31, 2006, and was due mainly to
 three items. The first was the $163,811 increase in cash, cash equivalents,
 and marketable securities. The second was the $744,405 increase in accounts
 receivable, which was due to unpaid conference bridge access services. As
 discussed previously, Verizon, Sprint and AT&T are refusing to pay for
 these services. The third was the $514,100 increase in the current portion of
 Bredas note receivable. At December 31, 2007, Breda held a $480,000 note
 receivable from Jaguar Communications, Inc. earning interest at the rate of
 4.81%, and which was acquired with Prairie Telephones sale of its interest
 in Desktop Media, LLC in September 2007. Breda also holds a promissory note
 to its unconsolidated affiliate, Spiralight Network, LLC, which earns
 interest at the rate of 8.5% per annum. At December 31, 2006, Prairie
 Telephone held a Desktop Media, L.L.C. note receivable of $439,974 less
 allowances of $219,691, for a balance due of $220,283. As discussed
 previously, this instrument of indebtedness was surrendered on June 28, 2007,
 with the signing of a purchase agreement with Jaguar Communications, Inc. to
 purchase Desktop Media, L.L.C.Current
 liabilities increased $1,004,057, or 185.7%, for the year ended December 31,
 2007, when compared to the year ended December 31, 2006. Accounts payable
 increased 672,101, or 376.9%, when comparing the two periods, which is mainly
 attributable to an increase in the amount incurred as of December 31, 2007
 for the provisioning of conference bridge services as compared to the amounts
 incurred for those services as of December 31, 2006. Other increased accounts
 payable resulted from construction projects and associated consulting fees.
 Accrued taxes increased $267,358, or 216.8%, for the year ended December 31,
 2007, when compared to the year ended December 31, 2006. Accrued taxes also
 increased current liabilities as of December 31, 2007, and was primarily the
 result of the increase in federal and state income taxes payable.The
 following table summarizes Bredas sources and uses of cash for the twelve
 months ended December 31, 2007 and 2006.47

For the Years Ended
 December 31,2007

2006Net Cash Provided (Used)Operating
Activities

$
3,099,063

$
1,740,959Investing
Activities


(2,343,043
)

(1,318,559
)Financing
Activities


(429,401
)

(384,433
)For the
 twelve months ended December 31, 2007 and 2006, cash provided by operating
 activities was $3,099,063 and $1,740,959, respectively.Cash used in
 investing activities increased $1,024,484 for the twelve-month period ended
 December 31, 2007, when compared to the twelve-month period ended December
 31, 2006, and is mainly attributable to an increase in capital expenditures
 for the twelve-month period ended December 31, 2007, when compared to the
 twelve-month period ended December 31, 2006. Capital expenditures for the
 twelve-month period ending December 31, 2007 were $1,319,496, and were $390,462
 for the same period in 2006.Cash used in
 financing activities was $429,401 for the twelve-month period ended December
 31, 2007, and $384,433 for the twelve-month period ended December 31, 2006.
 During the twelve-month period ended December 31, 2007, cash was used to
 repay $175,729 of long term debt, to pay dividends to the shareholders of $7
 per share totaling $217,112, and to redeem common stock for $36,560. Breda
 used cash during the twelve-month period ended December 31, 2006 to repay
 $164,514 of Rural Telephone Finance Cooperative long term debt, to pay
 dividends to shareholders of $7 per share totaling $217,161, and to redeem
 common stock for $2,758.Long Term DebtAs of
 December 31, 2007, Breda had outstanding $1,139,205 of long-term debt with
 the Rural Telephone Finance Cooperative. This debt carries a fixed rate of
 interest of 7.35%. Substantially all of the assets of Breda are pledged as
 security for the long-term debt. The Rural Telephone Finance Cooperative
 notes are to be paid in equal quarterly installments covering principal and
 interest until paid in full by the year 2013.The security
 and loan agreements underlying the Rural Telephone Finance Cooperative notes
 contain certain restrictions on distributions to stockholders, investment in,
 or loans to others, and payment of management fees or an increase in
 management fees. Breda is restricted from making any distributions, except as
 might be specifically authorized in writing in advance by the Rural Telephone
 Finance Cooperative note holders, unless Bredas minimum net worth 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 1.48

Obligations and CommitmentsBredas
 ongoing capital commitments include capital expenditures and debt service
 requirements. For the twelve months ended December 31, 2007, capital
 expenditures were $1,319,496.Bredas
 contractual obligations for principal payments on its long-term debt as of
 December 31, 2007 are:2008

$
187,7102009


200,5072010


214,1772011


228,7792012 and
 after


308,032Breda
 believes that cash provided by operations and current cash balances will be
 adequate to meet Bredas currently foreseeable operational, capital
 expenditure, and debt service requirements. Bredas actual cash needs and the
 availability of required funding may, however, differ from Bredas
 expectations and estimates, and those differences could be material. Future
 capital requirements would depend on many factors, including, among others,
 the demand for Bredas services in Bredas existing markets and regulatory,
 technological and competitive developments.Off-Balance Sheet Risk and Concentration of Credit RiskBreda has no
 off-balance sheet exposure or risk.Breda has
 certain financial instruments which could potentially subject Breda to
 concentrations of credit risk. The financial instruments consist primarily of
 trade receivables and cash and temporary cash investments.Breda
 adheres to an investment policy for its marketable securities, which allows
 investments in:
Securities
 issued or guaranteed by the U.S. Government or its agencies.
Corporate or
 municipal bonds rated A or better by a major rating service.
Money market
 funds investing in U.S. Government, U.S. Agency or highly rated municipal
 securities.49

Item 7.
Financial Statements.EXPLANATORY NOTE

Breda has
 investments in certain partnerships that it accounts for using the equity
 method. Because of the materiality of these investments at December 31, 2007,
 Bredas independent registered public accounting firm, Kiesling Associates
 LLP, is required to perform certain audit procedures or rely on the audits of
 other auditors to obtain reasonable assurance that the investments and
 related equity income were presented fairly, in all material respects, in the
 consolidated financial statements of Breda as of and for the year ended
 December 31, 2007.Kiesling
 Associates LLP has not performed the necessary audit procedures or been given
 the authorization to rely on the audits of other auditors to obtain
 reasonable assurance that the investments and related equity income were
 presented fairly in all material respects for three outstanding partnerships
 for the year ended December 31, 2007. Given these circumstances, and because
 of the materiality of these outside investments in relation to Bredas
 financial statements for the year ended December 31, 2007, the auditors have
 issued a qualified audit opinion on the consolidated financial statements for
 Breda for the year ending December 31, 2007. The qualified audit opinion and
 financial statements are set out below.[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

50

Breda Telephone Corp.
And Subsidiaries
Breda, IA

Consolidated Financial Statements
For the Years
Ended December 31, 2007 and 2006

51

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

Contents

PageConsolidated
 Financial Statements:Independent Auditors Report

53Consolidated Balance Sheets

54Consolidated Statements of Income

55Consolidated Statements of Stockholders
 Equity

56Consolidated Statements of Cash Flow

57Notes to Consolidated Financial Statements

58-7452

REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

To the Board
of Directors 
Breda Telephone Corporation and Subsidiaries 
Breda, Iowa

We have
audited the accompanying consolidated balance sheets of Breda Telephone
Corporation (an Iowa corporation) and subsidiaries as of December 31, 2007 and
2006, and the related consolidated statements of income, stockholders equity
and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

Except as
discussed in the following paragraph, we conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The company is not required to have, nor were we
engaged to perform an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as,
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

We were unable
to perform audit procedures for 2007 supporting the Companys investments in
Spiralight Network LLC, Iowa 8 Monona Limited Partnership, and RSA No. 9
Limited Partnership stated at $2,889,873 at December 31, 2007, or its equity in
earnings in such partnerships of $244,777, which is included in net income for
the year ended as described in Note 4 to the financial statements.

In our
opinion, except for the effects of such adjustments, if any, as might have been
determined to be necessary had we been able to examine evidence regarding the
investment and earnings of Spiralight Network LLC, Iowa 8 Monona Limited
Partnership, and RSA No. 9 Limited Partnership, the consolidated financial
statements referred to above present fairly, in all material respects, the
financial position of Breda Telephone Corporation and subsidiaries as of
December 31, 2007 and 2006, and the results of their operations and their cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

/s/ Kiesling
Associates LLP

West Des
Moines, Iowa 
March 28, 2008

53

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONSOLIDATED BALANCE SHEETS 
December 31, 2007 and December 31, 2006

December
  31,
  2007

December
  31,
  2006ASSETSCURRENT ASSETSCash and cash
equivalents

$
1,104,327

$
777,708Marketable
securities


480,311


643,119Accounts
receivable, net of allowances of $676,422 and $46,750 in 2007
  and 2006, respectively


1,740,266


995,861Interest
receivable


98,013


82,241Current
portion of note receivable, less allowance of $219,691 in 2006


734,383


220,283Inventory, at
average cost


152,857


151,659Other


17,973


47,440Deferred
income taxes


14,294


12,2914,342,424


2,930,602OTHER NONCURRENT
ASSETSMarketable
securities


7,374,754


6,775,348Investments in
unconsolidated affiliates at equity


7,950,825


7,562,375Other
investments at cost


611,707


622,554Goodwill


896,812


896,81216,834,098


15,857,089PROPERTY, PLANT AND
EQUIPMENT


5,015,302


4,509,149TOTAL ASSETS

$
26,191,824

$
23,296,840LIABILITIES AND
  STOCKHOLDERS EQUITYCURRENT LIABILITIESCurrent
portion of long-term debt

$
187,710

$
175,729Accounts
payable


850,432


178,331Accrued
taxes


390,659


123,301Other


116,034


63,4171,544,835


540,778LONG-TERM DEBT, less current
portion


951,495


1,139,205OTHER NONCURRENT
LIABILITIES


1,213,607


1,359,628STOCKHOLDERS
EQUITYCommon stock,
Class A - no par value, 5,000,000 shares authorized,
  28,923 and 31,016 shares issued and outstanding at $457 and $394 stated
  values, respectively


13,217,811


12,220,304Common stock,
Class B - no par value, 5,000,000 shares authorized,
  2,013 shares issued and outstanding at $457 stated value, as of December 31,
  2007


919,941


Retained
earnings


8,344,135


8,036,92522,481,887


20,257,229TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY

$
26,191,824

$
23,296,840The accompanying notes are an integral part of these consolidated
financial statements.

