|U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
Form 10-KSB
(Mark One)
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|                                                                                    

|x                                                                        | ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------
|                                                                         |                                                                                   
|                                                                         | For the fiscal year ended: December 31, 2006                                      
|                                                                         |                                                                                   
|o                                                                        | TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                                         |                                                                                   
|                                                                         | For 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
    incorporation or organization) |  | (I.R.S. Employer
    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
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|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. x
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: $8,667,053.

|
|



|State the aggregate market value of the voting and non-voting common equity held by non-affiliates:
$12,060,734, as of March 1, 2007. 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 current $394 per share redemption price of the registrants stock as determined by its board
of directors. 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: 31,016 shares of common stock, no par value, at March 1, 2007.
Transitional Small Business Disclosure Format (check one):   Yes o  No x
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|
|



|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:
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|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |  | 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.

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|[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. provides the local telephone services
  through leased loops from the incumbent local exchange carrier in the Carroll, Iowa area. 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      |  | Pacific Junction, Iowa
| | - | ---------------- | - | ----------------------
| |   |                  |   |                       
| |  | Lidderdale, Iowa |  | Yale, Iowa            
| |   |                  |   |                       
| |  | Macedonia, Iowa  |  | Westside, Iowa        
| |   |                  |   |                       
| |  | Farragut, Iowa   |  | Carroll, Iowa         
| |   |                  |   |                       

| | All 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, 2006, they were serving approximately 3,425 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 2006 were from providing Internet
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. As noted above, BTC, Inc. did not offer local telephone
services until October of 2003. BTC, Inc. also generated additional revenues in 2006 when it
began offering conference bridge services.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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.                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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.                                                                                                                                                                                                     

|2
|-



| | As indicated above, the IUB regulates or has the authority to regulate many aspects of Bredas,
  Prairie Telephones, Westside Independents and BTC, Inc.s telephone businesses.
  The material areas of regulation 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 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. 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. will 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; 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 carriers
  designation because they are able to                                                                                

|3
|-



| | provide services defined in the Iowa Administrative Code, Utilities Division 199, Chapter 39, as services
  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 $814,188 in the aggregate in 2004, $829,818 in the aggregate in 2005, and $910,608
  in the aggregate in 2006. Breda anticipates receiving High Costs program and Low Income program universal
  services funding in 2007 in an amount comparable to that received in 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | BTC, Inc. has been designated as an eligible telecommunications carrier by the IUB. BTC,
  Inc. does not, however, receive High Cost universal service funding because BTC, Inc., as a competitive
  local exchange carrier in the Carroll, Iowa market, would only be eligible to receive High Cost universal
  service funds if the incumbent local exchange carrier (Qwest) receives those funds. Since Qwest does
  not receive universal service funding for the Carroll, Iowa market, BTC, Inc. is 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 it 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
| | - | -----------------------------------------------------------------------------------------------------------------------------------

|4
|-



| | 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. It is therefore not possible to
    predict how the FCC will allocate the support payment funding in any year, and the amount of support
    payment funding received by Breda, Prairie Telephone and Westside Independent will vary from year
    to year. For example, they received, in the aggregate, support payment funding of $1,495,150 in 2004, $1,646,878
    in 2005, and $1,830,898 in 2006. Those amounts include the amount of the universal services funding
    component which is listed in the above discussion regarding the IUB. BTC, Inc. does not receive support
    payment funding from the National Exchange Carriers Association because 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.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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

|5
|-



| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In April 2001, the FCC initiated a Notice of Proposed Rule Making on Developing a Unified Intercarrier
  Compensation Regime (ICC) to begin the process of replacing the various different compensation
  mechanisms with a unified regime. In March 2005, the FCC released a Further Notice of Proposed Rule
  Making to solicit comments on various intercarrier compensation reform proposals submitted by a number
  of parties, including a bill and keep proposal from FCC staff, and several industry proposals.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | There was little agreement on how to arrive at a unified intercarrier compensation rate; whether it
  should be set by federal or state regulators or some combination of the two; whether rates should
  be uniform nationally or set based on individual carrier costs; and whether rates should be governed
  by tariffs or contracts. Many comments did focus on the need to fix phantom traffic problems immediately
  via truth-in-labeling requirements, enforcement actions and penalties. However, no consensus emerged
  on the issue of full cost recovery or revenue neutrality, although there was widespread
  recognition that this was a serious issue for rural carriers, such as Breda and its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On July 24, 2006, the National Association of Regulatory Utility Commissioners (NARUC) ICC Task Force
  submitted an industry-drafted ICC reform plan, entitled, The Missoula Plan, which proposes to unify
  intercarrier charges for most carriers over 4 years. The Missoula Plan entails categorizing carriers
  into three tracks based on carrier size and classification; reducing and unifying intercarrier
  charges over four steps; shifting a portion of network cost recovery from ICC charges
  to modest increases in subscriber line charges (SLC) and a new federal Restructure Mechanism; establishing
  uniform default interconnection rules; jurisdictional classification of traffic based on the telephone
  numbers of the calling and called parties; and rules to mitigate the problem of phantom traffic. Once
  the plan is fully implemented, the FCC would initiate a proceeding to review results and determine
  next steps. While the Missoula Plan was not endorsed by NARUC or its ICC Task Force, it is backed
  by more than 350 carriers representing regional bell operating companies (RBOCs), non-rural carriers,
  and medium and small rural carriers.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | 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 have the highest end-user
  rates. The Federal Benchmark mechanism would provide supplemental funding to ensure end-user
  rates remain within a national benchmark range when the Missoula Plan is implemented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The FCC has put the Missoula Plan for ICC reform and the Federal Benchmark Mechanism amendment out
  for public comment. Breda has not officially endorsed the Missoula Plan and has taken a cautious
  approach because some of the provisions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|6
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| | in the plan, for instance the federal Restructure Mechanism, have not been fully developed and the
  funding stream for this provision has not been detailed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | As noted previously, 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 independent
  local exchange carrier (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. Even when the originating service
  provider of the phantom traffic is discovered, getting proper payment is difficult and there are
  no penalties imposed. 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 the interim
  phantom traffic solution. It 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
  these records. The FCC has put this proposal out for public comment. Breda is in agreement with these
  supporters that in addition to clear and enforceable truth in labeling requirements,
  penalties and arbitration procedures should also be implemented. As noted elsewhere in this report,
  the Iowa Telecommunications Association Qwest Committee is also working with Qwest to address the
  issue of phantom traffic that traverses its network, and for which Qwest refuses to pay terminating
  access to the ILECs.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | In August 2005, the FCC opened an extremely broad comment proceeding on Universal Service Funding,
  in which it sought input on a variety of specific USF proposals offered by members of the Federal-State
  Joint Board on Universal Service. Again state industry associations have been meeting not only with
  FCC staff members, but also 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, suggestions 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, it is recommended
  that USF                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|7
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| | payments would allow recovery based on actual costs, rather than the incumbent carriers costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | One of the issues regarding the Universal Services Fund (USF) is the sheer number of telecommunication
  service providers designated as an eligible telecom carrier. The 1996 Telecom Act created twin goals
  of universal service and competition, and stated that high cost universal service funding may be
  provided to competing carriers if this were found to be in the public interest. Regulators have found
  it to be in the public interest to encourage the availability of wireless and wireline competitive
  services in high-cost areas, and have designated an increasing number of wireless carriers as Competitive
  Eligible Telecom Carriers (CETCs) who are then eligible to receive monies from the USF. Rapid
  growth in the number of CETCs and dramatic growth in high-cost funding requirements have focused
  a great deal of attention on the rules for designating CETCs and for accountability for USF
  support monies.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | In May 2001, the FCC Rural Task Force Order required states to certify that the CETCs are using
  USF funds in compliance with the statute. On March 17, 2005, the FCC released its Eligible Telecom
  Carrier (ETC) Designation Order outlining minimum requirements for ETC designation. It
  specified that ETC applicants must:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| | a) | Provide a specific, detailed five-year plan illustrating how high-cost USF support will be used to
  improve coverage, service quality or capacity in all areas for which it seeks ETC designation;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                    
| | b) | Demonstrate its ability to remain functional in emergency situations;                                                                                                                              
| |    |                                                                                                                                                                                                    
| | c) | Demonstrate that it will satisfy consumer protection and service quality standards;                                                                                                                
| |    |                                                                                                                                                                                                    
| | d) | Offer similar local usage plans to those offered by the ILEC in ETC-designated areas; and                                                                                                          
| |    |                                                                                                                                                                                                    
| | e) | Recognize that it may be required to provide equal access if all other ETCs in the designated
  service area relinquish their designation.                                                        
| |    |                                                                                                                                                                                                    

| | The Iowa Utilities Board (IUB) on October 6, 2006, issued its order regarding ETC reporting requirements
  for all wireline and wireless providers who receive universal service funding. The IUB had opened
  this docket early in 2006 to comply with the new federal requirements, and to standardize ETC requirements
  for wireline and wireless carriers. In its Order, the IUB issued new rules regarding annual reports
  and certifications, additional requirements for new ETCs, additional requirements for existing
  ETCs, and set up informational workshops to discuss the implementation strategies.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Breda attended the informational workshops; has prepared the required reports, plans, documentation,
  and certifications as required by the IUB Order for each of its companies; and has completed all
  filings as required by the IUB Order.                                                                                                                                                                                                                                                                                                                                                                        

|8
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| | Breda believes that federal universal service fund changes will occur but is unable to determine an
  estimated time frame or estimated financial ramifications as of the date of this filing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In 2004, the Joint Board (federal and state representatives) and the FCC sought comment on what type
  of mechanism should succeed the Rural Task Force (RTF) plan which would: ensure predictable and sufficient
  USF funding; effectively target rural carriers costs in high cost areas, and protect against
  excessive fund growth. As part of this consideration, the FCC asked whether separate mechanisms should
  be maintained for rural and non-rural carriers; whether the mechanism should be based on embedded
  costs or on forward-looking costs; and whether the definition of rural telephone company should be
  modified.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In August 2005, the FCC issued a Public Notice seeking comments on four proposals advanced by state
  members of the USF Joint Board to replace the RTF for rural carriers and basis of support for CETCs.
  While different in many regards, all four proposed a State Allocation Method (SAM) for the distribution
  of USF funds to ETCs in each state. The Notice also asked the public to supplement the record
  with any new facts that had arisen since the 2004 proceedings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | On May 16, 2006, the Commission released an order extending the high-cost universal support rules adopted
  in the Rural Task Force Order until the FCC adopts changes, if any, to those rules. In August 2006,
  the Joint Board sought comments on the merits of using reverse auctions (competitive bidding) to
  determine high-cost USF support for ETCs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | As noted previously, the National Exchange Carrier Association (NECA) has been delegated some authority
  by the FCC regarding the regulation of interstate access charge rates. In a letter dated January
  15, 2007, NECA notified Breda that beginning July 1, 2007 most carriers could expect an overall average
  cost settlement decrease of 7.27% as a result of the new settlement formulas filed by NECA with the
  FCC in December 2006. Overall, NECA projected that the majority of companies settlements will
  decrease between 5% and 15%. The decrease generally reflects new overall reduced cost levels and
  decreases due to Line Haul Distance Sensitive formula structure changes. NECAs 2007 Modification
  of Average Schedules filing included a proposed transition plan to help companies adjust to reduced
  settlements. The FCC is currently reviewing both the proposed formulas and the proposed transition
  plan. Breda is continuing to study the information provided by NECA, but preliminary figures provided
  by NECA indicate that Breda could expect to receive $322,860 (17.8%) less per year in average schedule
  payments after the 24-month transition period is completed.

|9
|-



| | 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 services providers like Breda, Prairie Telephone, Westside Independent and BTC, Inc. are
  subject to competition from other providers. As a result of the Telecommunications Act of 1996, telephone
  companies are no longer afforded exclusive franchise service areas. Under that Act, competitors can
  now offer telephone services to Bredas, Prairie Telephones, Westside Independents
  and BTC, Inc.s subscribers, and also request access to their lines and network facilities in
  order to offer any type of service that can be provided through those lines and facilities. The Act
  and the regulations promulgated by the FCC and state regulatory agencies to implement various parts
  of the Act could have a material adverse effect on Breda, Prairie Telephone, Westside Independent
  and BTC, Inc. because they open up Breda, Prairie Telephone, Westside Independent and BTC, Inc. to
  competition that they were not subject to in the past.                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | One example of the increased competition in Iowa occurred on October 18, 2004, when the IUB issued
  an Order Approving an Amendment to the Approved Application for Public Convenience to MCC Telephony
  of Iowa (MCC) to provide service in any area of Iowa where MCC affiliates own and operate a
  cable system and offer high-speed cable modems. MCC is a subsidiary of Mediacom that provides
  VoIP (voice over Internet protocol) service. The IUB had approved an earlier application of MCC to
  serve only those areas currently served by Qwest. Mediacom is the cable service provider in BTC,
  Inc.s Carroll, Iowa market area. Mediacom began rolling out its telephone service in parts
  of Iowa in spring 2005, and recently began actively competing in Bredas Carroll, Iowa
  market by offering Voice Over Internet Protocol (VoIP) phone service in its bundled package of video
  and Internet services. Breda presently does not have video facilities in the Carroll marketplace
  so is not able to offer a triple play option of phone, video and Internet in that marketplace. Breda
  has experienced mainly the loss of possible new customers who want a triple play option or who make
  their telecommunication provider selection based upon price offerings for services such as Internet
  or video instead of voice.

|10
|--



| | In December 2005, the IUB deregulated single-line flat-rate local exchange service in 20 exchanges
  serviced either by Frontier, Iowa Telecom or Qwest as the incumbent, local exchange carrier. The
  IUB relied on the existence of a partially over-built competitor, some decline of market share by
  the incumbent and the likely existence of future competition from wireless providers and other new
  technologies such as VoIP through cable, DSL or broadband over power lines. This action was a departure
  from an earlier IUB decision not to deregulate similarly situated exchanges.                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | In 2004, Breda and Prairie Telephone joined with eight other independent telephone companies in southwest
  Iowa in putting together a network to provide and improve the delivery of voice, data and video services
  over a fiber optic-based infrastructure. The South West Iowa Network is supported by Iowa Network
  Services, and collectively provides service in 28 exchanges in southwest Iowa. This network will
  be used to deliver the triple-play (voice, data and video), as well as to provide a scalable converged
  infrastructure for each company to connect to other companies and services outside Iowa. Breda and
  Prairie Telephone have three exchanges connected to this network in southwest Iowa. This network
  became operational on October 24, 2004. No further build-outs were done in 2005 or 2006, and no triple-play
  business plans have been feasible for Bredas locations at this point.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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 2007
  is small.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | BTC, Inc. provides telephone services in the Carroll, Iowa market area and there are already other
  companies providing telephone services in that area. For example as noted earlier, Mediacom, which
  is the ninth largest cable television operator in the United States and the local cable provider
  in the Carroll, Iowa market, has a phone service offering through Mediacoms partnership with
  Sprint. The IUB also granted Mediacom a certificate of public convenience to offer service in numerous
  areas throughout Iowa. Mediacom is able to market a triple play option since this phone service can
  be added to their video and high speed Internet offerings. The incumbent local exchange carrier,
  Qwest, is also marketing a triple play offering through its agreement with DirecTV which allows it
  to provide a video offering along with Qwests phone service and high speed Internet offerings.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Breda also anticipates that it will face competition from other providers of newer VoIP (voice over
  Internet protocol) technologies, such as Vonage and Skype, in all of its exchanges. Breda anticipates
  that Mediacoms and any such other offerings will result in a reduction of revenue. If any other
  telephone companies also at some point determine to provide service in any of Bredas, Prairie
  Telephones, Westside Independents or BTC, Inc.s service areas, there would also
  likely be a reduction in revenue.                                                                                                                                                                                                                                                                                                                                                                                           

|11
|--



| | 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.                                            
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | An industry issue that had significant ramifications for Breda, Prairie Telephone and Westside Independent
  during 2004 was number portability. Number portability provides residential and business telephone
  customers with the ability to retain their existing telephone numbers when switching from one telephone
  service provider to another. Number portability was one of the obligations that the Telecommunications
  Act of 1996 imposed on all local exchange carriers, and the Act required the FCC to promulgate rules
  to implement the number portability requirements. The number portability requirements are viewed
  as consistent with the purpose of the Act, which is to, in general, facilitate competition, because
  consumers might be reluctant to switch local exchange carriers if they have to change their telephone
  number.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The FCCs rules obligate incumbent local exchange carriers, such as Breda, Prairie Telephone and
  Westside Independent, to port numbers when the carrier receives a specific request from another telecommunications
  carrier (wireline or wireless) for number portability capability. The rules give incumbent local
  exchange carriers a maximum period of 180 days to implement number portability capability following
  receipt of a request, with the actual permissible time period dependent on the extent of the upgrades
  required to their switch in order to be able to provide number portability. Because of the small
  number of customers in the rural exchanges who would want to port their numbers, small rural carriers
  had hoped to delay the costs of the upgrades until they needed to change out their switches.                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | On February 18, 2004, two Iowa industry associations, the Iowa Telecommunications Association and the
  Rural Iowa Independent Telephone Association, filed a petition with the IUB that requested a waiver
  of the wireless-wireline number portability rules on behalf of all 2% or less carriers in Iowa. Breda,
  Prairie Telephone and Westside Independent were included in these joint filings.                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The IUB initially responded to the petition by issuing a 180 day temporary suspension of the wireless-wireline
  number portability rule, and later issued an order requiring all companies participating in the petition
  to provide the IUB with various company-specific information, including the number of customers of
  the company, the cost of number portability implementation and expected costs per customer that would
  be reflected in the number portability cost recovery charge authorized by the                                                                                                                                                                                                                                                                                                                                              

|12
|--



| | FCC.  Breda, Prairie Telephone and Westside Independent all submitted their individualized data
  in response to the IUBs order in July of 2004. The IUB issued its final order in response to
  the petition on October 6, 2004. Under the IUBs order, all companies participating in the petition
  were given extensions ranging from six months to 18 months from the date of the IUB order, or in
  some cases until six months after the company received a bona fide request for number portability
  from a wireless carrier. Breda and Prairie Telephone were classified in the group receiving a six-month
  extension, and Westside Independent was classified in the group receiving a one-year extension.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | On October 26, 2004, the Iowa Telecommunications Association and the Rural Iowa Independent Telephone
  Association filed an application for rehearing of the IUBs October 6, 2004 order. The application
  requested the IUB to reconsider its order and to clarify various other matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | As noted above, Breda and Prairie Telephone received six-month extensions, and Westside Independent
  received a twelve-month extension. Software upgrades and service agreements to implement number portability
  for Breda, Prairie Telephone and Westside Independent had all been completed in preparation for the
  six-month extension date of April 6, 2005. Final routing and translation work was being scheduled
  as the last outstanding process for number portability implementation when word was received on March
  11, 2005, that the U.S. Court of Appeals for the DC Circuit had suspended the FCCs November
  10, 2003 Intermodal LNP Order implementing wireline to wireless local number portability. The court
  ruled that the FCC failed to follow regulatory guidelines designed to examine the impact of its orders
  on small businesses such as rural carriers. The court sent the FCCs Order back to the FCC with
  directions to prepare a final regulatory flexibility analysis showing the impact of its Order on
  small carriers and their customers, and until that analysis is complete, the court stayed the effect
  of the Order solely as it applied to those carriers that qualified as small entities under the regulatory
  flexibility analysis. Under that analysis, a wireline telecommunications carrier with 1,500 or fewer
  employees is defined as a small entity. The IUB subsequently reported that the court ruling would
  suspend LNP implementation in Iowa until further notice from the FCC.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | In August 2005, the state industry associations prepared written comments to the FCC asking them not
  to require that independent rural carriers comply with its wireless number portability requirements
  and to delay implementation until real demand could be shown and the costs of the service justified.
  No further industry updates have been received as of the date of this filing.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | While Breda anticipates that LNP implementation in Iowa is merely delayed until after the regulatory
  flexibility analysis is prepared, it has stopped all LNP compliance work. Breda estimates its cost
  to complete the remaining translation and routing work to become number portability compliant is
  less than $10,000. BTC, Inc. already has the hardware and software capabilities and is able to port
  customer telephone numbers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|13
|--



| | 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 have been granted various extensions from time to time for compliance with
  the various requirements of the Act. Breda received notification from the FBI on September 16, 2004
  that the FBI would grant Breda, Prairie Telephone and Westside Independent another extension until
  June 30, 2006 for certain of the remaining deployment schedules under the Act. The FCCs May
  12, 2006 Second Order outlined further extension options. Breda would not qualify for further extensions
  and Breda has developed plans for the purchase and installation of new switches in its remaining
  small exchange areas to meet the CALEA requirements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | As already noted, CALEA was intended to preserve the ability of Federal, State and local law enforcement
  agencies to conduct electronic surveillance by requiring telecommunications carriers and manufacturers
  to modify and design their equipment, facilities, and services to ensure they have the required surveillance
  capabilities. Section 103 of CALEA specifies the four assistance capabilities carriers are required
  to have in order to facilitate lawfully authorized electronic surveillance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | In response to a joint petition filed in March 2004 by various law enforcement agencies (DOJ, FBI,
  and DEA), the FCC adopted a First Report and Order on September 23, 2005, that applied CALEA requirements
  to all facilities-based broadband Internet access providers and providers of interconnected VoIP
  services. The effective date of the Order was November 14, 2005, but the compliance deadline for
  newly covered entities and providers of newly covered services was set for May 14, 2007. The FCC
  indicated it would release another order addressing the assistance capabilities required of providers
  pursuant to section 103 of CALEA, as well as other issues, such as compliance extensions and exemptions,
  cost recovery, identification of future services and entities subject to CALEA, and enforcement.                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | On May 12, 2006, the FCC released a Second Report & Order, affirming the compliance deadline for
  all facilities-based broadband Internet access providers and interconnected VoIP providers is 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 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                           

|14
|--



| | 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. Breda has
  enlisted Iowa Network Services to be its Trusted Third Party resource in meeting the CALEA requirements.
  Breda has also timely filed all required CALEA reports in the first quarter of 2007 per the FCC filing
  dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | 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 continues to operate under the 1999 agency agreement.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda has two retail outlets in the Carroll, Iowa market. The two retail outlets are located at Bredas
  and BTC, Inc.s office in Carroll, Iowa and the Wal-Mart store in Carroll, Iowa.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|15
|--



| | Breda, Prairie Telephone, Westside Independent and BTC, Inc. also sell and lease telephone, cellular
  and related equipment. They face 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.                                                                                                         
| |                                                                                                                                                                                                                                             
| | Broadcast Services.                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                             
| | Tele-Services owns and operates the cable television systems in the following seventeen Iowa towns:                                                                                                                                         
| |                                                                                                                                                                                                                                             

| |  | Arcadia  |  | Grand Junction |  | Sidney  
| | - | -------- | - | -------------- | - | --------
| |   |          |   |                |   |         
| |  | Auburn   |  | Hamburg        |  | Tabor   
| |   |          |   |                |   |         
| |  | Bayard   |  | Lohrville      |  | Thurman 
| |   |          |   |                |   |         
| |  | Breda    |  | Malvern        |  | Treynor 
| |   |          |   |                |   |         
| |  | Churdan  |  | Oakland        |  | Westside
| |   |          |   |                |   |         
| |  | Farragut |  | Riverton       |   |         
| |   |          |   |                |   |         

| | 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 eighteen Iowa towns until October 1, 2005,
  when it sold its Neola cable television system to Walnut Telephone Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                             
| | As of December 31, 2006, Tele-Services was providing cable television services to approximately 2,244
  subscribers.                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                             
| | 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       |  | Lohrville - March, 2008 
| | - | ---------------------------- | - | ------------------------
| |   |                              |   |                         
| |  | Auburn - January, 2009       |  | Malvern - October, 2016 
| |   |                              |   |                         
| |  | Bayard - May, 2008           |  | Riverton - June, 2013   
| |   |                              |   |                         
| |  | Beaver Lake - December, 2008 |  | Oakland - November, 2009
| |   |                              |   |                         
| |  | Breda - Year-to-Year Basis   |  | Sidney - October, 2010  
| |   |                              |   |                         
| |  | Churdan - June, 2008         |  | Tabor - September, 2016 
| |   |                              |   |                         
| |  | Farragut - January, 2008     |  | Thurman - December, 2015
| |   |                              |   |                         
| |  | Grand Junction - May, 2008   |  | Treynor - October, 2020 
| |   |                              |   |                         
| |  | Hamburg - Year-to-year Basis |  | Westside - June, 2009   

|16
|--



| | Tele-Services does not anticipate that any of its franchises or agreements will be terminated before
  the above normal 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. This 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 future
  proposed increases can be implemented in any of the towns.                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Tele-Services did implement rate increases in 2004 as part of Tele-Services adding various channels
  to its line-up in 14 of the 19 communities that are served by Tele-Services. The channel additions
  were completed in 11 communities by May 1, 2004, and by June 30, 2004 for the remaining 3 communities
  which received the additional channels. The rate increases were implemented effective May 1, 2004
  in the communities which were receiving the additional channels by that date, and the rate increases
  were implemented on July 1, 2004 for the communities which received the channel additions in May
  and June of 2004. Local channels were also added in six of the communities served by Tele-Services.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Tele-Services also implemented a rate increase in 2005 for its Sidney community when three 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.                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | In June 2006, Tele-Services combined the head end for its Auburn community with three of its other
  communities. 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. Breda plans to implement
  rate increases for both basic service and premium services in most of its service areas in early
  2007.                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Tele-Services franchises or agreements with the towns do not grant Tele-Services the exclusive
  right to provide cable services in the towns, and other cable service providers can 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 currently also does not contemplate any
  cable services competitor coming into the towns given, among other things, the smaller size of the
  towns.                                                                                                                                                                                                           

|17
|--



| | Tele-Services does face competition in other 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. This fact has
  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 can offer to its subscribers, 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. As noted above, Tele-Services did add 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. Those upgrades and installations were completed during the second quarter of 2004
  and the third quarter of 2005. Tele-Services also combined the head-ends on two of its systems into
  one head-end during the first quarter of 2004, which has allowed three communities to be served by
  one head-end, and for those three communities to receive local channel services. Tele-Services again
  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 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. The
  cost of Tele-Services upgrades was approximately $42,040 in 2005, approximately $71,548 in 2006,
  and is estimated to be approximately $153,500 in 2007.

|18
|--



| | On February 8, 2006, President Bush signed into law the Deficit Reduction Omnibus Reconciliation Act
    of 2005, which includes the digital television transition legislation (DTV). The DTV bill sets a
    February 17, 2009, deadline for broadcasters to transition from analog to digital spectrum. It includes
    up to $1.5 billion to subsidize set-top box purchases, and includes $1 billion for public safety
    interoperability. All of the Tele-Services cable service systems are analog systems so Tele-Services
    will be working to obtain cost estimates to determine its options and feasible business plan in order
    to meet this deadline.                                                                                                                                                                                                                   
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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. As
    discussed above, 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.                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Iowa Senate is considering a bill that allows incumbent video providers to utilize the current
    franchising process, or, upon expiration of their local franchise, opt in to the state-issued franchise.
    New video providers can chose to use either state or local franchise. The legislation caps the franchise
    fee for a new market entrant under the state franchise at the same percentage as the incumbent provider
    or up to five percent of gross revenues, whichever is less. 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 pay PEG fees if the incumbent is paying PEG fees.
    In the state franchise, build-out requirements are eliminated and cities maintain control over rights-of-way.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Breda does not anticipate any material affect due to the outcome of this possible legislation because
    its service areas as noted above are rural and small with little competition other than from satellite
    service providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Internet 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 1,112 subscribers as of December 31, 2006. Of that amount, approximately 652 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.                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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. experienced a 24.2% decrease
  in its dial-up customer base in this market during the calendar year 2006. BTC, Inc. had                                                                                                                                                                                                                                                                                                                                                                     

|19
|--



| | experienced a 21.9% decrease in its dial-up customer base in the Carroll, Iowa market area in 2005,
  and a 19.2% decrease in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | In the last three months of 2006, 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. Breda was able to provide high-speed Internet
  service to these previously unserved areas because reliable technology was now available in the industry,
  which allowed Breda to provide service to customers residing at a great distance from the central
  office. Breda had excellent response to this high speed Internet service offering and added 95 high
  speed Internet customers in the last quarter of 2006 from these 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. For example, Breda began offering a dial-up accelerator product in June 2004, which allows
  Internet service providers, such as BTC, Inc., to deliver data services over their existing dial-up
  and wireless networks at up to six times the normal speed. This type of service would be considered
  an upgrade from dial-up, but not a replacement for the high-speed Internet service. Approximately
  5.2% of BTCs dial-up customer base have elected to upgrade to the accelerator product as of
  December 31, 2006.                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda added another 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.
  This product has been well received by both Breda Internet customers, and customers receiving their
  Internet service from other providers.                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda also 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 may otherwise lack the opportunity to obtain high-speed
  Internet service through existing broadband options, such as cable modem, DSL, and wireless, because
  of distance and location factors. NRTC has a master distribution agreement with WildBlue Communications,
  Inc., through which NRTC has obtained rights to market, promote, sell and distribute satellite-based
  Internet access services and related products to end users in the continental United States, including
  through NRTCs eligible members, such as Breda.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda began offering Wild Blue satellite Internet service in September 2005. The overall response to
  this service was phenomenal not only in the satellite beam where Breda is marketing these services,
  but in all of the beams across the United States and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|20
|--