54

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended 2007 and 2006

For
  the Years Ended2007

2006OPERATING REVENUES

$
10,482,625

$
8,667,053OPERATING EXPENSESCost of
services


5,274,092


4,109,781Depreciation
and amortization


1,016,247


960,685Selling,
general, and administrative


2,227,901


2,181,3428,518,240


7,251,808OPERATING INCOME


1,964,385


1,415,245OTHER INCOME (EXPENSES)Interest and
dividend income


486,217


391,562Gain on sale
of investments


68,058


1,165,392Gain or (Loss)
on disposal of assets


13,958


(21,714
)Interest
expense


(91,871
)

(108,774
)Income from
equity investments


1,447,477


1,872,028Other,
net


(43,964
)

5,7701,879,875


3,304,264INCOME BEFORE
INCOME TAXES


3,844,260


4,719,509INCOME
TAXES


1,365,930


1,900,632NET
INCOME

$
2,478,330

$
2,818,877NET INCOME PER
COMMON SHARE

$
79.94

$
90.87DIVIDENDS PER
COMMON SHARE

$
7.00

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

55

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

CONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY

Common
StockRetained 
EarningsShares

Amount


TotalBalance at
 December 31, 2005


31,023

$
11,075,211

$
6,583,060

$
17,658,271Comprehensive
income:Net
Income








2,818,877


2,818,877Dividends
paid








(217,161
)

(217,161
)Common stock
redeemed, net


(7
)

(2,758
)




(2,758
)Stated value
stock adjustment





1,147,851


(1,147,851
)Balance at
 December 31, 2006


31,016


12,220,304


8,036,925


20,257,229Comprehensive
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

$
22,481,88756

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2007 and 2006

2007

2006CASH FLOWS
 FROM OPERATING ACTIVITIESNet
income

$
2,478,330

$
2,818,877Adjustments to
reconcile net income to cash
provided by operating activities:Depreciation
and amortization


1,016,247


960,685Deferred income
taxes


(148,024
)

367,274Amortization of
investment premium/discount
 - net


42,831


97,488Equity income
in unconsolidated affiliates,
 net of distributions received of
$1,228,439 and $1,153,057 in
 2007 and 2006, respectively


(219,038
)

(718,971
)Realized (gain)
or loss on sale of property


(13,958
)

21,714Note receivable
discount





(814
)Gain on sale of
marketable securities


(13,062
)

Gain on sale of
equity investments


(97,100
)

Gain on sale of
investments - at cost





(1,165,392
)Changes in
assets and liabilities:(Increase)
Decrease in assets


(731,908
)

(52,245
)Increase
(Decrease) in liabilities


784,745


(587,657
)Net cash
provided by operating activities


3,099,063


1,740,959CASH FLOWS
 FROM INVESTING ACTIVITIESCapital
expenditures


(1,319,496
)

(390,462
)Proceeds from
the sale of assets


18,385


116,247Purchase of
marketable securities


(2,040,367
)

(3,177,070
)Purchase of
equity investments


(169,412
)

(960,000
)Purchase of
other investments - at cost


(5,055
)

(5,978
)Proceeds from
the sale of marketable
 securities


1,574,000


1,755,003Proceeds from
the sale of equity
 investments


63,000Proceeds from
the sale of other investments
 - at cost


15,902


1,343,701Issuance of
notes receivable


(480,000
)

Net cash used
in investing activities


(2,343,043
)

(1,318,559
)CASH FLOWS
 FROM FINANCING ACTIVITIESRepayment of
long term debt


(175,729
)

(164,514
)Common stock
redeemed, net


(36,560
)

(2,758
)Dividends
paid


(217,112
)

(217,161
)Net cash used
in financing activites

$
(429,401
)
$
(384,433
)Net Increase in Cash and Cash Equivalents

$
326,619

$
37,967Cash and
 Cash Equivalents at Beginning of Period


777,708


739,741Cash and
 Cash Equivalents at End of Period

$
1,104,327

$
777,708Supplemental
 Disclosures of Cash Flow InformationCash paid
during the period for:Interest

$
91,871

$
108,774Income
taxes

$
1,236,856

$
1,798,064The accompanying notes are an integral part
of these consolidated financial statements.

57

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS 
December 31, 2007 and 2006

NOTE 1.
SUMMARY
 OF SIGNIFICANT ACCOUNTING POLICIESNature of Business

The Breda Telephone
Corporation (herein referred to as the Company) is a provider of
telecommunications exchange and local access services, long distance services,
cable television services and Internet services in a service area located
primarily in western Iowa. The company is also involved in retail sales of
cellular equipment and service plans for cellular partnerships of which it owns
interests, and sales of other telecommunications equipment.

Basis of Presentation

The accounting policies of
the Company and its subsidiaries conform to accounting principles generally
accepted in the United States of America. Management uses estimates and
assumptions in preparing its consolidated financial statements. Those estimates
and assumptions affect the reported amounts of assets, liabilities, revenues,
and expenses, and the disclosure of contingent revenues and expenses. Telephone
operations reflect practices appropriate to the telephone industry. The
accounting records of the telephone companies are maintained in accordance with
the Uniform System of Accounts for Class A and B Telephone Companies prescribed
by the Federal Communications Commission (FCC) as modified by the state
regulatory authority.

The accounting records for
the Companys cable television operations are maintained in accordance with the
Uniform System of Accounts for CATV Companies prescribed by the National
Association of Regulatory Utility Commissioners.

Principles of Consolidation

The consolidated financial
statements include the accounts of the Company and its 100% owned subsidiaries,
Prairie Telephone Co., Inc., Tele-Services, Ltd., and Westside Independent
Telephone Company. The financial statements of Prairie Telephone Co., Inc.
include the accounts of Prairie and its 100% owned subsidiary, BTC, Inc. All
material intercompany transactions have been eliminated in consolidation.

Cash Equivalents

All highly liquid
investments with a maturity of three months or less at the time of purchase are
considered cash equivalents.

Investments

Marketable debt and equity
securities bought and held principally for selling in the near future are
classified as trading securities and carried at fair value. Unrealized holding
gains and losses on trading securities are reported in earnings. Marketable
debt and equity securities classified as available-for-sale are carried at fair
value with unrealized holding gains and losses recorded as a separate component
of stockholders equity.

58

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 1.
SUMMARY
 OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Investments, (Continued)

Debt securities for which
the Company has both the positive intent and ability to hold to maturity are
classified as held-to-maturity and are carried at amortized cost. The Company
uses the specific identification method of computing realized gains and losses.

Nonmarketable equity
investments, over which the Company has significant influence or a 20%
ownership, are reflected on the equity method. Other nonmarketable equity
investments are stated at cost.

Inventory

Inventory includes both
merchandise held for resale and material and supplies. Merchandise held for
resale is recorded at the lower of cost or market with cost determined by the
average cost method. Materials and supplies, used in the construction of the
Companys facilities to provide telecommunications services, are recorded at
average cost.

Goodwill

Goodwill is deemed to have
an indefinite life and is stated at the lower of cost or fair value. The asset
is subject to periodic impairment tests.

Property, Plant and Equipment

Telephone and cable
television plant are capitalized at original cost including the capitalized
cost of salaries and wages, materials, certain payroll taxes, employee benefits
and interest incurred during the construction period.

The Company provides for
depreciation for financial reporting purposes on the straight-line method by
the application of rates based on the estimated service lives of the various
classes of depreciable property. These estimates are subject to change in the
near term.

Renewals and betterments of
units of property are charged to telephone and cable television plant in
service. When plant is retired, its cost is removed from the asset account and
charged against accumulated depreciation less any salvage realized. No gains or
losses are recognized in connection with routine retirements of depreciable
property. Repairs and renewals of minor items of property are included in plant
specific operations expense.

Repairs of other property,
as well as renewals of minor items of property are included in plant specific
operations expense. A gain or loss is recognized when other property is sold or
retired.

59

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 1.
SUMMARY
 OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Long-Lived
Assets

The Company would provide
for impairment losses on long-lived assets when indicators of impairment are
present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets carrying amount. Based on current conditions,
management does not believe any of its long-lived assets are impaired.

Income Taxes

Income taxes are accounted
for using a liability method and provide for the tax effects of transactions
reported in the consolidated financial statements including both taxes
currently due and deferred. Deferred taxes are adjusted to reflect deferred tax
consequences at current enacted tax rates. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Significant components of the Companys deferred taxes
arise from differences between the book and tax basis of plant assets, certain
investments, receivables and goodwill. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible, when the assets and liabilities are recovered
or settled.

Revenue Recognition

The Company recognizes
revenues when earned regardless of the period in which they are billed. The
Company is required to provide telephone service to subscribers within its
defined service territory.

Local network, Internet and
cable television service revenues are recognized over the period a subscriber
is connected to the network.

Network access and long
distance service revenues are derived from charges for access to the Companys
local exchange network. The interstate portion of access revenues is based on
an average schedule settlement formula administered by the National Exchange
Carrier Association (NECA), which is regulated by the FCC. The intrastate
portion of access revenues is billed based upon the Companys tariff for access
charges filed with the Iowa Utilities Board (IUB). The charges developed from
these tariffs are used to bill the connecting long distance provider and
revenues are recognized in the period the traffic is transported based on the
minutes of traffic carried. Long distance revenues are recognized at the time a
call is placed based on the minutes of traffic processed at contracted rates.

Cellular sales and
commission revenues are recognized at the time of customer activation.

The
Company uses the reserve method to recognize uncollectible customer accounts.


Reclassifications

Certain reclassifications
have been made to the 2006 consolidated financial statements to conform with
the 2007 presentation.

60

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 2.
MARKETABLE SECURITIESThe amortized
cost and fair value of held-to-maturity securities are:

Amortized
  Cost

Gross
  Unrealized
  Gains

Gross
  Unrealized
  Losses

Fair
  ValueDecember
  31, 2007Held-to-Maturity:Municipal
bonds

$
4,848,490

$
59,473

$
(23,457
)
$
4,884,506Government
securities


3,006,575


10,572


(39,972
)

2,977,175$
7,855,065

$
70,045

$
(63,429
)
$
7,861,681December
  31, 2006Held-to-Maturity:Municipal
bonds

$
4,687,740

$
29,187

$
(54,495
)
$
4,662,432Government
securities


2,730,727


9,982


(45,299
)

2,695,410$
7,418,467

$
39,169

$
(99,794
)
$
7,357,8422007

2006Amounts classified as:Current

$
480,311

$
643,119Noncurrent


7,374,754


6,775,348Total

$
7,855,065

$
7,418,467The amortized
cost and fair value of marketable debt securities at December 31, 2007, by
contractual maturity are shown below.
Expected maturities may differ from contractual maturities because the
issuers of the securities may have the right to prepay obligations without
prepayment penalties.