| | Canada.  Breda had been notified by NRTC that the beam in which Breda is providing service would
  reach its maximum capacity level in the latter part of March 2006. Breda stopped marketing this product
  because it was not able to add customers to this service until such time as a new satellite was launched,
  that could increase the capacity in Bredas service area. NRTC and Wild Blue generated the funding
  for this expansion, and are in the process of launching a new satellite in the first quarter of 2007.
  Breda determined to stop selling this service to new customers because of not only the Wild Blue
  capacity issue, but also because Breda is now able to serve these same customers with its own high
  speed Internet, long-reach products.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Breda still believes that it will need to continue to pursue new marketing approaches in order to attempt
  to retain and increase its Internet customer base, and that there will be continuing competitive
  pressures to lower dial-up rates and to provide higher speed Internet access. Breda continues to
  evaluate and offer special promotions on its high-speed Internet service offerings, and review adjustments
  in pricing and Internet service options that may be possible with the completion of its switch in
  the Carroll, Iowa market, and its new ability to offer another type of high-speed Internet.                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 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.                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Other.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Breda and BTC, Inc. moved their Carroll, Iowa operations to a building located at 603 N. Adams, Carroll,
  Iowa on October 4, 2003. The building has approximately 4,450 square feet, which is over two times
  the space of the former location in Carroll. This building allowed BTC, Inc. and Breda to consolidate
  their operations in the Carroll, Iowa market. The location is also affording Breda the opportunity
  to expand its service offerings in the Carroll market. Breda uses a portion of the building as a
  retail store for the sale and lease of telephone, cellular and related equipment and merchandise.
  Breda had used a portion of BTC, Inc.s former building in Carroll since April, 2000 for the
  same purposes.                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | 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 is                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|21
|--



| | 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. 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. 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, 2006.                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Both Breda and Prairie Telephone obtained their personal communications services spectrum from Iowa
  Wireless, which was formed by Western Wireless Corporation and Iowa Network Services, Inc. The original
  Participation Agreement called for Iowa Wireless, which changed its name to i-wireless in early 2004,
  to disaggregate/partition and sell to the individual equity holders of Iowa Network Services, Inc.
  up to ten MHz in certain defined areas. A separate Spectrum Partitioning Agreement required i-wireless
  and the spectrum acquiring telcos, such as Breda and Prairie Telephone, to construct facilities by
  June 23, 2000 to serve with a signal level sufficient to provide adequate service to at least one-third
  of the total population of the Des Moines Major Trading Area covering the combined A Block spectrum
  licensed service areas of Iowa Wireless, Western PCS 1 Corporation and the participating telcos.
  Build-out provisions in this agreement also required that two-thirds of the total population of the
  Des Moines Majoring Area covering the same combined service areas of Iowa Wireless, Western PCS 1
  and the telcos have a signal level sufficient to provide adequate service by June 23, 2005.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | The members of both Carroll County Wireless, L.L.C. and Guthrie Group, L.L.C. authorized the funding
  to erect their first tower in their respective service areas in order to meet the June 23, 2005 deadline.
  Prairie Telephone paid its proportionate share of the first Guthrie Group L.L.C. capital call, which
  was $50,000, in February 2005. Breda also paid its proportionate share of the first Carroll County
  Wireless, L.L.C. capital call, which was $30,000, in February 2005. Both groups co-located their
  towers on pre-existing towers instead of purchasing or leasing land on which to erect free-standing
  towers. Carroll County Wireless, L.L.C. turned up its tower to accept roaming traffic in January
  2006. The Guthrie Group, L.L.C. tower was turned up to receive roaming traffic on March 24, 2006.
  Breda and its partners in these wireless investments continue to evaluate feasibility studies to
  determine future tower site build-out time frames.                                                                                                                                                                                                                                                               

|22
|--



| | 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. Also, Breda, Prairie Telephone, Westside Independent
  and BTC, Inc. will face competition in providing personal communications services because no exclusive
  rights can be acquired with respect to that technology.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | On March 1, 2005, Bredas board of directors authorized Prairie Telephones purchase of 5,000
  units of Bug Tussel Wireless, L.L.C. Prairie Telephones investment of $200,000 was made in
  March 2005, and Prairie Telephone owned 7.87% of the issued and outstanding units of Bug Tussel Wireless,
  L.L.C. In July 2005 Prairie purchased 2,462.264 additional units for $113,264.15, and now owns 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | The outstanding balance on Prairie Telephones loans to Desktop Media, L.L.C. is $439,974. The
  Company collected no principal payments during 2006. All regularly scheduled interest payments totaling
  $35,565 were paid in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Prairie Telephone and the other owners of Desktop Media, L.L.C., are negotiating a purchase agreement
  to sell their respective interests in this entity. It is anticipated that a sale may be finalized
  in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|23
|--



| | 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. Alpine Communications
  sold its consulting division to Iowa Telecom during 2003, and moved its corporate headquarters from
  Des Moines, Iowa to its facilities in Clayton County, 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 received a nominal annual fee from Alpine Communications, L.C. in consideration for Bredas
  chief executive officer serving as a director on Alpines board of directors in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Prairie Telephone purchased a 30% interest in Spiralight Network, L.L.C. on December 28, 2006 for $960,000.
  Spiralight Network, L.L.C. provides fiber transport services in Wisconsin, Illinois and Minnesota. The investment will be accounted for on the
  equity method of accounting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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 there 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|24
|--



| | which may from time to time be presented to the National Exchange Carrier Association, Inc. (NECA).
  The original officers of Solix, Inc. were also the officers of NECA, and they had experience in the
  telecommunications industry. It was contemplated that non-regulated business opportunities would
  be conducted by Solix, Inc. so that NECA could concentrate on its traditional core tariff and pooling
  services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Breda, Prairie and Westside were notified in November 2005 that NECA Services, Inc. had changed its
  name to Solix, Inc. The new name had been chosen to reflect the growing diversity in the companys
  business. 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, the company also now serves numerous agencies of both the state
  and federal governments. More than half of the company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 increases
  in the value of Solix 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 and a $1 per share dividend in
  2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | There were substantial restrictions imposed upon the ability to transfer shares in Solix, Inc., all
  of which potentially could adversely affect the value and marketability of the Solix, Inc. stock.
  In a letter to shareholders dated November 21, 2005, the Board of Directors of Solix, Inc. outlined
  proposed changes to the Bylaws to address these issues, and asked for execution of a Written Consent
  of Shareholders. The Board had become convinced that the Certificate of Incorporation unduly restricted
  Solix ability to expand and diversity the Corporations stockholder base, especially,
  as the Corporations activities diversity. Two restrictions in particular were the most burdensome
  according to the Board. One restriction prohibited current stockholders from reselling their shares
  to any persons or entities other than NECA members or their affiliates thereby narrowing the potential
  pool of future stockholders. Another constraint was the obligation of the Corporation to repurchase
  the shares at certain times and at certain amounts. The shareholders consent forms were to be submitted
  by December 21, 2005, and, as a result, the two restrictions are no longer in place. Current stockholders
  can now sell their shares to any persons or entities, instead of being limited to NECA members or
  their affiliates. The other provision reducing a required buy-back provision of the corporations
  shares from $10 per share to $1 per share should also aid the companys liquidity position in the future.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Breda, Prairie and Westside were each owners of Class C stock in the Rural Telephone Bank. Breda owned
  596 shares. Prairie owned 700 shares, and Westside owned 40 shares. At its quarterly meeting on August
  4, 2005, the Board of Directors of the Rural Telephone Bank approved the liquidation and dissolution
  of the Bank. On November 10, 2005, the liquidation and dissolution process was initiated with the
  signing of the 2006 Agriculture Appropriations bill by President Bush, which                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|25
|--



| | contained a provision lifting the restriction on the retirement of more than 5 percent of the Class
  A stock held by the U.S. government. This paved the way for all Bank stock to be redeemed. These
  investments were carried at cost on the Companys books. The par value of the Companys
  investment was $1,336,000, and the Company received $1,336,000 pursuant to the liquidation on April
  13, 2006. The companys net of tax gain on the liquidation of this investment 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.                                                                                                                                                                                                                                                                                                                                                                                                               

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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. It
  is the Companys intention that the use of the mark and logos will create an integrated, unified
  marketing approach for all of the products and services of Breda and its subsidiaries and will increase
  awareness of those products and services.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | Employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | As of December 31, 2006, Breda had thirty-three full time employees and two 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, 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:                                                                                                                             

|26
|--



| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | Bredas corporate office building was constructed on real estate that was already owned by Breda.
  There was already a building on the real estate, and that building was attached to the corporate
  office building as part of constructing the corporate office building. The building is Bredas
  central office building and it 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, 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

|27
|--



| | 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 owns the real estate and building located at 707 Phillips Street, Farragut, 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 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 Washington 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. This 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. had owned the real estate and building located at 526 N. Carroll Street, Carroll, Iowa until
  its sale 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                                                                                                                                                                                   

|28
|--



| | the building were moved to 603 N. Adams, Carroll, Iowa, in October, 2003. The final closing for the
  sale of this building occurred on May 1, 2006, and the company received $116,247 in net proceeds
  from the sale.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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. This type of equipment is sometimes referred
  to in the cable industry as head-end equipment. The buildings each have approximately
  150 square feet. The 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-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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Tele-Services, Ltd. purchased the land on which its head-end equipment is located in Malvern, Iowa
  for $5,000. This sale was finalized on January 1, 2006. This real estate had previously been leased.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | All of the real estate and substantially all of the other assets of Breda, Prairie Telephone 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 the loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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. This 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 2006. 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.                                                                                                                                                                            

|29
|--



|        | 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 current equipment was purchased over the period
  from 1984 to 2006. 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.                                                                                                                                                                                                                                                                                               
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|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.                                                                                                                                                                                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                        
|        | Other than with respect to election of directors and appointment of auditors at Bredas annual
  meeting held October 25, 2006, 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, 2006 through December
  31, 2006.
|        |                                                                                                                                                                                                                                                                                                                        
|        | At the annual meeting, Rick Anthofer (an existing director), Clifford Neumayer and Robert Buelt were
  elected as directors. Charles Thatcher, Neil Kanne, Dave Grabner and Daniel Nieland continued as
  directors.                                                                                                   
|        |                                                                                                                                                                                                                                                                                                                        
|        | The voting for the nominees for director positions was as follows:                                                                                                                                                                                                                                                     
|        |                                                                                                                                                                                                                                                                                                                        

|Nominee |                   | For |     | Against |   | Abstain |   | Broker 
    Non-Votes |  
|------- | ----------------- | --- | --- | ------- | - | ------- | - | --------------------- | -
|        |                   |     |     |         |   |         |   |                       |  
|        | Rick Anthofer     |     | 178 |         |  |         |  |                       | 
|        | Clifford Neumayer |     | 167 |         |  |         |  |                       | 
|        | Robert Buelt      |     | 167 |         |  |         |  |                       | 
|        | Mark Hoffman      |     | 120 |         |  |         |  |                       | 

| |                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------
| | Keisling Associates LLP was reappointed as Bredas auditors by vote of 178 for and 21 against,
  with 70 abstentions. There were no broker Non-Votes.

|30
|--



|PART II
|-------
|       

|Item 5. | Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity
  Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | Breda is authorized to issue 5,000,000 shares of common stock. Breda had 31,016 shares of its common
  stock issued and outstanding as of December 31, 2006. Those shares were held by approximately 573
  different shareholders.                                                                                                                                                                                                                                                                                                                                             
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 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 Restated Articles of Incorporation of Breda establish various conditions on
  the issuance of, and various restrictions on the transfer of, shares of its common stock. Those conditions
  and restrictions are summarized in the following paragraphs.
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | The common stock can only be issued to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

| |  | residents of the Breda or Lidderdale telephone exchange areas served by Breda who subscribe to Bredas
  telephone services, and                                              
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                               
| |  | entities which have their principal place of business in the Breda or Lidderdale telephone exchange
  areas served by Breda and which subscribe to Bredas telephone services.
| |   |                                                                                                                                                                               

| | As indicated, only residents of the Breda and Lidderdale telephone exchange service areas served by
  Breda are eligible to purchase stock. Although Breda also provides telephone services to Macedonia,
  Iowa and the surrounding area, residents of Macedonia, Iowa and the surrounding rural area cannot
  acquire any shares of common stock of Breda even if they are receiving telephone services from Breda.
  Subscribers to any services from any of Bredas subsidiaries cannot buy common stock of Breda
  unless they also meet the requirements discussed above in this paragraph.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Since approximately January 1, 1996, no person has been allowed to purchase more than thirty shares
  of common stock from Breda. A shareholder can own more than thirty shares, subject to the 1% limitation
  discussed in the following paragraph, but only thirty shares can be acquired through the issuance
  of the shares by Breda. Breda has not issued any shares since 1998.                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | No shareholder may own more than 1% of the total issued and outstanding common stock of Breda unless:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|31
|--



| |  | the shareholder already exceeded that percentage on February 28, 1995, or                                      
| | - | ---------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                
| |  | the shareholder goes over 1% as a result of Breda redeeming shares of its common stock from other shareholders.
| |   |                                                                                                                

| | In either of those cases, the shareholder may not increase the percentage of shares owned by the shareholder.
  If a shareholder owns 5% or more of the ownership interests of an entity which owns shares of Bredas
  common stock, the shares of Bredas common stock held by that entity and by the shareholder
  will be added together for determining whether the 1% limitation is exceeded.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                    
| | There can generally only be one shareholder for each telephone number served by Breda. There can also
  generally only be one shareholder for each household receiving telephone services from Breda, even
  if the household has more than one telephone number.                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                    
| | Bredas board of directors determines the purchase price payable for newly-issued shares of Bredas
  common stock. Bredas board of directors also determines the redemption price that will be paid
  by Breda if it elects to redeem a shareholders shares in any of the circumstances in which
  Breda has the right to purchase those shares. Breda has that right if:                       
| |                                                                                                                                                                                                                                                                                                                                                                                                    

| |  | the shareholder is no longer receiving services from Breda, unless the shareholder already was not
  receiving services from Breda on February 28, 1995;                                    
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                             
| |  | the shareholder no longer resides in the Breda or Lidderdale telephone exchange areas served by Breda,
  unless the shareholder already resided outside those areas on February 28, 1995; or
| |   |                                                                                                                                                                                             
| |  | the shareholder dies, unless the heir of the shares of Bredas stock meets the eligibility requirements
  for ownership of Bredas stock.                                                   
| |   |                                                                                                                                                                                             

| | The board of directors had historically established the issuance price and the redemption price at
  approximately 75% of the book value of Breda, but in 2002, the board began to establish those prices
  at approximately 70% of the book value of Breda.                                                                                                                                                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The board of directors had historically made this determination in March, April or May of each year,
  based upon Bredas then most recent year-end audited 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 issuance price and the redemption price as so determined
  by the board of

|32
|--



| | directors then generally applies until the board of directors makes a new determination and announces
    the new price at the next annual shareholders meeting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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, however, on November 2, 1999, by adopting
  a resolution fixing the issuance price for newly issued shares and the redemption price to be $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 issuance price
  and redemption 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 issuance price and redemption price for
  Bredas shares of common stock to be $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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 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 the issuance price for newly issued shares of Bredas common stock and the
  redemption price for Bredas shares of 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 issuance
  price and the redemption 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 previously determined issuance and
  redemption price of $180 per share. The shareholders of Breda were notified of the increase in the
  issuance price and the redemption price for Bredas shares of common stock from $180 to $235
  per share by letter dated June 14, 2000.

|33
|--



| | At the time the board made its determination on June 12, 2000, Prairie Telephone had received, in the
  aggregate, 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
  issuance price and redemption 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. As indicated, the board of directors believed this was a material
  event which made it appropriate to make a new determination of the issuance price and redemption
  price for shares of Bredas common stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The board of directors has followed Bredas historical practices since that time, by announcing
  a new issuance and redemption 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 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.
| |                                                                             

| | In 2006, Bredas annual
 shareholder meeting was delayed until October 25, 2006. The 2006 annual
  meeting was delayed because Breda had not yet received the audited 2005 financial information from
  some of Bredas outside investments, in which it had a material interest. Because of this delay,
  the board of directors decided to announce the new share redemption value prior to the annual meeting.
  The shareholders of Breda were notified of the increase in the issuance price and the redemption
  price for Bredas shares of common stock from $357 to $394 per share by letter dated July 12, 2006.                               
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Breda has again determined that its 2007 annual shareholder meeting may be delayed until June 25, 2007
  because Breda has not received audited 2006 financial information from some of Bredas outside
  investments in which it had a material interest. Because of this anticipated delay, Bredas
  board of directors has decided to again announce the new share redemption value prior to the annual
  meeting. It is anticipated that the shareholders of Breda will be notified by letter dated April
  2, 2007 of the increase in the issuance price and the redemption price for Bredas shares of
  common stock from $394 to $457 per share.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | In 2006 Breda was the recipient of a significant cash return on its investment
in the Rural Telephone Bank when the government liquidated the Rural Telephone
Bank (RTB). Breda received $1,336,000 for the redemption of its
1,336 shares of Class                                                                                                                                                                                                                                                                                                                                                                                                    

|34
|--



| | C stock in the RTB.  Bredas pre-tax gain was $1,170,211, and Breda estimates its after tax
  gain to be approximately $698,946.                                                                                                                                                                                                                                                                                 
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The per share amount was established based upon Bredas book value as reflected in its most recent
  year-end audited financial statements, consistent with Bredas historical practices, except
  that, since 2002, the redemption price has been set at approximately 70% of the book value.                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The board of directors currently intends to continue to address this issue on an annual basis consistent
  with the above described historical practices of the board of directors, 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 issuance and redemption price as determined by the board of directors has increased from $27 per
  share in 1995 (based on the 1994 year-end audited financial statements of Breda) to the current $457
  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, those being
  the sale of Bredas direct broadcast satellite operation, the sale of Prairie Telephones
  stock in Central Iowa Cellular, Inc., and the redemption of Breda, Prairie, and Westside Telephones
  stock in the RTB.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                  
| |  | 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,
  repurchases of common stock by Breda currently is the primary method 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.                                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | As discussed below, 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, however, to arrange any other auctions in the future. Breda
  does maintain a list of shareholders desiring to sell their shares, and of other shareholders desiring
  to purchase those shares, as discussed below.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | In any of the circumstances where Breda has the right to redeem a shareholders shares, a shareholder
  may, with the consent of Bredas board of directors, transfer the shareholders shares
  to another person who is eligible to be a shareholder by reason of the fact that the person is receiving
  services from Breda and is residing in the Breda or Lidderdale telephone exchange areas served by
  Breda.                                                

|35
|--



| | No shareholder can sell or transfer any of his or her shares of Breda to any person who is not otherwise
  eligible to be a shareholder in Breda, with one exception. The exception is that a person who was
  a shareholder on July 20, 1995, may make a one time transfer of the shares held by the person on
  that date to a family member of the shareholder (which means a spouse, natural born or adopted child,
  grandchild, parent, grandparent, or sibling), even if the family member is not receiving services
  from Breda and is not residing in the Breda or Lidderdale telephone exchange areas served by Breda.
  These transfers are not subject to Bredas right of first refusal described in the following
  paragraph. Any family member receiving shares by this process does not have the same right, however,
  and can only sell or transfer the shares in accordance with the Amended and Restated Articles of
  Incorporation of Breda.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Any shareholder who wants to sell or transfer his or her shares in Breda to another shareholder or
  person who is eligible to be a shareholder must first give Breda the right to purchase the shares.
  The shareholder must give Breda at least sixty days prior written notice of the proposed sale, including
  a copy of the written offer to purchase the shares. Breda may elect to purchase the shares for the
  same price offered to the shareholder at any time within sixty days after it receives the notice
  from the shareholder. If Breda elects to buy the shares, it must pay the purchase price in full upon
  the shareholder surrendering the stock certificates for the shares to Breda.                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The board notified shareholders by letter dated September 23, 2005, that commencing January 1, 2006,
  all stock redemption requests would be redeemed after a ninety-day waiting period. This ninety-day
  period was implemented to encourage the offering of shares for sale to other eligible buyers who
  have expressed interest in purchasing shares of Breda Telephone Corp. stock. Breda reserves its right
  to exercise its right of first refusal, but if the shareholder wishing to redeem shares elects to
  not contact eligible buyers, the shares could still be redeemed if approved by the Board, but under
  a 90-day time period for completing the redemption.                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | Bredas bylaws may also contain provisions restricting the transfer of shares. The current bylaws
  do not contain any restrictions, other than some of those described in this annual report, but the
  bylaws can be amended by the directors or shareholders at any time.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | The following table provides information regarding Bredas purchases of its common stock from
  shareholders during the period of October 1, 2006 through December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|36
|--



|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 Programs1**
| | ------------------------------------------------------------------------ |  | -------------------------------------------------------- |  | ----------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                         
| | Month
      #1
      (October 1, 
      2006-October 
      31, 2006     |  | 7 Shares of 
      Common 
      Stock                   |  | $394 per
      Share                                  |  | -0-                                                                                                                                          |  | -0-                                                                                                                                                                          
| |                                                                          |  |                                                          |  |                                                       |  |                                                                                                                                              |  |                                                                                                                                                                              
| | Month
      #2 
      (November 1, 
      2006-November 
      30, 2006) |  | 0
      Shares of 
      Common 
      Stock             |  | $394 per
      Share                                  |  | -0-                                                                                                                                          |  | -0-                                                                                                                                                                          
| |                                                                          |  |                                                          |  |                                                       |  |                                                                                                                                              |  |                                                                                                                                                                              
| | Month
      #3
      (December 1,
      2006-December
      31, 2006)    |  | 0
      Shares of 
      Common 
      Stock             |  | $394 per
      Share                                  |  | -0-                                                                                                                                          |  | -0-                                                                                                                                                                          
| |                                                                          |  |                                                          |  |                                                       |  |                                                                                                                                              |  |                                                                                                                                                                              
| | Total                                                                    |  | 7                                                        |  | $394                                                  |  | -0-                                                                                                                                          |  | -0-                                                                                                                                                                          
| |                                                                          |  |                                                          |  |                                                       |  |                                                                                                                                              |  |                                                                                                                                                                              

| | 1 | All of the shares of common stock were purchased by Breda pursuant to the redemption right or the right
  of first refusal granted to Breda in its Amended and Restated Articles of Incorporation, 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 $394 redemption price that was established
  by the board of directors at the October 25, 2006 annual meeting of Bredas shareholders.                                                                                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | Given that repurchases of common stock by Breda currently are the primary method 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 1996 through 2006.                                                                                                                                                                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | Over the period of January 1, 1996 through June 24, 1996, Breda repurchased four hundred and twenty-four
  shares of its common stock from two shareholders, at a purchase price of $27 per share. Over the
  period of June 25, 1996 through February 20, 1997, Breda repurchased seven hundred and eighty-nine
  shares of its common stock from nine different shareholders, at a purchase price of $31 per share.
  Over the period of February 21, 1997 through March 1, 1998, Breda repurchased one thousand

|37
|--



| | nine hundred and ninety-six shares of its common stock from fourteen different shareholders, at a purchase
  price of $41 per share. Over the period of March 2, 1998 through December 31, 1998, Breda repurchased
  three hundred and fifty-eight shares of its common stock from five different shareholders, at a purchase
  price of $64 per share.                                                                                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | No shares were repurchased by Breda in 1999, except that in November, 1999, Breda effectuated a repurchase
  of forty shares by depositing the purchase price for those forty shares with the appropriate Iowa
  authorities under Iowas escheat laws. The forty shares were held of record by twenty different
  shareholders that Breda had been unable to locate. The purchase price utilized for this purpose was
  $149 per share. Breda also deposited the amount of the April 21, 1999 dividend that was otherwise
  payable on the forty shares. The total amount deposited by Breda was $6,080, with $120 of that amount
  being for the April 21, 1999 dividend.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | During 2000, Breda repurchased four hundred forty-one shares of its common stock from fourteen 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 twenty-six 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 thirty-two 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.                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 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. All of these
  shares were purchased at $394 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | There were 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|38
|--



| | 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 one year 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 discussed above, however, the governing documents of Breda impose numerous material
  limitations and restrictions on a shareholders ability to sell or transfer any shares of Bredas
  common stock.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | The marketability and value of Bredas shares of common stock may also be limited or adversely
  affected by some of the other terms of the common stock. For example, each shareholder is entitled
  to only one vote on each matter presented to the shareholders, regardless of the number of shares
  of common stock held by the shareholder, with one exception regarding shareholders who previously
  held Class A stock of Breda. Those shareholders have one vote for each share of former Class A stock
  that was held by them on February 28, 1995, and continuing until one of the following occurs:                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| |  | the shareholder no longer receives service from Breda,                                               
| | - | -----------------------------------------------------------------------------------------------------
| |   |                                                                                                      
| |  | the shareholder no longer resides in the Breda or Lidderdale telephone exchange area served by Breda,
| |   |                                                                                                      
| |  | the shareholder dies, or                                                                             
| |   |                                                                                                      
| |  | the shareholder transfers the shareholders shares to someone else.                                  
| |   |                                                                                                      

| | As of December 31, 2006, there were 21 shareholders with multiple voting rights arising from their
  prior ownership of the former Class A stock, and they have one vote for each share of the former
  Class A stock that was held by them on February 28, 1995. Those 21 shareholders held a total of 57
  shares of Class A stock on that date.                                                                                                                                                                                                                                                                                                                                            
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | An auction was held on October 24, 1999, where shareholders desiring to sell their shares of Bredas
  common stock were given the opportunity to sell those shares to other Breda shareholders desiring
  to purchase additional shares of Bredas common stock. Breda paid the costs of the auction,
  except that the sellers paid the auction fees and clerking fees related to their shares. The auction
  was provided for the convenience of Bredas shareholders, and no shares were repurchased or
  issued by Breda pursuant to the auction. A total of 1,924 shares of common stock were sold by 32
  different shareholders to 25 other shareholders of Breda, for purchase prices

|39
|--



| | ranging from $145 per share to $180 per share. As discussed above, Breda had a right of first refusal
  to purchase all of the shares sold in the auction, but elected not to exercise its right. Breda did,
  however, offer to purchase shares in the auction for $142 per share, but no shareholder chose to
  sell the shareholders shares to Breda at that price. The $142 figure was approximately 60%
  of Bredas book value per share as of the close of the second quarter in 1999. No officers or
  directors of Breda sold or purchased any shares in the auction. Breda does not have any plans to
  arrange any other auctions in the future.                                                                                                                                                                                                                                      
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The board of directors of Breda 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 to any qualified
  buyer, and to allow qualified buyers to advise Breda of the fact that they desire to purchase shares
  of Bredas common stock from other shareholders of Breda. Breda will keep a list of those shareholders
  and qualified buyers, and make the list available to all of the shareholders and qualified buyers
  on the list. A qualified buyer is a person who is a resident of the Breda or Lidderdale telephone
  exchange areas served by Breda who subscribes to Bredas telephone services, or an entity which
  has its principal place of business in the Breda or Lidderdale telephone exchange areas served by
  Breda and which subscribes to Bredas telephone services.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | A person or entity cannot, however, be a qualified buyer if the person or entity already owns more
  than 1% of the total issued and outstanding shares of common stock of Breda. Also, a qualified buyer
  cannot purchase shares from any shareholder of Breda to the extent that the shares purchased by the
  qualified buyer would cause the qualified buyer to own more than 1% of the total issued and outstanding
  shares of common stock of Breda. If a person owns 5% or more of the ownership interests of an entity
  which owns shares of Bredas common stock, the shares of Bredas common stock held by that
  entity and by the person will be added together for determining whether the 1% limitation is exceeded.
  The 1% limitation is set forth in the Amended and Restated Articles of Incorporation of Breda.                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | The terms of any sale between a shareholder and a qualified 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 qualified buyer
  under the right of first refusal granted to Breda in its Amended and Restated Articles of Incorporation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | During the calendar year 2000, five separate sales of shares occurred between shareholders on the list.
  Two sales each involved two shares, which were sold for $235 per share. One sale involved fifty-three
  shares, which were sold for $235 per share. One sale involved thirty-one shares, which were sold
  for $155 per share. One sale involved two shares, which were sold for $149 per share. Breda elected
  not to exercise its right of first refusal on any of these shares.                                                                                                                                                                                                                                                                                                                                                                                                     

|40
|--



| | During the calendar year 2001, three separate sales of shares occurred between shareholders on the
  list. Two sales each involved seven shares, which were sold for $258 per share. The other sale involved
  forty-three 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, three separate sales of shares occurred between shareholders on the
  list. Two sales involved two shares which were sold for $258 per share. The other sale involved three
  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, one sale of shares occurred between shareholders on the list. The sale
  involved two 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, six separate sales of shares occurred between shareholders on the list.
  One sale involved twelve shares which were sold for $326 per share. One sale involved twenty eight
  shares which were sold for $357 per share. Two sales involved two 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
  twenty one 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, six separate sales of shares occurred between shareholders on the list
  or among family members. One sale involved eighty shares which were sold for $400 per share. One
  sale involved one share which was sold for $357 per share. One sale involved ten shares which were
  sold for $410 per share. Two sales involved forty shares which were sold for $400 per share. The
  last sale involved two shares which were sold for $394 per share. Breda elected not to exercise its
  right of first refusal with respect to any of these share transfers.                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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 eight dividends to its shareholders since Breda was incorporated in 1964.
  These eight dividends were declared in March or April of, respectively, 1999, 2000, 2001, 2002, 2003,
  2004, 2005 and 2006. Except for the dividend paid in 2005 and 2006, which were $7.00 per share, each
  of those dividends was in the amount of $3.00 per share. The aggregate dividend paid was, respectively,
  $113,166, $113,046, $111,087, $104,214, $98,436, $94,479, $218,190, and $217,161. Breda also declared
  a $7.00 per share dividend on March 13, 2007, for an aggregate dividend of $217,112. The dividend
  declared on March 13, 2007 will be payable on or about April 1, 2007, to shareholders of record on
  March 13, 2007.