Amortized
  Cost


Fair ValueDue in one year or
less

$
480,311

$
478,047Due after one year through
three years


1,282,099


1,294,050Due after three years through
five years


1,538,553


1,550,087Due after five years


4,554,102


4,539,497$
7,855,065

$
7,861,68161

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 3.
NOTE
RECEIVABLENotes receivable
consist of the following:

2007

2006Desktop Media, LLC - 8.75%





439,974Allowance - Desktop





(219,691
)Jaguar Communications, Inc.
  - 4.81%


254,383


Spiralight Network, LLC -
  8.5%


480,000


734,383


220,283Less current
portion


734,383


220,283$


$
The Company,
Desktop Media, LLC, and each of Desktop Media, LLCs members signed a purchase
agreement with Jaguar Communications, Inc., on June 28, 2007.  Upon the closing of this purchase agreement,
the Company surrendered its $439,974 instrument of indebtedness in exchange for
a 28% equity interest in Desktop Media, LLC.
The company had held a 17% ownership interest.  The sale of Desktop Media, LLC, to Jaguar Communications, Inc.
was finalized on September 28, 2007.
The Company received cash of $63,000 and a short-term promissory note of
$254,383, for its 28% ownership interest in Desktop Media, LLC.  The promissory note dated September 28, 2007,
accrues interest from September 28, 2007, at a rate of 4.81 percent per annum
until payment is made in full, which shall be the earlier of (i) the twelve
month anniversary of the date of the note, or (ii) upon the payment to Jaguar
of the initial Foundation for Rural Service disbursement with respect to
Jaguars currently pending loan request with the Rural Utilities Service (RUS).

The Company
originated a promissory note to its unconsolidated affiliate, Spiralight
Network, LLC, on September 5, 2007.  The
amount of the note is $480,000 and accrues interest from September 5, 2007, at
a rate of 8.5 percent per annum until payment is made in full on September 14,
2008.  The note may not be prepaid.  The Company has a 35.29% ownership interest
in Spiralight Network, LLC.

62

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 4.
OTHER INVESTMENTSINVESTMENTS IN
UNCONSOLIDATED AFFILIATES AT EQUITY

Investments in
unconsolidated affiliates at equity include investments in partnerships,
limited liability companies and joint ventures as follows:

2007

2006Alpine
 Communications, L.C.

$
2,227,935

$
2,064,675West
 Iowa Cellular, Inc.


1,492,056


1,321,626RSA
 #1, Ltd.


1,395,594


1,204,368RSA
 #7, Ltd.


554,043


451,619RSA
 #9, Ltd.


1,024,903


769,064Desktop
 Media, L.L.C.





Quad
 County Communications


102,928


56,068Carroll
 County Wireless, L.L.C.


66,764


63,038Guthrie
 Group, L.L.C.


40,222


54,619Bug
 Tussel Wireless, L.L.C.


673,466


617,298Spiralight
 Network, L.L.C.


372,914


960,000$
7,950,825

$
7,562,375The Company
has a 17.42% ownership interest in Alpine Communications, L.C. (Alpine) at
December 31, 2007 and 2006. Alpine owns and operates several wireline telephone
exchanges in northeastern Iowa, along with providing Internet and cable
television services in and around its wireline service territory.

The following is a summary of
condensed financial information pertaining to the company described above as of
December 31, 2007 and 2006 and the twelve months then ended.

Alpine Communications, L.C.2007

2006Assets

$
24,059,444

$
19,092,728Liabilities


12,223,043


8,193,306Equity

$
11,836,401

$
10,899,422Revenues

$
7,699,177

$
7,632,340Expenses


5,721,682


5,340,054Net
 Income

$
1,977,495

$
2,292,286The Companys
percentage ownership interests in partnerships providing cellular telephone
services within their respective service areas at December 31, 2007 and 2006
are as follows:

West Iowa
 Cellular, Inc.,


25.0
%RSA #1, Ltd.


10.3
%RSA #7, Ltd.


7.1
%RSA #9, Ltd.


16.7
%63

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 4.
OTHER INVESTMENTS (Continued)The following
is a summary of condensed financial information pertaining to the companies
described above as of December 31, 2007 and 2006 and the twelve months then
ended.

2007West Iowa
 Cellular, Inc.

RSA #1

RSA #7

RSA #9Assets

$
6,318,015

$
13,798,319

$
10,852,365

$
7,840,536Liabilities


349,787


1,171,448


3,108,684


1,691,242Equity

$
5,968,228

$
12,626,871

$
7,743,681

$
6,149,294Revenues

$
3,172,534

$
9,546,084

$
19,339,038

$
12,046,486Expenses


1,290,809


6,573,884


14,396,749


8,811,605Net
 Income

$
1,881,725

$
2,972,200

$
4,942,289

$
3,234,8812006West Iowa
 Cellular, Inc.

RSA #1

RSA #7

RSA #9Assets

$
5,627,101

$
11,825,263

$
9,614,812

$
6,239,458Liabilities


340,599


966,659


3,302,667


1,625,995Equity

$
5,286,502

$
10,858,604

$
6,312,145

$
4,613,463Revenues

$
2,328,612

$
8,193,772

$
16,900,499

$
10,828,447Expenses


980,885


6,021,512


13,176,017


8,318,020Net
 Income

$
1,347,727

$
2,172,260

$
3,724,482

$
2,510,427As discussed
previously in Note 3, the Company sold its ownership interest in Desktop Media,
LLC, on September 28, 2007. The Company had owned a 17% interest in Desktop at
December 31, 2006 and had owned a 28% interest on September 28, 2007. Desktop
operates in southeastern Minnesota and is a provider of Internet and telephone
services.

This
investment was accounted for under the equity method with the Company
recognizing their proportionate share of income and losses to the extent that
the investment exceeds losses. Accordingly, the recorded investment amount in
Desktop was eliminated at December 31, 2004. In 2005, additional losses in
excess of the basis totaling $46,717 were applied against the outstanding note
receivable.

The Companys
basis in the outstanding note receivable of $439,974 on the date of the sale
was $220,283. The Company is reporting a $97,100 gain on the sale of its
ownership interest in Desktop Media, LLC, upon its receipt of $63,000 in cash
on September 28, 2007. The company also received a short-term promissory note
of $254,383, as noted previously.

64

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 4.
OTHER INVESTMENTS (Continued)The following
is a summary of condensed financial information pertaining to the company
described above as of December 31, 2006 and the twelve months then ended.

Desktop Media,
  L.L.C.2006Assets

$
516,434Liabilities


1,926,356Equity

$
(1,409,922
)Revenues

$
2,230,723Expenses


2,443,209Net
  Income

$
(212,486
)The Company
has a 33.33% ownership interest in Quad County Communications (Quad County) at
December 31, 2007 and 2006. This entity owns and operates a fiber optic
network.

The following
is a summary of condensed financial information pertaining to the company
described above as of December 31, 2007 and 2006 and the twelve months then
ended.

Quad County Communications2007

2006Assets

$
317,942

$
174,882Liabilities


9,159


6,677Equity

$
308,783

$
168,205Revenues

$
190,867

$
24,088Expenses


50,574


51,831Net
  Income

$
140,293

$
(27,743
)65

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 4.
OTHER INVESTMENTS (Continued)The Companys
percentage interests in Carroll County Wireless, L.L.C. and Guthrie Group,
L.L.C. are each 33.33% at December 31, 2007 and 2006. Both companies have
purchased the licenses to provide personal communication services (PCS);
however, neither company has begun providing PCS services as of December 31,
2007.

The following
is a summary of condensed financial information pertaining to the companies
described above as of December 31, 2007 and 2006 and the twelve months then
ended.

2007Carroll County
  Wireless, L.L.C.

Guthrie
  Group, L.L.C.Assets

$
200,291

$
120,667Liabilities





Equity

$
200,291

$
120,667Revenues

$
41,984

$
4,403Expenses


30,806


47,963Net
  Income

$
11,178

$
(43,560
)2006Carroll County
  Wireless, L.L.C.

Guthrie
  Group, L.L.C.Assets

$
189,113

$
164,227Liabilities





Equity

$
189,113

$
164,227Revenues

$
29,685

$
3,459Expenses


27,559


12,068Net
  Income

$
2,126

$
(8,609
)The Company
has a 9.94% ownership interest in Bug Tussel Wireless LLC (Bug Tussel) at
December 31, 2007 and 2006. Bug Tussel has constructed a wireless network in
rural Wisconsin, which provides roaming services to cellular carriers offering
service in the state.

The following is a summary of
condensed financial information pertaining to the company described above as of
December 31, 2007 and 2006 and the twelve months then ended.

Bug Tussel Wireless, L.L.C.2007

2006Assets

$
14,954,261

$
9,671,295Liabilities


9,398,031


4,740,197Equity

$
5,556,230

$
4,931,098Revenues

$
11,242,608

$
8,351,715Expenses


9,838,227


5,966,644Net
  Income

$
1,404,381

$
2,385,07166

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 4.
OTHER INVESTMENTS (Continued)The Company
has a 35.29% ownership interest in Spiralight Networks LLC (Spiralight) at
December 31, 2007 and 2006. Spiralight provides fiber optic transport services
in Wisconsin, Illinois and Minnesota.

The following is a summary of
condensed financial information pertaining to the company described above as of
December 31, 2007 and 2006 and the twelve months then ended.

Spiralight Network, L.L.C.2007

2006Assets

$
3,342,987

$
4,844,566Liabilities


2,286,398


2,928,169Equity

$
1,056,589

$
1,916,397Revenues

$
2,632,734

$
438Expenses


4,434,893


5,041Net
  Income

$
(1,802,159
)
$
(4,603
)Partnership
investments above with less than a 20% ownership are carried at equity due to
the level of influence the Company has with respect to each investment.
Investments in limited liability companies are on the equity method if
ownership is more than 3-5%.

LONG-TERM INVESTMENTS AT COST

Long-term investments at cost
include nonmarketable equity securities and certificates as follows:

2007

2006NECA
  Services, Inc. - stock

$
300,000

$
300,000Rural
  Telephone Finance Cooperative -     certificates


173,352


178,616Iowa
  Network Services - stock


78,705


78,705NRTC
  Patronage Capital - certificates


48,650


54,233Other


11,000


11,000$
611,707

$
622,55467

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 5.
GOODWILLGoodwill
consists of the following:

2007

2006Balance,
  beginning of year

$
896,812

$
896,812Goodwill
acquired





Goodwill
impairment





Balance,
  end of year

$
896,812

$
896,812The Company
annually assesses its recorded balances of goodwill and indefinite lived
intangible assets. As a result, the Company determined no impairment needed to
be recorded for the years ended December 31, 2007 and 2006.