|41
|--



| | 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 in this Item.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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, should Breda otherwise determine to do so.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | No shares of stock were issued by Breda in 2006. 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.
|        |                                                                                                                                                                          

| | General                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda is a small provider of telecommunication services to residential and business customers in the
  west central region and the southwest region of rural Iowa. Breda and its subsidiaries, Prairie Telephone
  Co., Inc., Westside Independent Telephone Company, Tele-Services, Ltd. and BTC, Inc., all conduct
  business under the names W.I.N. or Western Iowa Networks.
| |                                                                                                                                                                                                                                                                                                                                                                                     
| | Breda and its subsidiaries operate seven telephone exchanges as the incumbent or historical local exchange carrier (ILEC). BTC, Inc. began in October 2003 to offer competitive local exchange
  carrier services (CLEC) to residential and business customers in Carroll, Iowa, where Qwest is the
  incumbent local exchange carrier.                                           

|42
|--



| | Other telecommunications services provided include long distance services, dial-up and high-speed Internet
    services, cable TV services, and satellite Internet services.                                                                                                                                                                                                                                   
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Operating Segments                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Breda organizes its business into three reportable segments. Those segments are local exchange carrier
  services, broadcast services, and Internet service provider services. Breda has organized its business
  into those segments because the segments are each strategic business units that are managed separately
  and that offer different products and services in different regulatory environments.
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Local Exchange Carrier Services.  This segment provides telephone, data services, and other services to customers in the local
  exchanges served by Breda and its telephone subsidiaries. Breda also provides long distance services
  to its customers in all of its ILEC and CLEC exchanges, and surrounding areas.                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Broadcast Services.  This segment provides cable television services to customers in a total of seventeen towns in
  Iowa and one town in Nebraska. Tele-Services, Ltd. sold its Neola, Iowa cable TV system to Walnut
  Telephone Co. in September 2005, so Tele-Services, Ltd. now provides cable TV service to seventeen,
  instead of eighteen, towns in Iowa.                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Internet Services.  This segment provides Internet access to customers in the local exchanges and the surrounding
  areas and in the Carroll, Iowa market area through BTC, Inc.                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | The segments in which Breda and its subsidiaries operate are as follows:                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Local Exchange Carrier                                                                                                                                                                                                                                                                                                                                                                                         
| | Breda                                                                                                                                                                                                                                                                                                                                                                                                          
| | Prairie Telephone Co., Inc.                                                                                                                                                                                                                                                                                                                                                                                    
| | Westside Independent Telephone Company                                                                                                                                                                                                                                                                                                                                                                         
| | BTC, Inc. (competitive local exchange carrier)                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Broadcast Services                                                                                                                                                                                                                                                                                                                                                                                             
| | Tele-Services, Ltd.                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                
| | Internet Service Provider                                                                                                                                                                                                                                                                                                                                                                                      
| | BTC, 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. As noted above, BTC, Inc. is also a local exchange carrier providing local and long distance
  telephone services to customers in the Carroll, Iowa market area, where Qwest is the incumbent local
  exchange carrier.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|43
|--



| | 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, 2007, 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 or fixed 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, Prairie 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 number of miles of their cable over
  which they transfer long distance calls made by their subscribers. Bredas total access charge
  revenues had been increasing in past years, and that trend continued in 2006 due to traffic routing
  changes for some of Bredas Internet usage, traffic routing changes as a result of the installation
  of a tandem switch in Bredas Carroll Iowa market, additional traffic on BTC, Inc.s network
  with the installation of conference bridging services, and because BTC, Inc. began to offer local
  phone service in the Carroll, Iowa market in October 2003. Customers that moved their service from
  the incumbent local carrier to BTC, Inc. also usually selected 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 its minutes
  of use because of competition from wireless carriers offering calling plans with such features 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. Also, the Iowa Utilities Board has ruled that some intrastate
  wireless traffic is considered local traffic, so the wireless carriers are not entering into interconnection
  agreements with the wireline carriers for use of their networks. The
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|44
|--



| | wireline carriers, such as Breda, accordingly receive less traffic over their networks, and receive
  less payment for the traffic that the wireless carriers do route over the wireline networks since
  May 2004 when new wireless agreements were negotiated at substantially reduced rates. Breda negotiated
  reciprocal transport and termination agreements with some of the wireless carriers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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.
  Breda has received notification from NECA that it is very likely that the FCC will approve a line
  haul rate decrease effective July 1, 2007. NECA estimates that on average, most of their average
  schedule companies will experience a 5%-15% decrease in line haul reimbursements once a proposed
  24-month transition period is over. Based on NECAs estimates, Breda could possibly experience
  an approximate $322,000 decrease in its average schedule settlements beginning July 1, 2009.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 facilities which is considered unbillable. In July 2005, an ITA Task
  Force met with Qwest representatives to discuss how to address this continuing problem of unbillable
  traffic. This ITA Task Force had been looking at ways to
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|45
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| | reduce the amount of unbillable traffic being terminated on independent carrier networks.
  During this meeting Qwest suggested a new billing arrangement that is based on an agreement that
  Qwest reached with the independent telephone companies in Minnesota. Qwest proposed to generate billings
  that it sends to independent telephone companies based on its own information and on CLEC originating
  call information. The independent telcos would then invoice Qwest from those billings. Additionally,
  Qwest would agree to provide call records that would include monthly usage data to each independent
  that would include call records, EAS and local wireless call data to allow the independents to bill
  for nearly all (98%) of the traffic that is terminated. These records would have to be purchased
  from Qwest, and would be used to identify and bill the true originator of the remaining wireline
  traffic delivered by Qwest.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | 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 their new system, Qwest intends to begin paying
  terminating charges to ILECS and Iowa Network Services for Qwests own intraLATA retail toll,
  and 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 INS. Qwest will also provide the Iowa Telecommunications Associations Qwest
  Traffic committee with reports for analysis to attempt to identify carriers delivering traffic
  through Qwest that Qwest is refusing to pay terminating charges on to the ILECs.                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| |  | 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 three years. Their competitors include other third parties
  providing these services, and competition from 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.

|46
|--



| |  | 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 a 16.2% increase in
  its long distance customer base from December of 2005 to December of 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. This fact has 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 can offer to its subscribers, 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. 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 will be able to offer cable television programming over their telephone lines as of December
  31, 2006. 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. Tele-Services is also faced with
  a declining population base in its service areas, which results in a lower potential customer base.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | On February 8, 2006, the Deficit Reduction Omnibus Reconciliation Act of 2005, which includes the digital
  television transition legislation (DTV), was signed into law. The DTV bill sets a February 17, 2009,
  deadline for broadcasters to transition from analog to digital spectrum. Tele-Services has not finalized
  the costs to upgrade                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|47
|--



| | all of its transmission equipment from analog to digital but this law would require significant upgrade
  to its plant, equipment, and cables in order to provide digital transmission of all programming.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Tele-Services is also monitoring the State Cable and Video Franchise Bill, which has passed out of
  both the Iowa Senate and Iowa House of Representatives commerce committees. This bill would eliminate
  city franchises and move to a certificate issued by the Secretary of State. It provides for a fee
  that is a percentage of gross revenues which means the percentage set by the municipality which shall
  not be greater than the most recent percentage paid by the incumbent cable provider as a franchise
  fee or five percent, which ever is less. Incumbent providers would keep their existing franchises
  until they expire at which time they would apply for a certificate through the Secretary of State.                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | The industry associations are monitoring this bill because a majority of the independent telcos are
  current cable providers operating with franchises, many of which are 15-25 year agreements containing
  build-out and other requirements that would not apply to competitive providers. If a competitor came
  into a present providers area with a certificate, they would pay the same fee as the incumbent
  but the incumbent would continue to face the additional requirements contained in the agreements.
  In addition, upon expiration of existing franchises and obtaining a certificate, the fee charged
  by the municipality may in some circumstances be increased, due to the elimination of negotiating
  with the city. Increased fees, if they occur also raise a competitive issue with satellite providers
  who pay no franchise fees. Both of these circumstances could result in disadvantages for Tele-Services, Ltd.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

| |                               |  |       |   | 
| | ----------------------------- |  | ----- | - | 
|
|
|
| | Local exchange carrier (1)    |  | 84.4  | % | 
| | Broadcast (2)                 |  | 8.4   | % | 
| | Internet service provider (3) |  | 7.2   | % | 
| |                               |  |       |   | 
| |                               |  | 100.0 | % | 
| |                               |  |       |   | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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

|48
|--



| | subscribers, (iv) per minute rates and calling plans rates for long distance services, and (v) monthly
  cellular commissions, advertising fees, and miscellaneous revenues. BTC, Inc. began providing local
  telephone services in October 2003. Prior to that time, BTC, Inc. only provided long distance services
  and Internet services. BTC, Inc. began providing conference bridge services in September 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                       

| | (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, 2006 Compared to Twelve months ended December 31, 2005                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                    
| | The table below sets forth the components of Bredas revenues for the twelve months ended December
  31, 2006, compared to the same period in 2005.

| |                                       |   |           |  |  
| | ------------------------------------- | - | --------- |  | -
|
|
|
|
| | OPERATING
      REVENUES              |   |           |  |  
| | Local Exchange
      Carrier          |   |           |  |  
| | Local
      network services          | $ | 906,612   |  | $
| | Network
      access services         |   | 4,425,849 |  |  
| | Long
      distance services          |   | 317,227   |  |  
| | Cellular
      services               |   | 1,523,482 |  |  
| | Billing
      and collection services |   | 15,387    |  |  
| | Miscellaneous                         |   | 126,511   |  |  
| |                                       |   |           |  |  
| |                                       | $ | 7,315,068 |  | $
| |                                       |   |           |  |  
| |                                       |   |           |  |  
|
| | Broadcast
      Services              |   | 724,957   |  |  
| |                                       |   |           |  |  
|
| | Internet
      services               |   | 627,028   |  |  
| |                                       |   |           |  |  
|
| |                                       |   |           |  |  
| |                                       | $ | 8,667,053 |  | $
| |                                       |   |           |  |  

| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There was an increase in total operating revenues for the twelve-month period ended December 31, 2006
  (when compared to the twelve-month period ended December 31, 2005) of $1,220,716, or 16.4%.                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                              
| | Local Exchange Carrier Services - $1,251,355                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                              
| | Local exchange carrier services revenues accounted for 84.4% of all operating revenue in the twelve-month
  period ended December 31, 2006. There was a $1,251,355, or 20.6%, increase in local exchange carrier
  services revenues for the twelve-month period ended December 31, 2006, when compared to the twelve-month
  period ended December 31, 2005.

|49
|--



| | Local network services revenues increased $66,446, or 7.9%, for the twelve months ended December 31,
  2006, as compared to the same period in 2005, primarily because of the increased number of customers
  taking phone service from Breda in its CLEC town of Carroll, IA. Bredas long distance services
  revenue also increased $70,009, or 28.3%, for the twelve months ended December 31, 2006, as compared
  to the twelve-month period ended December 31, 2005, 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 $1,099,593, or 33.1%, for the twelve-month period ended December
  31, 2006, when compared to the twelve-month period ended December 31, 2005. This increase mainly
  resulted from increased originating and terminating access revenues received on toll traffic generated
  by Bredas Internet service subscribers in Bredas southern Iowa exchanges to reach Bredas
  Internet service equipment in Breda, Iowa. This method of provisioning generated approximately $450,983
  of access revenue during the twelve-month period ended December 31, 2006, compared to $279,705 for
  the same period in 2005, and allows Breda to offer its own Internet services to these customers instead
  of reselling the Iowa Network Services Internet product. Bredas conference bridge services
  generated approximately $320,748 of access revenue for the twelve-month period ending December 31,
  2006, and for which there was no comparable revenue in the twelve-month period ending December 31,
  2005. Breda also negotiated wireless agreements with five wireless carriers in the first quarter
  of 2005, and is now billing and receiving payments from those carriers. Bredas access revenue
  has also increased because of its increased customer base, and particularly the Carroll, IA, CLEC
  customer base, taking its long distance services. These customers generate access revenue when they
  use Bredas networks to make long distance calls. Breda also installed a tandem switch in its
  Carroll location which allows the consolidation of traffic from almost all of its subsidiary exchanges
  to produce economies of scale and also allows Breda to now bill a tandem switching rate element on
  some of its traffic. The twelve-month period ended December 31, 2006 includes twelve months of the
  tandem switching rate element revenue compared to the twelve-month period ended December 31, 2005
  which included one month of tandem switching rate element revenue.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Cellular services increased $59,858, or 4.1%, for the twelve-month period ended December 31, 2006,
  when compared to the twelve-month period ended December 31, 2005. While the overall number of customers
  served between the two years was very similar, there was an increase in the amount of cellular equipment
  sales for the twelve-month period ended December 31, 2006, when compared to the twelve-month period
  ended December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Miscellaneous revenue decreased $40,118, or 24.1%, for the twelve-month period ended December 31, 2006,
  when compared to the twelve-month period ended December 2005. The main component of miscellaneous
  revenue is the receipt of rent from other telephone companies or industry carriers for the lease
  of capacity over                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|50
|--



| | fiber optic rings owned by Breda, or owned jointly with neighboring telephone companies. 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 jointly-owned ring after a true-up of fiber optic revenue proceeds had been jointly
  undertaken. There was no corresponding entry during the twelve-month period ended December 31, 2005,
  and no future payments are due because all telephone companies owning the ring are currently being
  paid directly from the leasing company. Miscellaneous revenue also increased approximately $60,000
  from the implementation of switching and transport agreements between neighboring telephone companies,
  for whom Breda provided those services in 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Broadcast Services  ($78,604)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| | Broadcast services decreased $78,604, or 9.8%, for the twelve-month period ended December 31, 2006,
  when compared to the twelve-month period ended December 31, 2005. Bredas subsidiary, Tele-Services,
  Ltd. continues to lose customers and to face stiff competition from satellite providers, who are
  able to provide extensive channel line-up packages, and who are now able to also include local channels
  in their package offerings. In June 2006, Tele-Services combined the head end for its Auburn, Iowa
  community with three of its other communities. Tele-Services had completed a fiber construction project
  during the quarter ended December 31, 2005, which allowed it to combine its Sidney and Riverton cable
  TV head ends. Breda continues to explore other consolidation opportunities in its cable TV communities
  in order to reduce its operating costs through consolidation of equipment and maintenance costs.
  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. Rate increases had also been implemented
  in November 2005 for the one community that received additional channels from the consolidation of
  the Sidney and Riverton head ends. Breda plans to implement rate increases for both basic service
  and premium services in most of its service areas in early 2007. During the third quarter of 2005,
  Breda upgraded its software and operating systems on its local channel equipment and therefore was
  able to implement a paid advertising program for businesses and individuals on the local channels
  in the communities that have the local channels. Breda hopes to generate some customer loyalty through
  this avenue of information on local community events, as well as the weather and local news. Another
  factor faced by Tele-Services is the declining population base in the small rural communities served
  by Tele-Services. Effective October 1, 2005, Tele-Services sold its Neola, Iowa cable service system
  to Walnut Telephone Company. This system had generated broadcast services revenue from approximately 111 subscribers.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | Internet Services  $47,965                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| | Internet services revenue increased $47,965, or 8.3%, for the twelve-month period ended December 31,
  2006, when compared to the twelve-month period ended December 31, 2005. The increase is directly
  attributable to the increase in BTC,
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|51
|--



| | Inc.s
  high-speed Internet service customer base. 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. Bredas satellite Internet
  revenue increased $39,826 for twelve months ended December 31, 2006, when compared to the same period
  in 2005. As stated above, Breda began offering Wild Blue satellite Internet service in September
  2005. Breda has also seen an increase in revenues from its SecureIT service since this service was
  added to its Internet service offerings in June 2005, and since Breda has begun selling high-speed
  Internet and the SecureIT service as a bundled product. In the last three months of 2006, 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. 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.
  Breda continues to face intense competition by multiple suppliers in the Carroll, Iowa market area.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  
|------------------
|OPERATING
EXPENSES
|                  

| | The table below sets forth the components of Bredas operating costs for the twelve months ended
December 31, 2006, compared to the same period in 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                         

| |                                     | Years Ended 
      December 31, |           | Change |  
| | ----------------------------------- | ------------------------------- | --------- | ------ | -
|
|
|
| | OPERATING EXPENSES                  |                                 |           |        |  
| | Cost of services                    | $                               | 4,109,781 |        | $
| | Depreciation and amortization       |                                 | 960,685   |        |  
| | Selling, general and administration |                                 | 2,181,342 |        |  
| |                                     |                                 |           |        |  
| |                                     | $                               | 7,251,808 |        | $
| |                                     |                                 |           |        |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cost of Services - $577,983                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Cost of
  services increased $577,983, or 16.4%, for the twelve-month period ended December 31, 2006,
  when compared to the twelve-month period ended December 31, 2005. As a result of customer growth
  in competitive local exchange carrier access lines, long distance services, and cellular services,
  the provisioning costs for those services (which include labor and benefits) increased $405,330 during
  the twelve-month period ended December 31, 2006, when compared to the twelve-month period ended December
  31, 2005. Cellular provisioning accounted for $47,712 of the $405,330 increase. As noted previously,
  overall customer growth declined for Bredas cable TV services. As a result, Breda experienced
  a $6,478 programming fees decrease for its cable TV offerings during 2005. Breda had additional provisioning
  costs for its satellite Internet service and its dialup customers in Iowa Telecom exchanges, as well
  as long distance provisioning costs to provide its own Internet service in its southern Iowa exchanges
  which caused a $179,131 increase in Internet provisioning costs during the twelve-month period ended
  December 31, 2006 when compared to the twelve-month period ended December 31, 2005. Breda is

|52
|--



| | allocating a portion of shared provisioning costs between its CLEC operation and its Internet services
  operation.
| | -------------------------------------------------------------------------------------------------------------------
| |                                                                                                                    
| | Depreciation and Amortization  $29,391                                                                            

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Depreciation
  and amortization expense increased $29,391, or 3.2%, for the twelve-month period ended
  December 31, 2006, when compared to the twelve-month period ended December 31, 2005. 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. These assets became operational in the fourth
  quarter of 2005, and have generated additional depreciation expense for the twelve months ended December
  31, 2006, for which there was no corresponding depreciation expense in the first three quarters of 2005.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Selling, General and Administration  $225,963                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| | Selling, general and
  administration expenses increased $225,963, or 11.6%, for the twelve-month period
  ended December 31, 2006, when compared to the twelve-month period ended December 31, 2005. While
  property tax expense and use tax expense decreased $15,293 during the twelve-month period ended December
  31, 2006, when compared to the same period in 2005, this decrease was offset by increased wage and
  benefits costs for all departments in 2006. Corporate operations increased $309,720 for the twelve-month
  period ended December 31, 2006 when compared to the twelve-month period ended December 31, 2005,
  and was mainly due to the increase in wages and benefits from the addition of administrative staff
  in 2006. Breda hired a Chief Executive Officer and a Chief Operating Officer, both with an effective
  start date of July 1, 2006. Breda also experienced increased consulting fees associated with Bredas
  SEC compliance work, the recruitment of new management staff, the strategic planning of its CLEC
  operations, and the preparation of and SEC compliance work for proxy solicitations, proxies and other
  information for consideration by Bredas shareholders at a special meeting scheduled for March
  28, 2007 in connection with the requested approval and adoption of restated articles of incorporation
  for Breda Telephone Corp.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | OTHER INCOME (EXPENSE)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The table below sets forth the components of other income (expense) for the twelve-month period ended
  December 31, 2006, compared to the same period in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

| |                                             | Years Ended
      
      December 31, |           | Change |  
| | ------------------------------------------- | ------------------------------------- | --------- | ------ | -
|
|
|
| | OTHER INCOME
      (EXPENSE)                |                                       |           |        |  
| | Interest
      and dividend income          | $                                     | 391,562   |        | $
| | Gain or (loss)
      on sale of investments |                                       | 1,165,392 |        |  
| | Gain or (loss)
      on disposal of assets  |                                       | (21,714   | )      |  
| | Interest
      expense                      |                                       | (108,774  | )      |  
| | Income from
      equity investments        |                                       | 1,872,028 |        |  
| | Other, net                                  |                                       | 5,770     |        |  
| |                                             |                                       |           |        |  
| |                                             | $                                     | 3,304,264 |        | $
| |                                             |                                       |           |        |  

|53
|--



| | Interest and Dividend Income.Interest and dividend income decreased $70,820, or 15.3%, for the twelve-month period ended December
  31, 2006, when compared to the twelve-month period ended December 31, 2005. Two of Bredas subsidiaries,
  Prairie and Westside, received catch-up dividends for past years totaling $31,018 from their investment
  in Iowa Network Services during the twelve-month period ending December 31, 2005, and for which there
  was no corresponding income during the twelve-month period ended December 31, 2006. The company also
  received increased dividends during the twelve-month period ended December 31, 2005, for some of
  its other investments, for which there was no corresponding dividend paid during 2006.                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Gain or (loss) on sale of investments.The increase in gain or (loss) on sale of investments is directly related to the gain from the Rural
  Telephone Bank stock sale in April 2006, for which there is no corresponding entry in the same twelve-month
  period in 2005. Breda received $1,336,000 from the Rural Telephone Bank upon the redemption of its
  1,336 shares of Class C Stock. Bredas before tax gain on the redemption of the RTB shares was
  $1,170,211.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Gain or (loss) on disposal of assets.The decrease in gain or (loss) on disposal of assets is attributable to the loss of $21,714 on the
  sale of a building at 526 N. Carroll Street, Carroll, Iowa, in May 2006, when compared to the $33,304
  gain on the sale of the Neola cable system during the twelve-month period ended December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Interest Expense. The $3,365, or 3.2%, decrease in interest expense for the twelve-month period ended December 31, 2006,
  when compared to the twelve-month period ended December 31, 2005, is the result of the declining
  Rural Telephone Finance Cooperative outstanding loan balance on which interest is figured because
  scheduled principal payments have been made. There has been no change in interest rate and no additional
  loan proceeds have been borrowed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Income
  from Equity Investments.Income from equity investments increased $530,330, or 39.5%, for the twelve-month period ended December
  31, 2006, when compared to the twelve-month period ended December 31, 2005. The equity investments
  income shown on Bredas financial statements is Bredas pro-rata share of the net income
  or net loss of each equity investment, based on Bredas percentage of ownership in each equity
  investment. The increase in equity investments income reported on Bredas income statement for
  the twelve-month period ended December 31, 2006 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. Breda is also now generating income from equity
  investments, such as Bug Tussel, L.L.C., which was a new investment during the twelve-month period
  ended December 31, 2005, and for which there was no corresponding revenue during the twelve-month
  period ended December 31, 2005.

|54
|--



| | Other, net.There was
 a $15,650 increase to Other Income (Loss) for the twelve-month period ended December 31, 2006, when
  compared to the twelve-month period ended December 31, 2005. This increase is the result of a decrease
  in partnership-related costs, as well as an increase in revenue from the rental of tower space cellular
  providers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Income Tax Expense.Income taxes increased $1,031,281, or 118.6%, for the twelve-month period ended December 31, 2006,
  when compared to the same period in 2005. The increase is a direct reflection of the increased income
  generated from operations and other income sources such as the gain on the redemption of the Rural
  Telephone Bank stock. The effective tax rate in 2006 is 40.3%, compared to a 31.6% tax rate in 2005.
  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 $940,940, or 50.1%, for the twelve-month period ended December 31, 2006, when
  compared to the same period in 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Liquidity and Capital Resources at Twelve Months Ended December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Bredas short-term and long-term liquidity requirements arise primarily from: working capital
  requirements; capital expenditures; interest payments on the long term financing from the Rural Telephone
  Finance Cooperative; dividend payments on Bredas common stock; redemption of Bredas common
  stock; and potential industry-related acquisitions or investments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Breda intends to fund the operations, working capital requirements, capital expenditures, interest
  payments, dividend payments, and stock redemptions from cash from operations. Breda also intends
  to fund smaller industry-related acquisitions or investments from cash from operations. For the twelve
  months ended December 31, 2006 and 2005, cash provided by operating activities was $1,736,140 and
  $2,415,829, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | To fund any significant future acquisitions or investments, Breda would consider the redemption of
  its short-term and long-term marketable securities investments; the use of its revolving lines of
  credit with the Rural Telephone Finance Cooperative; or the addition of long-term debt from industry
  lenders. Breda presently has an unused line of credit with the Rural Telephone Finance Cooperative
  of $1,500,000, and Prairie Telephone has an unused line of credit with the Rural Telephone Finance
  Cooperative of $500,000. Bredas present revenues would be able to sustain the costs of additional
  debt if the need arose. However, all potential acquisitions or investments would be evaluated on
  their own merits for cash and revenue production, and whether the return on investment was sufficient
  to incur the additional debt.

|55
|--



| | 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, 2006, and December 31, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                  | As of December 31, |          
| | -------------------------------- | ------------------ | ---------
|
|
|
| | Short-Term Liquidity             |                    |          
| | Current Assets                   | $                  | 2,930,602
| | Current Liabilities              |                    | 540,778  
| |                                  |                    |          
| | Net Working Capital              | $                  | 2,389,824
| |                                  |                    |          
| |                                  |                    |          
| | Cash and Cash Equivalents        | $                  | 777,708  
| | Short Term Marketable Securities | $                  | 643,119  
| | Available on Line of Credit      | $                  | 2,000,000

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The increase in current assets from December 31, 2005 to December 31, 2006 is mainly due to a $76,283
  increase in the current portion of Bredas note receivable, due to the pending sale of the investment
  in Desktop Media, L.L.C. as mentioned in Item 1. Other contributing factors are a $37,967 increase
  in the Companys cash and temporary investments, a $28,706 increase in inventories, and a $43,282
  increase in its accounts receivable. The increase in accounts receivable is mainly due to increased
  amounts due to the Company from its interexchange carriers for the use of the Companys networks
  to terminate their traffic.                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The decrease in current liabilities from December 31, 2005 to December 31, 2006 is due mainly to a
  $249,880 decrease in Accounts Payable, a $255,570 decrease in Accrued Taxes, and a $80,165 decrease
  in Other Liabilities. The Account Payable decrease was primarily due to receiving and paying in 2006
  invoices for the payment of 2005 plant under construction costs for the switch installation in the
  Carroll CLEC exchange. The invoice amounts were reported as expenses on the twelve-month period ending
  December 31, 2005, but were paid in 2006. The Accounts Payable decrease also included amounts owing
  to a neighboring telephone company for fiber rent at December 31, 2005 and for which there was no
  corresponding liability at December 31, 2006. Accrued Taxes also decreased current liabilities as
  of December 31, 2006, and was primarily the result of the decrease in federal and state income taxes
  payable because of the increased estimated tax payments made in 2006, related to the gain on the
  Rural Telephone Bank stock sale.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The following table summarizes Bredas sources and uses of cash for the twelve months ended December
  31, 2006 and 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

| | For the Years Ended
      December 31, |  
| | -------------------------------------- | -
|
|
|
| | **Net Cash Provided (Used)**           |  
| | Operating Activities                   | $
| | Investing Activities                   |  
| | Financing Activities                   |  

|56
|--



| | For the
twelve months ended December 31, 2006 and 2005, cash provided by operating activities was $1,736,140
  and $2,415,829, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Cash used in
investing activities decreased $974,470 for the twelve-month period ended December 31,
  2006, when compared to the twelve-month period ended December 31, 2005, and is mainly attributable
  to a decrease in capital expenditures for the twelve- month period ended December 31, 2006, when
  compared to the twelve-month period ended December 31, 2005.                                                                                                                                                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | During the
third quarter of 2005, Prairie Telephone purchased an additional 2,462.264 units of Bug
  Tussel Wireless, L.L.C. for $113,264.15. With Prairie Telephones initial purchase of 5,000
  units for $200,000 in March 2005, Prairie Telephone now has a 9.94% interest in Bug Tussel Wireless,
  L.L.C. During the twelve-month period ended December 31, 2005, the Company also contributed additional
  capital of $50,000 to its Guthrie Group, L.L.C. investment and $30,000 to its Carroll County Wireless
  L.L.C. investment for tower buildout construction.                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Cash used in
financing activities was $384,433 for the twelve-month period ended December 31, 2006,
  and $424,682 for the twelve-month period ended December 31, 2005. During the twelve-month period
  ended December 31, 2006, cash was used to repay $164,514 of long term debt, to pay dividends to the
  shareholders of $7 per share totaling $217,161, and to redeem common stock for $2,758. Breda used
  cash during the twelve-month period ended December 31, 2005 to repay $154,013 of Rural Telephone
  Finance Cooperative long term debt, to pay dividends to shareholders of $7 per share totaling $218,190,
  and to redeem common stock for $52,479.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | Long Term Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

| | As of December 31, 2006, Breda had outstanding $1,314,934 of long-term debt with the Rural Telephone
  Finance Cooperative. This debt carries a fixed rate of interest of 7.35%. Substantially all of the
  assets of Breda are pledged as security for the long-term debt. The Rural Telephone Finance Cooperative
  notes are to be paid in equal quarterly installments covering principal and interest until paid in
  full by the year 2013.                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The security and loan agreements underlying the Rural Telephone Finance Cooperative notes contain certain
  restrictions on distributions to stockholders, investment in, or loans to others, and payment of
  management fees or an increase in management fees. Breda is restricted from making any distributions,
  except as might be specifically authorized in writing in advance by the Rural Telephone Finance Cooperative
  note holders, unless Bredas minimum net worth exceeds 40% and distributions are limited to
  certain levels of prior year cash margins. In addition, Breda is required to achieve a debt service
  coverage ratio of not less than 1.25 to 1 and a times interest earned ratio of not less than 1.5 to 1.