NOTE 6.
PROPERTY, PLANT AND EQUIPMENTProperty,
plant and equipment includes the following:

2007

2006Telephone
  plant in service:Land

$
41,408

$
41,508Buildings


1,406,982


1,412,256Other general
support assets


2,305,688


1,713,384Central office
assets


4,063,231


4,028,301Cable and wire
facilities


5,086,640


4,870,035Other plant
and equipment


1,075,939


991,66813,979,888


13,057,152Cable
  television plant in service:Land

$
8,846

$
8,846Buildings


132,673


132,673Other plant
and equipment


207,753


222,146Towers,
antennas and head end equipment


1,613,382


1,603,930Cable and wire
facilities


1,573,544


1,573,544Franchises


30,092


30,0923,566,290


3,571,231Total
property, plant and equipment


17,546,178


16,628,383Less
accumulated depreciation


13,008,767


12,119,2344,537,411


4,509,149Plant under
construction


477,891


$
5,015,302

$
4,509,149Telephone
cable and wire facilities of approximately $752,000 and cable television head
end equipment of approximately $506,000 were fully depreciated in 2007.
Depreciation on depreciable property resulted in composite rates of 6.0% and
5.8% for 2007 and 2006, respectively.

68

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 7.
INCOME TAXESIncome taxes
reflected in the Consolidated Statements of Income consist of the following:

2007

2006Federal
  income taxes:Current tax
expense

$
1,147,635

$
1,208,959Deferred tax
expense


(112,633
)

275,838State
  income taxes:Current tax
expense


366,319


324,399Deferred tax
expense


(35,391
)

91,436Total
  income tax expense

$
1,365,930

$
1,900,632Deferred
federal and state tax liabilities and assets reflected in the Consolidated
Balance Sheets are summarized as follows:

2007

2006Deferred
  tax liabilitiesFederal

$
1,097,484

$
1,156,574State


341,792


356,426Total deferred
tax liabilities


1,439,276


1,513,000Deferred
  tax assetsFederal


(178,802
)

(125,259
)State


(61,161
)

(40,404
)Total deferred
tax assets


(239,963
)

(165,663
)Net deferred
tax liabilities

$
1,199,313

$
1,347,337Current
  portion

$
(14,294
)
$
(12,291
)Long-term
  portion


1,213,607


1,359,628Net deferred
tax liability

$
1,199,313

$
1,347,337The tax
provision differs from the expense that would result from applying the federal
statutory rates to income before income taxes as the result of state income
taxes and tax-exempt interest on municipal bonds.

69

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 7.
INCOME TAXES (Continued)The following
is a reconciliation of the statutory federal income tax rate of 34% to the
Companys effective income tax rate:

2007

2006Statutory
  federal income tax rate


34.0
%

34.0State
  income taxes, net of federal benefit


10.1
%

10.1Amortization
  of bond premiums


0.4
%

0.4Dividends
  received deduction


(0.5
)%

(0.6
)Tax
  exempt interest


(2.2
)%

(3.7
)Other


(6.3
)%

0.1Effective
income tax rate


35.5
%

40.3The Company
files consolidated tax returns including their subsidiaries, Prairie Telephone
Co., Inc., Westside Independent Telephone Company and Tele-Services, Ltd.

NOTE 8.
LONG-TERM DEBTLong-term debt
consists of:

2007

2006Rural
  Telephone Finance Cooperative7.35% (Fixed
Rate)

$
1,139,205

$
1,314,934Less current
portion


187,710


175,729$
951,495

$
1,139,205The annual
requirements for principal payments on long-term debt for the next five years
are as follows:

2008

$
187,7102009


200,5072010


214,1772011


228,7792012


244,377Substantially all assets of the
Company are pledged as security for the long-term debt under certain loan
agreements with the Rural Telephone Finance Cooperative (RTFC). These mortgage
notes are to be repaid in equal quarterly installments covering principal and
interest beginning two to three years after date of issue and expiring by the
year 2013.

70

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 8.
LONG-TERM DEBT (Continued)The security
and loan agreements underlying the RTFC 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. The Company is restricted
from making any distributions, except as might be specifically authorized in
writing in advance by the RTFC noteholders, unless minimum net worth exceeds
40% and distributions are limited to certain levels of prior year cash margins.
In addition, the Company is required to achieve a debt service coverage ratio
of not less than 1.25 and a times interest earned ratio of not less than 1.5.
As of December 31, 2007 and December 31, 2006, all loan covenants were met.

The Company
has a line of credit with the RTFC for $1,500,000. The approved line of credit
is available until November 15, 2010. The interest rate at December 31, 2007 is
8.5%. No funds were advanced under the line at December 31, 2007. In addition,
the Company has a line of credit with the RTFC for $500,000. This approved line
of credit is available until November 30, 2010. The interest rate at December
31, 2007 is 8.5%. No funds were advanced under the line at December 31, 2007.

NOTE 9.
OPERATING SEGMENTS INFORMATIONThe Company
organizes its business into three reportable segments: local exchange carrier
(LEC) services, broadcast services and Internet service provider (ISP)
services. The LEC services segment provides telephone, data services and other
services to customers in local exchanges. The broadcast services segment
provides cable television services to customers in Iowa and Nebraska. The ISP
services segment provides Internet access to customers within the local
exchanges and the surrounding areas.

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

71

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2007 and 2006

NOTE 9.
OPERATING SEGMENTS INFORMATION (Continued)The segments
accounting policies are the same as those described in the summary of
significant accounting policies.

Local
  Exchange
  Carrier

Broadcast

Internet
  Service
  Provider

Total2007Revenues and sales


9,112,511


711,461


658,653

$
10,482,625Interest income


464,530


14,442


7,245


486,217Interest expense


(91,871
)







(91,871
)Depreciation and
  amortization


787,176


69,421


159,650


1,016,247Income tax expense
  (benefit)


1,306,950


(145,410
)

204,390


1,365,930Segment profit (loss)


3,319,045


(202,015
)

(638,700
)

2,478,330Segment assets


23,798,048


651,181


1,742,595


26,191,824Expenditures for segment
  assets


1,356,648


(78,056
)

40,904


1,319,4962006Revenues and sales

$
7,315,068

$
724,957

$
627,028

$
8,667,053Interest income


372,967


16,385


2,210


391,562Interest expense


108,774








108,774Depreciation and
  amortization


668,691


144,894


147,100


960,685Income tax expense
  (benefit)


2,035,978


(132,002
)

(3,344
)

1,900,632Segment profit (loss)


3,514,489


(184,972
)

(510,640
)

2,818,877Segment assets


21,416,179


748,796


1,131,865


23,296,840Expenditures for segment
  assets


246,657


71,548


72,257


390,462NOTE 10. NET INCOME PER COMMON SHARE

Net income per
common share for 2007 and 2006 was computed by dividing the weighted average
number of shares of common stock outstanding into the net income. The weighted
average number of shares of common stock outstanding for the years ended December
31, 2007 and 2006 were 31,003 and 31,021, respectively.

NOTE 11. STOCK VALUE ADJUSTMENT

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

During July 2006, the board of
directors authorized a $37 increase in the stated value of each share of common
stock from $357 to $394. There were 31,023 shares outstanding at the time of
the value adjustment, which reduced retained earnings by $1,147,851.

72

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006

NOTE 12.
STOCK RESTRICTIONSThe Companys
Articles of Restatement became effective on March 29, 2007. One of the changes
originating with the Articles of Restatement was the addition of a second class
of common stock. The Company is authorized to issue 10,000,000 shares,
comprised of the following two classes: (i) 5,000,000 shares of Class A Common
Stock, no par value; and (ii) 5,000,000 shares of Class B Common Stock, no par
value.

The Class A
Common Stock is comprised of the following three series:

(i)
Series 1 
 these shares represent Class A shares issued after March 29, 2007. These
 shares have voting rights of one vote per shareholder, regardless of the
 number of Class A shares held.(ii)
Series 2 
 these shares were issued and outstanding immediately prior to the March 29,
 2007 effective date and with respect to which the holders of such shares had
 one vote per shareholder, regardless of the number of Class A shares held.
 The shares had previously been shares of the former Class A stock of the
 Corporation that were issued and outstanding on February 28, 1995.(iii)
Series 3 
 these shares were issued and outstanding immediately prior to the March 29,
 2007 effective date and with respect to which the holders of such shares had
 one vote for each such share. The shares had previously been shares of the
 former Class A stock of the Corporation that were issued and outstanding on
 February 28, 1995. These shares have voting rights of one vote per share.The Class B
Common Stock represent non-voting shares issued after March 29, 2007.

Restrictions
on the stock include the following:


Individuals
 purchasing Class A, Series 1 stock must be living within the Breda and
 Lidderdale service areas of the Company and subscribe to its telephone
 services. Individuals or entities can purchase Class B, non-voting stock
 without service area or service participation restrictions.
Shareholders
 are individually limited to ownership of not more than one percent of the
 joint outstanding Class A and Class B stock unless ownership was prior to the
 Articles of Restatement. There may be two stockholders per household and
 their joint ownership may not exceed two percent of the joint outstanding
 Class A and Class B stock.
Shareholders
 shall not sell any shares of stock owned unless the Company has been given
 first right of refusal.
Stock
 transfers require consent of the board of directors.
The Company
 may adopt bylaws, which may further restrict the transfer or ownership of
 capital stock of the Company.NOTE 13.
EMPLOYEE BENEFITSThe Company
has a defined benefit pension plan covering most employees. The multi employer
retirement program is with the National Telephone Cooperative Association
(NTCA) and has been approved by the Internal Revenue Service. Pension costs
expensed and capitalized for 2007 and 2006 were $158,110 and $144,376,
respectively. The Company makes annual contributions to the plan equal to
amounts accrued for pension expense.

73

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2007 and 2006

NOTE 14.
ASSET RETIREMENT OBLIGATIONGenerally
accepted accounting principles require entities to record the fair value of a
liability for legal obligations associated with an asset retirement in the
period in which the obligations are incurred. When the liability is initially
recorded, the entity capitalizes the cost of the asset retirement obligation by
increasing the carrying amount of the related long-lived asset. Over time, the
liability is accreted to its present value each period, and the capitalized
cost is depreciated over the useful life of the related asset.

The Company
has determined it does not have a material legal obligation to remove long-term
assets and accordingly, there have been no liabilities recorded for the years
ended December 31, 2007 and 2006.

NOTE 15.
RELATED PARTY TRANSACTIONSThe Company
receives commission revenue from RSA #9, Ltd. Partnership (RSA #9) based on
cellular service activation and retention. The Company has a 16.7% ownership
interest in RSA #9. Commissions received by the Company for the years ended
December 31, 2007 and 2006 were approximately $1,143,000 and $1,111,000,
respectively. At December 31, 2007 and 2006, $156,870 and $147,351 were due
from RSA #9 for commissions.

NOTE 16.
CONCENTRATIONS OF CREDIT RISKThe Company
grants credit to local service customers, all of whom are located in the
service area, broadcast customers, Internet customers and telecommunications
intrastate and interstate long distance carriers.

The Company
received 71% of its 2007 revenues from access revenues and assistance provided
by the Federal Universal Service Fund. As a result of the Telecommunications
Act of 1996, the manner in which access revenues and Universal Service Funds
are determined is currently being modified by regulatory bodies.

Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents, along with both
temporary and long-term investments. The Company places its cash, cash
equivalents and investments in several financial institutions which limits the
amount of credit exposure in any one financial institution.

The Company
maintains its cash in bank deposit accounts which, at times, may exceed
federally insured limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash and cash equivalents.

The Company
routes conference bridging minutes of use through its switch in Carroll, Iowa.
The Company generates revenues from this service based on tariffed rates per
minutes of use, which is charged to interexchange carriers. In April 2007
certain interexchange carriers began disputing the charges and the volume of
minutes on which the charges were billed, and stopped payment until the dispute
could be settled. The Company is currently corresponding with the interexchange
carriers regarding the payment of the unpaid access charges. The Companys
estimated unpaid access charges resulting from conference bridge services as of
December 31, 2007 is $1,414,528. The Company has recorded an estimated
allowance of $632,552 for non-payment of these charges as of December 31, 2007,
and has accrued additional accounts payable for related costs associated with
the conference bridge minutes of $284,355.

NOTE 17.
NONCASH INVESTING ACTIVITIESNoncash
investing activities included $207,331 during the year ended December 31, 2007
relating to plant and equipment additions placed in service during 2007, which
are reflected in accounts payable at year-end.

74

Item 8.
Changes In and Disagreements With Accountants on Accounting and
 Financial Disclosure.Breda has
 not had any change in its accountants during Bredas two most recent fiscal
 years, or any disagreements with its accountants during that period which are
 of the type required to be disclosed under this ItemItem 8A(T).
Controls and Procedures.Evaluation of Disclosure Controls and Procedures.Bredas
 chief executive officer, chief operations officer and chief financial officer
 have evaluated the effectiveness of Bredas disclosure controls and
 procedures as of the end of the period covered by this annual report, and
 have concluded that the disclosure controls and procedures have been
 effective for the purposes for which they are intended.Managements Annual Report on Internal Control Over Financial
 Reporting.The
 management of Breda is responsible for establishing and maintaining adequate
 internal control over financial reporting for Breda. Bredas internal control
 system was designed to, in general, provide reasonable assurance to Bredas
 management and board of directors regarding the preparation and fair
 presentation of published financial statements, but because of its inherent
 limitations, internal control over financial reporting may not prevent or
 detect misstatements. Also, projections of any evaluation of effectiveness to
 future periods are subject to the risk that controls may become inadequate
 because of changes in conditions, or that the degree of compliance with the
 policies or procedures may deteriorate.Bredas
 management assessed the effectiveness of Bredas internal control over
 financial reporting as of December 31, 2007. The framework used by management
 in making that assessment was the criteria set forth in the document entitled
 Guidance for Smaller Public Companies Reporting on Internal Control over
 Financial Reporting issued by the Committee of Sponsoring Organizations of
 the Treadway Commission. Based on that assessment, Bredas management has determined
 that as of December 31, 2007, Bredas internal control over financial
 reporting was not effective based on those criteria because Breda has not
 completed all of the requirements set out in that criteria. The completion of
 all requirements of the SEC under Section 404 of the Sarbanes-Oxley Act of 2002
 was not completed as of the date of this filing.While Breda
 has always had policies in place regarding a code of ethics for all
 employees, including the managers, has documented accounting procedures, and
 has a culture condoning only the highest integrity in all of its
 transactions, Breda is continuing to augment and formalize these control
 procedures. Breda enlisted a third-party consultant to confirm the minutes
 originating and terminating in its switches, and the subsequent tracing of
 those minutes to Iowa Network Services, where they75

are coded
 and returned to Breda for processing. Breda is presently considering
 outsourcing the carrier access billing service to a vendor that has
 documented and certified controls as evidenced by its SAS 70 certification.
 During 2007 Breda installed new operating support software, which included all
 billing, financial, plant and customer service modules. Breda also installed
 new shareholder support software. Breda will also be completing the revision
 of some of its procedures to identify the new system processes in order to be
 compliant with all internal control standards by December 31, 2008.This annual
 report does not include an attestation report of Bredas registered public
 accounting firm regarding internal control over financial reporting.
 Managements report was not subject to attestation by Bredas registered
 public accounting firm pursuant to temporary rules of the Securities and
 Exchange Commission that permit Breda to provide only managements report in
 this annual report.Changes in Internal Control Over Financial Reporting.No change in
 Bredas internal control over financial reporting occurred during the period
 of October 1, 2007 through December 31, 2007 that has materially affected, or
 is reasonably likely to materially affect, Bredas internal control over
 financial reporting.Item 8B.
Other Information.There was no
 information required to be disclosed in a report on Form 8-K during the
 period of October 1, 2007 through December 31, 2007 which was not reported on
 Form 8-K.76

PART III

Item 9.
Directors, Executive Officers, Promoters, Control Persons and
 Corporate Governance; Compliance with Section 16(a) of the Exchange Act.Directors and Officers.The
 directors and executive officers of Breda are as follows:Name

Age

Position(s)Charles
 Thatcher

56

President
 and
 DirectorDave Grabner

59

Vice
 President and
 DirectorRick
 Anthofer

51

Treasurer
 and
 DirectorNeil Kanne

61

Secretary
 and DirectorClifford
 Neumayer

59

DirectorRobert Buelt

49

DirectorDaniel
 Nieland

51

DirectorCharles
 (Chuck) Thatcher has been a director of Breda since May, 2001. His current
 term as a director of Breda will end at the annual shareholders meeting which
 will be held in 2010. He has also served as a director of each of Bredas
 subsidiaries since May, 2001. Mr. Thatcher has been the President of Breda
 and of each of Bredas subsidiaries since June 14, 2005. Mr. Thatcher has
 been an owner of Midwest Wholesale Building Products in Carroll, Iowa for
 over 20 years. Midwest Wholesale Building Products is a wholesaler/retailer
 of lumber, building products and materials.Dave Grabner
 has been a director of Breda since April, 1999. His current term as a
 director of Breda will end at the annual shareholders meeting which will be
 held in 2008. He has also been a director of each of Bredas subsidiaries
 since April, 1999. Mr. Grabner was the Treasurer of Breda and of each of
 Bredas subsidiaries from June 11, 2001 until June 14, 2005. He has served as
 the Vice President of Breda and of each of Bredas subsidiaries since June
 14, 2005. Mr. Grabner has been self-employed as an electrician for over 30
 years. He was also previously self-employed as a farmer.Rick Anthofer
 has been a director of Breda since August, 2003. His current term as a
 director will end at the annual meeting of the shareholders which is held in
 2009. He has also served as a director of each of Bredas subsidiaries since
 August, 2003. Mr. Anthofer has served as the Treasurer of Breda and each of
 Bredas subsidiaries since June 14, 2005. Mr. Anthofer has been the vice
 president of Breda Savings Bank, in Breda, Iowa, since approximately
 September 15, 1999. He was an agricultural and commercial loan officer and an
 assistant vice president at Carroll County State Bank in Carroll, Iowa, for
 approximately 13 years prior to that time. Mr. Anthofer has been a member of
 the Breda, Iowa City Council since 1988.Neil Kanne
 has been a director of Breda since May, 2004, and his term as a director will
 end at the annual shareholders meeting which will be held in 2010. He has
 also served as a director of each of Bredas subsidiaries since May, 2004.
 Mr. Kanne has been the Secretary of Breda and of each of Bredas subsidiaries
 since October 30, 2006. Mr. Kanne has been self-employed as a farmer since
 1970.77

Clifford
 Neumayer has been a director of Breda since October 25, 2006, and his current
 term as a director will end at the annual shareholders meeting which will be
 held in 2009. Mr. Neumayer has also served as a director of each of Bredas
 subsidiaries since October 2006. Mr. Neumayer was also a director of Breda
 and each of Bredas subsidiaries from April, 1996 until May 17, 2005. He was
 the vice president of Breda and each of Bredas subsidiaries from May 7, 1996
 through June 9, 2003, and the president of Breda and each of its subsidiaries
 from June 9, 2003 until June 14, 2005. Mr. Neumayer has been self-employed as
 a farmer since 1970.Robert Buelt
 has been a director of Breda since October, 2006, and his current term as a
 director will end at the annual shareholders meeting which will be held in
 2009. Mr. Buelt has also served as a director of each of Bredas subsidiaries
 since October, 2006. Mr. Buelt was the clubhouse manager for Breda Golf Club,
 Ltd. from March 1, 1999 until November 1, 2001. He has been the assistant
 manager of the Carroll Car Credit Company since November 1, 2001, and has
 been the owner and operator of Buelt Hatchery and Storage since January 1,
 1985. Carroll Car Credit Company helps individuals establish and reestablish
 credit to purchase vehicles available from Carroll Car Credit Company. Buelt
 Hatchery and Storage is a mini-storage unit facility.Daniel
 Nieland has been a director of Breda since May 17, 2005, and his current term
 as a director will end at the annual shareholders meeting which will be held
 in 2008. Mr. Nieland has also served as a director of each of Bredas
 subsidiaries since May, 2005. Mr. Nieland has been self-employed as a farmer
 since 1978. He has served as a board member of Mt. Carmel Mutual Insurance
 Association in Breda, Iowa since approximately 1988. Mr. Nieland has served
 as a Carroll County Supervisor since January 2007.The Board of
 Directors of Breda consists of seven members. 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.Each
 director must be a Class A Common Stock shareholder, and a director will
 automatically cease to be a director if he or she ceases to hold any shares of
 the Class A Common Stock. Each director must also be at least 18 years old.
 No individual may serve more than three consecutive terms as a director, and
 if an individual has served for three consecutive terms as a director, that
 individual must be off the Board for at least one year before the individual
 can again be elected as a director.The
 executive officers of Breda are elected annually by the Board of Directors at
 its annual organizational meeting, and hold office until the next annual
 organizational meeting of the Board of Directors and until their respective
 successors are chosen or until their death, resignation or removal. The
 annual organizational meeting of the Board of Directors is the first
 regularly scheduled meeting of the Board of Directors which is held after the
 annual shareholders meeting. Each officer, other than the chief78

executive
 officer, the chief operations officer and the chief financial officer, must
 also be a director of Breda.During 2007
 the following three employees made significant contributions to Bredas
 business:Name