|57
|--



| | Obligations and Commitments
| | ---------------------------
| |                            

| | Bredas ongoing capital commitments include capital expenditures and debt service requirements.
  For the twelve months ended December 31, 2006, capital expenditures were $390,462.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                     
| | Bredas contractual obligations
for principal payments on its long-term debt as of December 31, 2006 are:                                                                           
| |                                                                                                                                                                                     

| | 2007           | $ | 175,729 |  | 
| | -------------- | - | ------- |  | 
| | 2008           |   | 187,710 |  | 
| | 2009           |   | 200,507 |  | 
| | 2010           |   | 214,177 |  | 
| | 2011 and After |   | 536,810 |  | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Breda believes that cash provided by operations and current cash balances will be adequate to meet
  Bredas foreseeable operational, capital expenditure, and debt service requirements. However,
  Bredas actual cash needs and the availability of required funding may differ from Bredas
  expectations and estimates, and those differences could be material. Future capital requirements
  would depend on many factors, including, among others, the demand for Bredas services in Bredas
  existing markets and regulatory, technological and competitive developments.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Off-Balance Sheet Risk and Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Breda has no off-balance sheet exposure or risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

| | Breda has

  certain financial instruments which could potentially subject Breda to concentrations of
  credit risk. These financial instruments consist primarily of trade receivables and cash and temporary
  cash investments.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                   
| | Breda adheres to its investment policy, 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.

|58
|--



|Item 7. | Financial Statements.                                                                                                                                                                        
|------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                                                              
|        | The financial
  statements included in Item 7. of the 10-KSB are unaudited. As of the date of the filing,
  certain portions of the audit of Breda Telephone Corp. (Breda) were not complete.
|        |                                                                                                                                                                                              

| | Breda has investments in certain limited partnerships that it accounts for using the equity method.
  Because of the materiality of these investments at December 31, 2005, 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 are presented fairly, in all material respects, in the consolidated
  financial statements of Breda Telephone Corp. as of and for the years ended December 31, 2006 and
  December 31, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Breda will file an amended 10-KSB upon completion of the additional auditing procedures including receiving written assurances from other auditors.                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | /s/Kiesling Associates LLP
  Kiesling Associates LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|59
|--



|Breda Telephone Corp.And SubsidiariesBreda, IA
Consolidated Financial StatementsFor the YearsEnded December 31, 2006 and 2005
|-----------------------------------------------------------------------------------------------------------------------------

|60
|--



|BREDA TELEPHONE CORP. AND SUBSIDIARIESBREDA, IOWA
Contents
|----------------------------------------------------------

|                                                |  |     
|----------------------------------------------- |  | ----
|                                                |  | Page
|                                                |  |     
|                                                |  |     
|Consolidated Financial Statements:              |  |     
|                                                |  |     
|Consolidated Balance Sheets                     |  | 62  
|                                                |  |     
|Consolidated Statements of Income               |  | 63  
|                                                |  |     
|Consolidated Statements of Stockholders Equity |  | 64  
|                                                |  |     
|Consolidated Statements of Cash Flow            |  | 65  
|                                                |  |     
|Notes to Consolidated Financial Statements      |  | 66  

|61
|--



|BREDA TELEPHONE  CORP. AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------

|                                                                                
|--------------------------------------------------------------------------------
|CONSOLIDATED  BALANCE SHEETS (UNAUDITED)December 31,  2006 and December 31, 2005
|                                                                                

|                                                                                  | December
      31,
      2006
      (Unaudited) |            | December 31,
      2005
      (Unaudited
      and Restated) |  
|--------------------------------------------------------------------------------- | ----------------------------------------------- | ---------- | ------------------------------------------------------------ | -
|
|ASSETS                                                                            |                                                 |            |                                                              |  
|                                                                                  |                                                 |            |                                                              |  
|CURRENT ASSETS                                                                    |                                                 |            |                                                              |  
|Cash
      and cash equivalents                                                   | $                                               | 777,708    |                                                              | $
|Marketable
      securities                                                       |                                                 | 643,119    |                                                              |  
|Accounts
      receivable, net of allowances of $46,750 and $13,700               |                                                 |            |                                                              |  
|in
      2006 and 2005, respectively                                              |                                                 | 995,861    |                                                              |  
|Interest
      receivable                                                         |                                                 | 82,241     |                                                              |  
|Current
      portion of note receivable                                          |                                                 | 220,283    |                                                              |  
|Inventory,
      at average cost                                                  |                                                 | 151,659    |                                                              |  
|Other                                                                             |                                                 | 47,440     |                                                              |  
|Deferred
      income taxes                                                       |                                                 | 12,291     |                                                              |  
|
|                                                                                  |                                                 | 2,930,602  |                                                              |  
|
|OTHER NONCURRENT
      ASSETS                                                     |                                                 |            |                                                              |  
|Marketable
      securities                                                       |                                                 | 6,775,348  |                                                              |  
|Investments
      in unconsolidated affiliates at equity                          |                                                 | 7,562,375  |                                                              |  
|Other
      investments at cost                                                   |                                                 | 622,554    |                                                              |  
|Goodwill                                                                          |                                                 | 896,812    |                                                              |  
|Note
      receivable                                                             |                                                 |           |                                                              |  
|
|                                                                                  |                                                 | 15,857,089 |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|PROPERTY,
      PLANT AND EQUIPMENT                                               |                                                 | 4,509,149  |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|TOTAL ASSETS                                                                      | $                                               | 23,296,840 |                                                              | $
|
|                                                                                  |                                                 |            |                                                              |  
|LIABILITIES
      AND STOCKHOLDERS EQUITY                                        |                                                 |            |                                                              |  
|                                                                                  |                                                 |            |                                                              |  
|CURRENT LIABILITIES                                                               |                                                 |            |                                                              |  
|Current
      portion of long-term debt                                           | $                                               | 175,729    |                                                              | $
|Accounts
      payable                                                            |                                                 | 178,331    |                                                              |  
|Accrued
      taxes                                                               |                                                 | 123,301    |                                                              |  
|Other                                                                             |                                                 | 63,417     |                                                              |  
|
|                                                                                  |                                                 | 540,778    |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|LONG-TERM
      DEBT, less current portion                                        |                                                 | 1,139,205  |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|DEFERRED
      INCOME TAXES                                                       |                                                 | 1,359,628  |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|STOCKHOLDERS
      EQUITY                                                        |                                                 |            |                                                              |  
|Common
      stock - no par value, 5,000,000 shares authorized, 31,016 and 31,023 |                                                 |            |                                                              |  
|shares
      issued and outstanding at $394 and $357                              |                                                 |            |                                                              |  
|stated
      values, respectively                                                 |                                                 | 12,220,304 |                                                              |  
|Retained
      earnings                                                           |                                                 | 8,036,925  |                                                              |  
|
|                                                                                  |                                                 | 20,257,229 |                                                              |  
|
|                                                                                  |                                                 |            |                                                              |  
|TOTAL LIABILITIES
      AND STOCKHOLDERS EQUITY                                  | $                                               | 23,296,840 |                                                              | $
|

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

|62
|--



|BREDA TELEPHONE  CORP. AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------

|                                                                                            
|--------------------------------------------------------------------------------------------
|CONSOLIDATED  STATEMENTS OF INCOME (UNAUDITED)For the Years Ended December 31, 2006 and 2005
|                                                                                            

|                                      | For the Years Ended |          
|------------------------------------- | ------------------- | ---------
|
|
|                                      |                     |          
|OPERATING REVENUES                    | $                   | 8,667,053
|
|                                      |                     |          
|OPERATING EXPENSES                    |                     |          
|Cost of services                      |                     | 4,109,781
|Depreciation and amortization         |                     | 960,685  
|Selling, general, and administrative  |                     | 2,181,342
|
|                                      |                     | 7,251,808
|
|                                      |                     |          
|OPERATING INCOME                      |                     | 1,415,245
|
|                                      |                     |          
|OTHER INCOME (EXPENSES)               |                     |          
|Interest and dividend income          |                     | 391,562  
|Gain or (loss) on sale of investments |                     | 1,165,392
|Gain or (loss) on disposal of assets  |                     | (21,714  
|Interest expense                      |                     | (108,774 
|Income from equity investments        |                     | 1,872,028
|Other, net                            |                     | 5,770    
|
|                                      |                     | 3,304,264
|
|                                      |                     |          
|INCOME BEFORE INCOME TAXES            |                     | 4,719,509
|
|                                      |                     |          
|INCOME TAXES                          |                     | 1,900,632
|
|                                      |                     |          
|NET INCOME                            | $                   | 2,818,877
|
|                                      |                     |          
|NET INCOME PER COMMON SHARE           | $                   | 90.87    
|
|                                      |                     |          

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

|63
|--



|BREDA TELEPHONE  CORP. AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------

|                                                
|------------------------------------------------
|CONSOLIDATED  STATEMENTS OF STOCKHOLDERS EQUITY
|                                                

|                                                      | Common Stock |        |   |   |            |  
|----------------------------------------------------- | ------------ | ------ | - | - | ---------- | -
|
|
|
|                                                      |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Balance at December 31, 2004 (Audited and Restated)   |              | 31,170 |   | $ | 10,161,420 |  
|                                                      |              |        |   |   |            |  
|Comprehensive income:                                 |              |        |   |   |            |  
|Net Income                                            |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Dividends paid                                        |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Common stock redeemed, net                            |              | (147   | ) |   | (52,479    | )
|                                                      |              |        |   |   |            |  
|Stated value stock adjustment                         |              |        |   |   | 966,270    |  
|                                                      |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Balance at December 31, 2005 (Unaudited and Restated) |              | 31,023 |   |   | 11,075,211 |  
|                                                      |              |        |   |   |            |  
|Comprehensive income:                                 |              |        |   |   |            |  
|Net Income                                            |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Dividends paid                                        |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Common stock redeemed, net                            |              | (7     | ) |   | (2,758     | )
|                                                      |              |        |   |   |            |  
|Stated value stock adjustment                         |              |        |   |   | 1,147,851  |  
|                                                      |              |        |   |   |            |  
|                                                      |              |        |   |   |            |  
|Balance at December 31, 2006 (Unaudited)              |              | 31,016 |   | $ | 12,220,304 |  
|                                                      |              |        |   |   |            |  

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

|64
|--



|BREDA TELEPHONE  CORP. AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------

|                                                                                                 
|-------------------------------------------------------------------------------------------------
|CONSOLIDATED  STATEMENTS OF CASH FLOWS (UNAUDITED)For the Years  Ended December 31, 2006 and 2005
|                                                                                                 

|                                                                                                                                                               | 2006 |   | 2005       |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---- | - | ---------- | -
|
|
|
|CASH FLOWS
      FROM OPERATING ACTIVITIES                                                                                                                     |      |   |            |  
|Net
      income                                                                                                                                               |      | $ | 2,818,877  |  
|Adjustments
      to reconcile net income
          to cash provided by operating activities:                                                                  |      |   |            |  
|Depreciation
      and amortization                                                                                                                            |      |   | 960,685    |  
|Deferred
      income taxes                                                                                                                                    |      |   | 367,274    |  
|Amortization
      of investment tax credits                                                                                                                   |      |   |           |  
|Amortization
      of investment premium/discount - net                                                                                                        |      |   | 97,488     |  
|Equity
      income in unconsolidated affiliates, net of distributions
              received of $1,153,057 and
      $847,902 in 2006 and 2005,  respectively |      |   | (718,971   | )
|Realized
      (gain) or loss on sale of property                                                                                                              |      |   | 21,714     |  
|Note
      receivable discount                                                                                                                                 |      |   | (814       | )
|Gain
      on sale of investments                                                                                                                              |      |   | (1,165,392 | )
|Changes
      in assets and liabilities:                                                                                                                       |      |   |            |  
|(Increase)
      Decrease in assets:                                                                                                                           |      |   | (52,245    | )
|Increase
      (Decrease) in liabilities:                                                                                                                      |      |   | (587,657   | )
|
|                                                                                                                                                               |      |   |            |  
|Net
      cash provided by operating activities                                                                                                                |      |   | 1,740,959  |  
|                                                                                                                                                               |      |   |            |  
|                                                                                                                                                               |      |   |            |  
|CASH FLOWS
      FROM INVESTING ACTIVITIES                                                                                                                     |      |   |            |  
|Capital
      expenditures                                                                                                                                     |      |   | (390,462   | )
|Proceeds
      from the sale of assets                                                                                                                         |      |   | 116,247    |  
|Purchase
      of marketable securities                                                                                                                        |      |   | (3,177,070 | )
|Purchase
      of equity investments                                                                                                                           |      |   | (960,000   | )
|Purchase
      of other investments - at cost                                                                                                                  |      |   | (5,978     | )
|Proceeds
      from the sale of property                                                                                                                       |      |   |           |  
|Proceeds
      from the sale of marketable securities                                                                                                          |      |   | 1,755,003  |  
|Proceeds
      from the sale of other investments - at cost                                                                                                    |      |   | 1,343,701  |  
|Repayment
      of notes receivable                                                                                                                            |      |   |           |  
|                                                                                                                                                               |      |   |            |  
|Net
      cash used in investing activities                                                                                                                    |      |   | (1,318,559 | )
|                                                                                                                                                               |      |   |            |  
|                                                                                                                                                               |      |   |            |  
|CASH FLOWS
      FROM FINANCING ACTIVITIES                                                                                                                     |      |   |            |  
|Repayment
      of long term debt                                                                                                                              |      |   | (164,514   | )
|Common
      stock redeemed, net                                                                                                                               |      |   | (2,758     | )
|Dividends
      paid                                                                                                                                           |      |   | (217,161   | )
|                                                                                                                                                               |      |   |            |  
|Net
      cash used in financing activites                                                                                                                     |      | $ | (384,433   | )
|                                                                                                                                                               |      |   |            |  
|                                                                                                                                                               |      |   |            |  
|Net Increase
      in Cash and Cash Equivalents                                                                                                                |      | $ | 37,967     |  
|                                                                                                                                                               |      |   |            |  
|Cash and
      Cash Equivalents at Beginning of Period                                                                                                         |      |   | 739,741    |  
|                                                                                                                                                               |      |   |            |  
|                                                                                                                                                               |      |   |            |  
|Cash and
      Cash Equivalents at End of Period                                                                                                               |      | $ | 777,708    |  
|                                                                                                                                                               |      |   |            |  
|                                                                                                                                                               |      |   |            |  
|Supplemental
      Disclosures of Cash Flow Information
          Cash paid during the period for:                                                             |      |   |            |  
|Interest                                                                                                                                                       |      | $ | 108,774    |  
|Income
      taxes                                                                                                                                             |      | $ | 1,798,064  |  
|                                                                                                                                                               |      |  