Age

PositionSteve
 Frickenstein

56

Chief
 Executive OfficerCharles
 Deisbeck

41

Chief
 Operations OfficerJane A.
 Morlok

54

Chief Financial
 OfficerMr.
 Frickenstein became employed as the chief executive officer of Breda
 effective on July 1, 2006. Mr. Frickenstein served as a general manager of
 construction support for AT&T from May 1, 2000 through July 22, 2005. He
 provided various consulting services to Breda during the period of January,
 2006 to June, 2006. Mr. Frickenstein has 36 years of experience in the
 telecommunications industry, and he began his career as a lineman for
 Illinois Bell. He also had assignments in Europe and with Bell Labs in New
 Jersey.Mr. Deisbeck
 became employed as the chief operations officer of Breda effective on July 1,
 2006. Mr. Deisbeck was an operations manager at Choice One Communications in
 Milwaukee, Wisconsin, from September, 2000, to October, 2002. He served as
 the operations manager at Red River Telephone Company in Abercrombie, North
 Dakota, from October, 2002, until June 30, 2006. He has held various plant
 operations positions in the telecommunications industry since 1988.Ms. Morlok
 was the chief financial officer and co-chief executive officer of Breda from
 March 20, 1998 to July 1, 2006. She also served as Bredas interim chief
 executive officer from April 11, 2006 until July 1, 2006. Her title since
 July, 2006 has been chief financial officer.Section 16(a) Beneficial Ownership Reporting Compliance.Clifford
 Neumayer is a director of Breda. Mr. Neumayers spouse purchased five shares
 of the common stock of Breda on September 20, 2007. Mr. Neumayer may be
 deemed to have indirect beneficial ownership of those shares under the
 regulations of the Securities and Exchange Commission related to the filing
 of reports under Section 16(a) of the Securities Exchange Act of 1934. As
 such, Mr. Neumayer should have filed a Form 4 with respect to his spouses
 purchase of the five shares of common stock by September 26, 2007. Mr.
 Neumayer inadvertently did not file the Form 4 until October 3, 2007.79

Audit Committee and Audit Committee Financial Expert.Breda does
 not have a separately-designated standing audit committee, and Bredas entire
 board of directors performs any functions that would otherwise be performed
 by an audit committee.Bredas
 board of directors has determined that Breda does not have an audit committee
 financial expert, as that term is defined in Item 407(d)(5)(ii) of Regulation
 S-B, serving on its board of directors. There are various factors which may
 contribute to the fact that Breda does not have an audit committee financial
 expert serving on its board of directors. For example, although Breda is
 subject to the reporting requirements of the Securities Exchange Act of 1934,
 it is a relatively small company, and its corporate offices are located in a
 small, rural community in Iowa, both of which facts limit its ability to
 identify and to attract an audit committee financial expert. Also, under
 Bredas governing documents, an individual can only be a director of Breda if
 the individual holds shares of the Class A common stock of Breda, and there are
 restrictions on who can hold shares of the Class A common stock of Breda.
 There is therefore a limited pool of individuals who are even eligible to be
 considered for a director position with Breda. There are also limitations on
 the number of shares which can be held by any shareholder. For example, no
 household may own more than 2% of the total issued and outstanding common
 stock of Breda. In addition, each shareholder is generally entitled to only
 one vote on each matter submitted to the shareholders, regardless of the
 number of shares held by the shareholder. Those restrictions may limit the
 number of individuals who desire to be a shareholder in Breda. Further, all
 nominees for election as a director of Breda are nominated by the
 shareholders, and the shareholders may not take into consideration some of
 the particular issues that are raised or attempted to be addressed by the
 Securities Exchange Act of 1934 and its implementing regulations. Bredas
 board of directors believes that all of these factors make it unlikely that
 Breda will have an audit committee financial expert serving on its board of
 directors in future years.Procedures for Recommending Nominees to Bredas Board of
Directors.There were
 no material changes in 2007 to the procedures by which the shareholders of
 Breda may recommend nominees to Bredas board of directors.Code of Ethics.Breda has
 not adopted a code of ethics that applies to Bredas principal executive
 officer, principal financial officer or persons performing similar functions.
 Although Breda intends to continue to monitor the need for a code of ethics
 and may adopt one at some point, Breda currently believes that a code of
 ethics is not necessary given Bredas size and its other existing internal
 processes and procedures.80

Item 10.
Executive Compensation.Summary Compensation Table.The
 following summary compensation table shows the compensation paid by Breda to
 Robert J. Boeckman, Bredas former chief operations officer, during the 2006
 fiscal year, and to Steve Frickenstein, Charles Diesbeck and Jane Morlok,
 Bredas chief executive officer, chief operations officer and chief financial
 officer, respectively, during the 2006 and 2007 fiscal years.Summary Compensation TableName and
 Principal Position

Year

Salary

Bonus

All Other
 Compensation

TotalRobert Boeckman,Chief Operations
 Officer1

2006

$
29,410

$
15,725


$ 10,015


$
55,150Steve Frickenstein,Chief Executive

2007

$
142,884

$
21,600

$ 16,630



$
181,114Officer2

2006

$
59,708

$
-0-

$   7,531



$
67,239Charles Deisbeck,Chief Operations

2007

$
105,853

$
18,500

$ 23,080



$
147,433Officer3

2006

$
44,234

$
-0-

$ 15,094



$
59,328Jane Morlok,Chief Financial

2007

$
97,377

$
17,020

$ 18,194



$
132,591Officer

2006

$
87,822

$
21,125

$ 26,656



$
135,603(1)
Mr. Boeckman
 resigned his position effective March 14, 2006.(2)
Mr.
 Frickenstein became the chief executive officer effective July 1, 2006.(3)
Mr. Deisbeck
 became the chief operations officer effective July 1, 2006.The Salary
 column in the summary compensation table includes contributions by the
 officer of 3% of the annual gross salary of the officer pursuant to Bredas
 defined benefit retirement and security program, which is sponsored by the
 National Telephone Cooperative Association. As a condition to participation
 in that program, participants must contribute a minimum of 3% of their annual
 gross salary.The All
 Other Compensation column in the above summary compensation table includes
 contributions by Breda to the defined benefit retirement and security program
 on behalf of the officer in an amount equal to 8.6% of the officers annual
 gross salary. Breda was also required to contribute a 2.32% surcharge on
 the officers annual gross salary into the defined benefit retirement and
 security program for plan years 2004 through 2007 in order to meet current
 and projected funding requirements. Mr. Frickenstein does not participate in
 the defined benefit retirement security program.81

The All
 Other Compensation column in the above summary compensation table also
 includes the following:
A long term
 disability contribution based on a combination of fixed percentages times
 premiums for medical/dental and group life; AD&D and the R&S
 retirement plan, as well as adjustments for the exclusionary period of the
 long term disability plan and Bredas selection of waived benefits options on
 the plan.
Premiums on
 health, life and accidental death and dismemberment insurance, and health
 insurance premiums and deductible reimbursements;
Payments
 from a fund established by Breda based upon sales of cell phones;
A yearly
 clothing allowance; and
The
 estimated yearly value of local telephone service, basic cable service,
 internet access and cellular phone service which is provided by Breda or its
 subsidiaries at no cost to the officer. The estimated yearly value of those
 services as of December 31, 2007 was as follows: (i) local telephone service
 - $210-$246; (ii) basic cable service -$0-$305.40; internet access
 -$275.28-$575.88; and cellular phone service - $467.76.Breda
 adopted the Retirement and Security Program of the National
 Telecommunications Cooperative Association and its member systems on January
 1, 1980. The program is a defined benefit pension plan which is among the 600
 largest pension plans in the United States, and the pension benefits are
 insured to established limits by the Pension Benefit Guaranty Corporation in
 the event that the entire program terminates. The benefits under the program
 are determined under a formula that takes into consideration the retirees
 age, highest five years of compensation, years of service, annual accruals,
 and actuarial factors. The benefit is then expressed as an annuity beginning
 at retirement age. A lump sum benefit payable under the program would be the
 actuarial equivalent present value of the annuity.Bredas
 contribution is 8.6% of the employees annual gross salary, of which 1.7%
 purchases a pre-retirement death benefit. Breda was also required to
 contribute a 2.32% surcharge on the employees annual gross salary into
 the defined benefit retirement and security program for plan years 2004
 through 2007 in order to meet current and projected funding requirements. The
 employee contribution is 3% of the employees annual gross salary.An employee
 who completes 1,000 hours of service and meets certain other eligibility
 requirements may begin participation on the closest of the following dates:
 January 1st, April 1st, July 1st or October
 1st.A summary of
 Bredas employment agreements with Mr. Frickenstein, Mr. Deisbeck and Ms.
 Morlok is set forth below in Significant Employees; Employment Agreement.82

As noted in
 that discussion, the terms of Bredas employment agreements with Mr.
 Frickenstein, Mr. Deisbeck and Ms. Morlok include the possible payment of a
 severance allowance if Breda terminates the employment agreement without
 cause. The amount of the severance payment with respect to Mr. Frickenstein
 and Mr. Deisbeck depends upon when the termination occurs. If the termination
 occurs during the first year of their employment agreement, the severance
 amount would be equal to six months of their regular salary, with the amount
 being lowered to four months of their regular salary if the termination
 occurs during the second year of the employment agreement, and with the
 amount being reduced to two months of their regular salary if the termination
 occurs during the third year of their employment agreement. The severance
 allowance under Ms. Morloks employment agreement will be the amount of
 salary remaining to be paid under the employment agreement at the time of the
 termination of the employment agreement by Breda without cause.Charles
 Thatcher is the president of Breda. No information is provided for Mr.
 Thatcher in the summary compensation table because he does not receive
 compensation in his capacity as the president of Breda. Mr. Thatcher does
 receive compensation for his services as a director of Breda. The
 compensation payable to directors is discussed below.Director Compensation.The
 following director compensation table shows the compensation paid by Breda to
 the directors of Breda during 2007.Director Compensation TableName

Fees Earned or
 Paid in Cash

All Other
 Compensation1

TotalCharles
 Thatcher

$7,600

$   900

$
8,500Dave Grabner

$5,500

$   804

$
6,304Rick
 Anthofer

$6,100

$   900

$
7,000Neil Kanne

$5,250

$   910

$
6,160Daniel
 Nieland

$4,400

$   804

$
5,204Clifford
 Neumayer

$5,800

$   900

$
6,700Robert Buelt

$4,600

$1,109

$
5,7091
The
 directors receive dial-up or high-speed Internet access and local telephone
 service from Breda or one of its subsidiaries at no cost. The estimated
 yearly value of dial-up and high-speed Internet access as of December 31,
 2007 was, respectively, $263.40 and $575.88. The estimated yearly value of
 local telephone service as of December 31, 2007 was $228-246.Since
 October, 2006, all of Bredas directors have received $200 for each regular,
 special and conference call meeting of the Board of Directors. The directors
 had83

received
 $150 for each such meeting from June, 2003 through May, 2005, and $175 from
 June, 2005 through September, 2006. The vice-president, secretary and
 treasurer of Breda also currently receive an additional $25 for each regular,
 special and conference call meeting of the Board of Directors, and the
 president of Breda receives an additional $100 per meeting. Those payments
 are, however, made to those individuals in their capacities as directors, and
 are based upon their additional duties at meetings of the Board of DirectorsSince October,
 2006, all of Bredas directors have received $200 per day for attending all
 day industry meetings related to Bredas or its subsidiaries businesses. The
 meetings are not generally formal meetings of the Board of Directors, but the
 meetings are attended by the directors in their capacity as a director of
 Breda. The directors had received $150 per day for each all day industry
 meeting from June, 2001 through May, 2005, and $175 from June, 2005 through
 September, 2006.Since
 October, 2006, all of Bredas directors have received $200 for each outside
 meeting attended by a director which lasts over three hours. The directors
 receive one-half of their regular meeting rate for each outside meeting which
 lasts less than three hours. Outside meetings are not formal meetings of the
 Board of Directors, and some examples of outside meetings are conventions and
 city council meetings and meetings for purposes of ballot counting. The
 directors had received $150 for each such outside meeting from June, 2001
 through May, 2005, and $175 from June, 2005 through September, 2006.Since
 October, 2006, directors who serve on a committee have received $200 for each
 committee meeting which does not coincide with another meeting of the Board
 of Directors. The directors had received $150 for each such committee meeting
 from October, 2001 through May, 2005, and $175 from June, 2005 through
 September, 2006.Bredas
 directors are also reimbursed for mileage and for any expenses incurred by
 them on account of attendance at any meeting of the Board of Directors or
 other meetings attended by them in their capacity as a director of Breda. The
 above director compensation table does not include amounts which were
 reimbursements to a director.The
 compensation of the directors is established solely by the Board of
 Directors.Significant Employees; Employment
 Agreements.Breda has
 three employees who make a significant contribution to Bredas business.
 Those employees are Steve Frickenstein, Charles Deisbeck, and Jane Morlok.
 Breda has employment agreements with each of those individuals, and those
 agreements are summarized below. Breda does not have any written employment
 agreements with any other employees.84

Mr. Frickenstein. Breda entered into an
 employment agreement with Steve Frickenstein on June 14, 2006, pursuant to
 which Mr. Frickenstein became employed as the chief executive officer of
 Breda effective on July 1, 2006. Mr. Frickenstein served as a general manager
 of construction support for AT&T from May 1, 2000 through July 22, 2005.
 He provided various consulting services to Breda during the period of
 January, 2006 to June, 2006. Mr. Frickenstein has 36 years of experience in
 the telecommunications industry. He began his career as a lineman for Illinois
 Bell. He also had assignments in Europe with Bell Labs in New Jersey. Mr.
 Frickenstein is 56 years old.Mr.
 Frickensteins annual salary was $135,000 during the first year of the
 employment agreement. The employment agreement provides that Mr. Frickensteins
 annual salary during the second year and the third year of the employment
 agreement will be set by Bredas board of directors, but will not be less
 than $135,000 per year. Mr. Frickensteins salary was set at $140,600 for the
 year commencing July 1, 2007. Bredas board of directors may also, in its
 sole discretion, establish a bonus program for Mr. Frickenstein for the
 second year and the third year of the employment agreement. No formal bonus
 program has been established, but Mr. Frickenstein received a bonus in 2007
 of $21,600. Mr. Frickenstein was
 also paid his relocation expenses and hotel expenses up to and including July
 19, 2006. Mr. Frickenstein will also be reimbursed for reasonable expenses
 incurred in connection with Bredas business. Mr. Frickenstein will also be
 entitled to any employee benefits as are provided by Breda from time to time,
 other than any retirement benefits as may be offered by Breda. Mr.
 Frickenstein is entitled to four weeks of paid vacation per year under the employment
 agreement.The term of
 the employment agreement is from July 1, 2006 through June 30, 2009. Breda
 may terminate the employment agreement at any time by giving 60 days written
 notice to Mr. Frickenstein. In that circumstance, Mr. Frickenstein will be
 paid a severance allowance on the date of termination, with the amount of the
 severance allowance depending upon when the termination occurs. If the
 termination occurs during the first year of the employment agreement, the
 severance allowance will be equal to six months of Mr. Frickensteins regular
 salary, with the amount being lowered to four months of his regular salary if
 the termination occurs during the second year of the employment agreement,
 and being reduced to two months of his regular salary if the termination
 occurs during the third year of the employment agreement.Mr.
 Frickenstein may also terminate the employment agreement by giving 60 days
 notice to Breda.The
 employment agreement may also be terminated by Breda for cause upon five days
 written notice to Mr. Frickenstein.The
 employment agreement may also be terminated by Breda if Mr. Frickenstein is
 absent from his employment by reason of illness or other incapacity for more
 than 2085

consecutive weeks. Breda will pay Mr. Frickenstein compensation during any
 period of illness or incapacity in accordance with Bredas sick pay policy as
 then in effect.The
 employment agreement includes a noncompete covenant that applies during the
 term of the employment agreement and for a period of one year after the
 termination of the employment agreement, and provides that Mr. Frickenstein
 will not enter into or engage in any business competitive with that of Breda
 within a 50 mile area in which Breda is then doing business or solicit or
 attempt to solicit any of Bredas customers with the intent or purpose to
 provide them with competitive goods or services.Mr. Deisbeck.Breda entered into an
 employment agreement with Mr. Deisbeck on June 14, 2006, pursuant to which Mr.
 Deisbeck became employed as the chief operations officer of Breda effective
 on July 1, 2006. Mr. Deisbeck was an operations manager at Choice One
 Communications in Milwaukee, Wisconsin, from September, 2000, to October,
 2002. He served as the operations manager at Red River Telephone Company in
 Abercrombie, North Dakota, from October, 2002, until June 30, 2006. He has
 held various plant operations positions in the telecommunications industry
 since 1988. Mr. Deisbeck is 41 years old.Mr.
 Deisbecks annual salary was $100,000 during the first year of the employment
 agreement. The employment agreement provides that Mr. Deisbecks annual
 salary during the second year and the third year of the employment agreement
 will be set by Bredas chief executive officer, with final approval by
 Bredas board of directors, but will not be less than $100,000 per year. Mr.
 Deisbecks salary was set at $104,160 for the year commencing July 1, 2007.
 Bredas chief executive officer, with the approval of Bredas board of directors,
 may also establish a bonus program for Mr. Deisbeck for the second year and
 the third year of the employment agreement. No formal bonus program has been
 established, but Mr. Deisbeck
 received a bonus in 2007 of $18,500. Mr. Deisbeck was also paid his
 relocation expenses and hotel expenses up to and including July 19, 2006. Mr.
 Deisbeck will also be reimbursed for reasonable expenses incurred in
 connection with Bredas business. Mr. Deisbeck will also be entitled to any
 employee benefits as are provided by Breda from time to time, including any
 retirement benefits as may be offered by Breda. Mr. Deisbeck is entitled to
 four weeks of paid vacation per year under the employment agreement.The term of
 the employment agreement is from July 1, 2006 through June 30, 2009. Breda
 may terminate the employment agreement at any time by giving 60 days written
 notice to Mr. Deisbeck. In that circumstance, Mr. Deisbeck will be paid a
 severance allowance on the date of termination, with the amount of the severance
 allowance depending upon when the termination occurs. If the termination
 occurs during the first year of the employment agreement, the severance
 allowance will be equal to six months of Mr. Deisbecks regular salary, with
 the amount being lowered to four months of his regular salary if the
 termination occurs during the second year of the employment agreement, and
 being reduced to two months of his regular salary if the termination occurs
 during the third year of the employment agreement.86

Mr. Deisbeck
 may also terminate the employment agreement by giving 60 days notice to
 Breda.The
 employment agreement may also be terminated by Breda for cause upon five days
 written notice to Mr. Deisbeck.The
 employment agreement may also be terminated by Breda if Mr. Deisbeck is
 absent from his employment by reason of illness or other incapacity for more
 than 20 consecutive weeks. Breda will pay Mr. Deisbeck compensation during
 any period of illness or incapacity in accordance with Bredas sick pay policy
 as then in effect.The
 employment agreement also includes a noncompete covenant that applies during
 the term of the employment agreement and for a period of one year after the
 termination of the employment agreement, and provides that Mr. Deisbeck will
 not enter into or engage in any business competitive with that of Breda
 within a 50 mile area in which Breda is then doing business or solicit or
 attempt to solicit any of Bredas customers with the intent or purpose to
 provide them with competitive goods or services.Ms. Morlok.Ms. Morlok was the chief
 financial officer and co-chief executive officer of Breda from March 20, 1998
 to July 1, 2006. She also served as Bredas interim chief executive officer
 from April 11, 2006 until July 1, 2006. Her title since July, 2006 has been
 chief financial officer. Ms. Morlok is 54 years old.Breda
 entered into its current employment agreement with Ms. Morlok on November 13,
 2006. The term of the employment agreement is 24 months, beginning retroactively
 on July 1, 2006 and ending on June 30, 2008.Ms. Morloks
 annual salary was $92,000 during the first year of the employment agreement.
 The employment agreement provides that Ms. Morloks annual salary for the
 years beginning July 1, 2007 and July 1, 2008 will be set by Bredas board of
 directors after receiving recommendations from Bredas chief executive
 officer, but will not be less than $92,000 per year. Her salary for the year
 commencing July 1, 2007 was set at $95,827. Ms. Morlok received a bonus of
 $21,125 under the employment agreement for 2006. The employment agreement
 provides that Ms. Morlok may also receive a bonus for the calendar years 2007
 and 2008, but the structure for determining the bonus and the amount of the
 bonus is to be determined by Bredas board of directors, with input from the
 chief executive officer. The final decision regarding bonuses for those
 calendar years rests, however, with the board of directors. Ms. Morlok
 received a bonus for the calendar year 2007 of $17,020. Ms. Morlok will also
 be reimbursed for reasonable and appropriate expenses incurred in connection
 with Bredas business. Ms. Morlok will also be entitled to all employee
 benefits as are provided by Breda from time to time to all full time
 employees of Breda.87

Breda may
 terminate the employment agreement at any time by giving 30 days written
 notice to Ms Morlok. In that circumstance, Ms. Morlok will be paid a
 severance allowance on the date of termination equal to the amount of salary
 remaining to be paid under the employment agreement.Ms. Morlok
 may also terminate the employment agreement by giving 60 days notice to
 Breda.The
 employment agreement may also be terminated by Breda for cause upon five days
 written notice to Ms. Morlok.The
 employment agreement may also be terminated by Breda if Ms. Morlok is absent
 from her employment by reason of illness or other incapacity for more than 26
 consecutive weeks. Breda will pay Ms. Morlok compensation during any period
 of illness or incapacity in accordance with Bredas sick pay policy as then
 in effect.The
 employment agreement includes a noncompete covenant that applies during the
 term of the employment agreement and for a period of one year after the
 termination of the employment agreement, and provides that Ms. Morlok will
 not enter into or engage in any business competitive with that of Breda
 within a 50 mile area in which Breda is then doing business or solicit or
 attempt to solicit any of Bredas customers with the intent or purpose to
 provide them with competitive goods or services.The
 employment agreement also includes a confidentiality covenant from Ms.
 Morlok.Mr. Boeckman.Robert Boeckman was the
 chief operations officer and co-chief executive officer of Breda during 2005
 and up to March 14, 2006. He had been employed by Breda in various capacities
 since May, 1982. Prior to January, 1995, he was Bredas assistant manager. He
 was the manager of Breda from January, 1995 to March, 1998, at which time he
 was given the title chief operating officer. His title became chief
 operations officer and co-chief executive officer on March 20, 1998. Mr.
 Boeckman resigned his position as Bredas chief operations officer and
 co-chief executive officer on March 14, 2006.Breda does
 not have any written employment agreements with any officers or any employees
 other than Mr. Frickenstein, Mr. Deisbeck and Ms Morlok.Item 11.
Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters.The
 following table sets forth certain information regarding the beneficial
 ownership of Bredas common stock as of March 1, 2008 by the following
 individuals:
Bredas
 directors;
Bredas
 officers;
All of
 Bredas directors and officers as a group.Breda had
 30,856 outstanding shares of common stock on March 1, 2008.88

Security Ownership TableAmount and NatureName of

ofTitle of Class

Beneficial Owner

Beneficial Ownership1

Percent of ClassSeries 1 and
 Series 2 Class A
 Common Stock

Charles
 Thatcher,
 Director and
 President

422

.136%Series 2
 Class A
 Common Stock

Dave
 Grabner,
 Director and
 Vice President

553

.178%Series 2
 Class A
 Common Stock

Rick
 Anthofer,
 Director and
 Treasurer

23

.075%Series 2
 Class A
 Common Stock

Neil Kanne,
 Director and
 Secretary

2

.006%Series 2
 Class A
 Common Stock

Daniel
 Nieland,
 Director

1

.003%Series 2
 Class A
 Common Stock

Clifford
 Neumayer,
 Director

1864

.603%Series 2
 Class A
 Common Stock

Robert
 Buelt,
 Director

1335

.431%All
 directors and officers as a group (7 persons)

442

1.432%1
Unless
 otherwise indicated by a footnote, all of the shares are directly owned by
 the listed individual and are not pledged as security.2
Sixteen of
 these shares are held by Mr. Thatchers spouse. Twenty five shares are shares
 of the Series 1 Class A Common Stock. All of the other shares are Series 2 Class
 A Common Stock.3
One of these
 shares is held by Mr. Grabners spouse.89

4
Five of
 these shares are held by Mr. Neumayers spouse and are Series 1 Class Common
 Stock shares.5
Ten of these
 shares are held by Mr. Buelts minor son.Steve
 Frickenstein, Charles Deisbeck and Jane Morlok are employed as, respectively,
 Bredas chief executive officer, chief operations officer and chief financial
 officer. None of them own any shares of Bredas common stock.To Bredas
 knowledge, as of March 1, 2008:
No person or
 group was the beneficial owner of more than 5% of Bredas outstanding common
 stock, and no person or group held more than 5% of Bredas outstanding common
 stock pursuant to any voting trust or similar agreement; and
There were
 no arrangements, including any pledge of common stock by any person, which
 may result in a change in control of Breda.Item 12.
Certain Relationships and Related
 Transactions and Director Independence.Transactions With Related Persons.Breda was
 not a party to any transaction during 2007, and is not currently a party to
 any proposed transaction, of the type required to be disclosed under this
 Item. The transactions to which this Item applies, in general, are transactions
 to which Breda was or is to be a party, which involve the lesser of $120,000
 or one percent of Bredas total assets, and in which any of the following
 types of persons had or will have a direct or indirect material interest:
any director
 or executive officer of Breda,
any
 beneficial owner of more than 5% of Bredas common stock, or
any
 immediate family member of any person referred to above.Director Independence.The
 directors of Breda are Charles Thatcher, Dave Grabner, Rick Anthofer, Neil
 Kanne, Clifford Neumayer, Robert Buelt and Daniel Nieland. Each of the
 directors meets the standards of independence under the Governance Guidelines
 and applicable NASDAQ Stock Market listing standards, including that each director
 is free of any relationship that would interfere with his individual exercise
 of independent judgment.Item 13.
Exhibits.A list of
 the exhibits included as part of this annual report is set forth in the
 Exhibit Index which immediately precedes such exhibits and is incorporated herein by this
 reference.90

Item 14.
Principal Accountant Fees and Services.The
 following paragraphs describe the aggregate fees that were billed to Breda by
 Kiesling Associates, LLP for the fiscal years ended December 31, 2006 and
 December 31, 2007.Audit Fees.Breda was
 billed $44,041 and $37,650 for, respectively, the fiscal years ended December
 31, 2006 and December 31, 2007 for the audit of Bredas annual financial
 statements and review of the financial statements included in Bredas
 quarterly reports on Form 10-QSB or services that are normally provided by
 the accountant in connection with statutory and regulatory filings or
 engagements for those two fiscal years.Audit Related Fees.Breda was
 billed $24,100 and $18,407 for, respectively, the fiscal years ended December
 31, 2006 and December 31, 2007 for assurance and related services that were
 reasonably related to the performance of the audit or review of Bredas
 financial statements and which are not reported under Audit Fees above. The
 nature of those services was compliance, assurance and review work in
 connection with SEC filings.Tax Fees.Breda was
 billed $4,625 and $4,700 for, respectively, the fiscal years ended December
 31, 2006 and December 31, 2007 for tax compliance, tax advice and tax
 planning services. The nature of those services was tax return and estimated
 tax preparation work.All Other Fees.Breda was
 billed $1,138 and $3,885 for, respectively, the fiscal years ended December
 31, 2006 and December 31, 2007 for products and services which are not
 described under Audit Fees, Audit Related Fees and Tax Fees above. The
 nature of those products and services was consulting on industry related
 issues.Each
 specific, one-time engagement of Kiesling Associates, LLP is approved by the
 board of directors of Breda. The board of directors does pre-approve on a
 quarterly basis a budget for the provision of services, such as industry consulting,
 accounting seminars, or tariff consulting, by non-audit personnel of Kiesling
 Associates, LLP. None of the services described in Audit Related Fees, Tax
 Fees or All Other Fees above were approved by Bredas board of directors
 pursuant to Rule 2-91

01(c)(7)(i)(C)
 of Regulation S-X.[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]92

SIGNATURES

In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

BREDA
 TELEPHONE CORP.Date: March
 28, 2008

By:
/s/ Steve
 FrickensteinSteve
 Frickenstein, Chief Executive OfficerBy:
/s/ Jane
 MorlokJane Morlok,
 Chief Financial OfficerIn
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By:
/s/ Daniel
 Nieland

By:
/s/ Neil
 KanneDaniel
 Nieland, Director

Neil Kanne,
 Secretary and DirectorDate: March
 28, 2008

Date: March
 28, 2008By:
/s/ Rick
 Anthofer

By:
/s/ Robert
 BueltRick
 Anthofer, Treasurer and Director

Robert
 Buelt, DirectorDate: March
 28, 2008

Date: March
 28, 2008By:
/s/ Clifford
 Neumayer

By:
/s/ Dave
 GrabnerClifford
 Neumayer, Director

Dave
 Grabner, Vice President and DirectorDate: March
 28, 2008

Date: March
 28, 2008By:
/s/ Charles
 Thatcher

By:
/s/ Jane
 MorlokCharles
 Thatcher, President and Director

Jane Morlok,
 Chief Financial OfficerDate: March
 28, 2008

Date: March
 28, 2008By:
/s/ Steve
 Frickenstein

By:
/s/ Charles
 DeisbeckSteve
 Frickenstein, Chief Executive Officer

Charles
 Deisbeck, Chief Operations OfficerDate: March
 28, 2008

Date: March
 28, 200793

EXHIBIT INDEXExhibits to Form 10-KSB of Breda
Telephone Corp.
for the Fiscal Year Ended December 31, 2007

Description of
Exhibit.

3.
Articles of Incorporation and Bylaws(a)
Articles of
 Restatement of Breda Telephone Corp. (Filed as Exhibit 3.1 to Bredas Form
 10-QSB for the quarterly period ended March 31, 2007, and filed May 14, 2007,
 and incorporated herein by this reference.)(b)
Second
 Amended and Restated Bylaws of Breda Telephone Corp. (Filed as Exhibit 3.2 to
 Bredas Form 8-K, filed April 4, 2007, and incorporated herein by this
 reference.)10.
Material Contracts.(a)
Employment
 Agreement dated November 13, 2006 between Breda and Jane Morlok. (Filed as
 Exhibit 10.1 to Bredas Form 10-QSB for the quarterly period ended September
 30, 2006 and filed November 14, 2006, and incorporated herein by this
 reference.)(b)
Employment
 Agreement dated June 14, 2006 between Breda and Steve Frickenstein. (Filed as
 Exhibit 10.2 to Bredas Form 10-QSB for the quarterly period ended June 30,
 2006 and filed August 11, 2006, and incorporated herein by this reference.)(c)
Employment
 Agreement dated June 14, 2006 between Breda and Charles Deisbeck. (Filed as
 Exhibit 10.3 to Bredas Form 10-QSB for the quarterly period ended June 30,
 2006 and filed August 11, 2006, and incorporated herein by this reference.)21.
Subsidiaries of the Registrant.(Filed as Exhibit 21 to Bredas Form
10-KSB
 for the fiscal year ended December 31, 2003 and filed March 26, 2004, and
 incorporated herein by this reference.)*31.
Rule 13a-14(a)/15d-14(a) Certifications31.1
Rule 13(a)-14(a) Certification of Chief Executive
Officer

E-131.2
Rule 13(a)-14(a) Certification of Chief Financial
Officer

E-3*32.
Section 1350 Certifications32.1
Section 1350 Certification of Chief Executive
Officer

E-532.2
Section 1350 Certification of Chief Financial
Officer

E-6*Included with this filing.