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

|65
|--



|BREDA TELEPHONE  CORPORATION AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------------
|                                                        

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 1.                SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|--------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                      

| | Nature 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.                                                                                                                                                                                                                                                                                                                

|66
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
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.                                                                                                                                                                                                                                                                

|67
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
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 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.                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Other
        revenues include contractually determined arrangements for the provision
        of billing and collecting services and are recognized in the period when
        the services are performed. Cellular sales and commission revenues are
        recognized at the time of customer activation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|68
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 1.                SUMMARY


OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|----------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                    

| | The Company uses the reserve method to recognize uncollectible customer accounts.                                            
| | -----------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                              
| | Reclassifications                                                                                                            
| |                                                                                                                              
| | Certain reclassifications have been made to the 2005 consolidated financial statements to conform to
  the 2006 presentation.

|                                            
|--------------------------------------------
|NOTE 2.                MARKETABLE
SECURITIES
|                                            

| | The amortized cost and fair value of held-to-maturity securities are:
| | ---------------------------------------------------------------------
| |                                                                      

| | Amortized
      Cost  |  | Gross 
      Unrealized
      Gains |           | Gross 
      Unrealized
      Losses |   | Fair 
      Value | 
| | --------------------- |  | ----------------------------------- | --------- | ------------------------------------ | - | ----------------- | 
|
| |                       |  |                                     |           |                                      |   |                   | 
| | December 31, 2006     |  |                                     |           |                                      |   |                   | 
| |                       |  |                                     |           |                                      |   |                   | 
| | Held-to-Maturity:     |  |                                     |           |                                      |   |                   | 
| | Municipal bonds       |  | $                                   | 4,687,740 |                                      | $ | 29,188            | 
| | Government securities |  |                                     | 2,730,727 |                                      |   | 9,981             | 
| |                       |  |                                     |           |                                      |   |                   | 
| |                       |  | $                                   | 7,418,467 |                                      | $ | 39,169            | 
| |                       |  |                                     |           |                                      |   |                   | 
| |                       |  |                                     |           |                                      |   |                   | 
| | December 31, 2005     |  |                                     |           |                                      |   |                   | 
| |                       |  |                                     |           |                                      |   |                   | 
| | Held-to-Maturity:     |  |                                     |           |                                      |   |                   | 
| | Municipal bonds       |  | $                                   | 4,735,425 |                                      | $ | 31,136            | 
| | Government securities |  |                                     | 1,363,282 |                                      |   | 1,177             | 
| |                       |  |                                     |           |                                      |   |                   | 
| |                       |  | $                                   | 6,098,707 |                                      | $ | 32,313            | 
| |                       |  |                                     |           |                                      |   |                   | 

| |                        |  |   |           |  |   |           | 
| | ---------------------- |  | - | --------- |  | - | --------- | 
|
|
| | Amounts classified as: |  |   |           |  |   |           | 
| | Current                |  | $ | 643,119   |  | $ | 635,409   | 
| | Noncurrent             |  |   | 6,775,348 |  |   | 5,463,298 | 
| |                        |  |   |           |  |   |           | 
| | Total                  |  | $ | 7,418,467 |  | $ | 6,098,707 | 
| |                        |  |   |           |  |   |           | 
| |                        |  |   |          

| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The amortized cost and fair value of marketable debt securities at December 31, 2006, 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 Value |           |  |   |           | 
| | ---------------------------------------- |  | ---------- | --------- |  | - | --------- | 
|
| | Due in one year or less                  |  | $          | 643,119   |  | $ | 633,028   | 
| | Due after one year through three years   |  |            | 893,372   |  |   | 886,323   | 
| | Due after three years through five years |  |            | 1,450,537 |  |   | 1,435,142 | 
| | Due after five years                     |  |            | 4,431,439 |  |   | 4,403,350 | 
| |                                          |  |            |           |  |   |           | 
| |                                          |  | $          | 7,418,467 |  | $ | 7,357,843 | 
| |                                          |  |            |           |  |   |           | 
| |                                          |  |            |          

|69
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|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 3.                NOTE RECEIVABLE
|-----------------------------------------------------------------------------------------------------------
|                                                                                                           

| | Note receivable consists of the following:
| | ------------------------------------------
| |                                           

| | 2006                          |  | 2005 |          |   |   |          |  
| | ----------------------------- |  | ---- | -------- | - | - | -------- | -
|
|
| | Desktop Media, L.L.C. - 8.75% |  |      | 439,974  |   |   | 439,160  |  
| | Allowance                     |  |      | (219,691 | ) |   | (219,691 | )
| |                               |  |      |          |   |   |          |  
| |                               |  |      | 220,283  |   |   | 219,469  |  
| | Less current portion          |  |      | 220,283  |   |   | 144,000  |  
| |                               |  |      |          |   |   |          |  
| |                               |  | $    |         |   | $ | 75,469   |  
| |                               |  |      |          |   |   |          |  
| |                               |  |      |         

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The note with Desktop Media, L.L.C., (Desktop) had an original balance of $500,000 and an original
  maturity in 2006. Interest on the note balance accrues at the rate of prime plus 1 percent (prime
  + 1%) per annum. The interest rate is adjusted on the anniversary of the note. The note is shown
  net of an unamortized discount of $814 at December 31, 2005. Principal payments of $12,000 plus interest
  were due the first of each month beginning May of 2003 and were due each month thereafter until paid
  in full. On September 17, 2003 the Company signed a principal deferral agreement with Desktop to
  defer principal payments due in the months of September through December 2003.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | The Company has recorded allowances of $219,691 and $219,691 at December 31, 2006 and 2005, respectively
  due to the fact that it has not received the scheduled monthly principal payments required by the
  note agreement. In 2005, the Company recorded an additional allowance of $46,717 on the note receivable.
  The Companys ownership in Desktop Media, L.L.C. increased to 17% in 2004 when certain conditions
  of a loan deferral agreement were not met, and as a result, the Company subsequently began to report
  its Desktop investment on the equity basis. The additional allowance represents losses in excess
  of the Companys cost in the Desktop investment.                       

|70
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 4.                OTHER
INVESTMENTS
|-------------------------------------------------------------------------------------------------------------

| |                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------
| | INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY                                                                                                
| |                                                                                                                                                   
| | Investments in unconsolidated affiliates at equity include investments in partnerships, limited liability
companies and joint ventures as follows:
| |                                                                                                                                                   

| | 2006                            |  | 2005 
      (Restated) |          
| | ------------------------------- |  | ---------------------- | ---------
|
|
| | Alpine Communications, L.C.     |  | $                      | 2,064,675
| | West Iowa Cellular, Inc.        |  |                        | 1,321,626
| | RSA #1, Ltd.                    |  |                        | 1,204,368
| | RSA #7, Ltd.                    |  |                        | 451,619  
| | RSA #9, Ltd.                    |  |                        | 769,064  
| | Desktop Media, L.L.C.           |  |                        |         
| | Quad County Communications      |  |                        | 56,068   
| | Carroll County Wireless, L.L.C. |  |                        | 63,038   
| | Guthrie Group, L.L.C.           |  |                        | 54,619   
| | Bug Tussel, L.L.C.              |  |                        | 617,298  
| | Spiralight, L.L.C.              |  |                        | 960,000  
| |                                 |  |                        |          
| |                                 |  | $                      | 7,562,375
| |                                 |  |                        |          
| |                                 | 

| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has a 17.42% ownership interest in Alpine Communications, L.C. (Alpine) at December 31,
      2006 and 2005. 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, 2006 and 2005 and the twelve months then ended.                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                             

| | Alpine Communications, L.C. | 
| | --------------------------- | 
|
|
|
| | Assets                      | 
| | Liabilities                 | 
| |                             | 
| | Equity                      | 
| |                             | 
|
| | Revenues                    | 
| | Expenses                    | 
| |                             | 
| | Net Income                  | 
| |                             | 

| |                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys percentage ownership interests in partnerships providing cellular telephone services
  within their respective service areas at December 31, 2006 and 2005 are as follows:
| |                                                                                                                                                                                         

| | West Iowa Cellular, Inc., |  | 25.0 | % | 
| | ------------------------- |  | ---- | - | 
| | RSA #1, Ltd.              |  | 10.3 | % | 
| | RSA #7, Ltd.              |  | 7.1  | % | 
| | RSA #9, Ltd.              |  | 16.7 | % | 

|71
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 4.                OTHER



INVESTMENTS (Continued)
|----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                            

| | The following is a summary of condensed financial information pertaining to the companies described

above as of December 31, 2006 and 2005 and the twelve months then ended.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                              
| | 2006                                                                                                                                                                         
| |                                                                                                                                                                              

| | West Iowa 
      Cellular, Inc. |  | RSA #1 |           | RSA #7 |   | RSA #9     | 
| | ------------------------------- |  | ------ | --------- | ------ | - | ---------- | 
|
|
| | Assets                          |  | $      | 5,627,101 |        | $ | 11,825,263 | 
| | Liabilities                     |  |        | 340,599   |        |   | 966,659    | 
| |                                 |  |        |           |        |   |            | 
| | Equity                          |  | $      | 5,286,502 |        | $ | 10,858,604 | 
| |                                 |  |        |           |        |   |            | 
|
| | Revenues                        |  | $      | 2,328,612 |        | $ | 8,193,772  | 
| | Expenses                        |  |        | 980,885   |        |   | 6,021,512  | 
| |                                 |  |        |           |        |   |            | 
| | Net Income                      |  | $      | 1,347,727 |        | $ | 2,172,260  | 
| |                                 |  |        |           |        |   |            | 
| |                                 |  |        |           |        |   |            | 
| | 2005 (Restated)                 |  |        |           |        |   |            | 
| |                                 |  |        |           |        |   |            | 
| |                                 |  |       
| |                                 |  |        |           |        |   |            | 
|
| | Assets                          |  | $      | 4,578,572 |        | $ | 10,554,590 | 
| | Liabilities                     |  |        | 239,797   |        |   | 927,484    | 
| |                                 |  |        |           |        |   |            | 
| | Equity                          |  | $      | 4,338,775 |        | $ | 9,627,106  | 
| |                                 |  |        |           |        |   |            | 
|
| | Revenues                        |  | $      | 1,603,705 |        | $ | 7,360,677  | 
| | Expenses                        |  |        | 664,214   |        |   | 6,117,008  | 
| |                                 |  |        |           |        |   |            | 
| | Net Income                      |  | $      | 939,491   |        | $ | 1,243,669  | 
| |                                 |  |        |           |        |   |            | 
| |                                 |  |        |          

| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has a 17% ownership in Desktop at December 31, 2006 and 2005. Desktop operates in southeastern
  Minnesota and is a provider of Internet and telephone services.                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | This investment is 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.

|72
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
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 2005 and the twelve months then ended.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                

| | Desktop Media, L.L.C. | 
| | --------------------- | 
|
|
|
| | Assets                | 
| | Liabilities           | 
| |                       | 
| | Equity                | 
| |                       | 
|
| | Revenues              | 
| | Expenses              | 
| |                       | 
| | Net Income            | 
| |                       | 
| |                       | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In January 2006, an interested party proposed a Letter of Intent to purchase Desktop Media, L.L.C.
  of which the Company is a 17% owner. In February 2007, a proposed Purchase Agreement was prepared
  by the same interested party and presented to Desktop Media, L.L.C.s owners. If negotiations
  are successful, the Company expects its portion of the proceeds from the sale to be approximately
  $26,000. Upon sale of Desktop Media, L.L.C., the Company would also expect to receive $439,974 for
  its note receivable from Desktop Media, L.L.C.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | The Company has a 33.33% ownership interest in Quad County Communications (Quad County) at December
  31, 2006 and 2005. 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, 2006 and 2005 and the twelve months then ended.                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | Quad County Communications | 
| | -------------------------- | 
|
|
|
| | Assets                     | 
| | Liabilities                | 
| |                            | 
| | Equity                     | 
| |                            | 
|
| | Revenues                   | 
| | Expenses                   | 
| |                            | 
| | Net Income                 | 
| |                            | 
| |                            | 

| |                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, 2006 and 2005. Both companies have purchased the licenses to provide
  personal communication services (PCS); however, neither company has begun providing PCS services
  as of December 31, 2006.

|73
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 4.                OTHER



INVESTMENTS (Continued)
|----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                            

| | The following is a summary of condensed financial information pertaining to the companies described

  above as of December 31, 2006 and 2005 and the twelve months then ended.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                

| |             |   |        
| | ----------- | - | -------
|
|
|
|
| | Assets      | $ | 189,113
| | Liabilities |   |       
| |             |   |        
| | Equity      | $ | 189,113
| |             |   |        
|
| | Revenues    | $ | 29,685 
| | Expenses    |   | 27,559 
| |             |   |        
| | Net Income  | $ | 2,126  
| |             |   |        

| |                 |   |        
| | --------------- | - | -------
| | 2005 (Restated)
|
|
| |                 |   |        
|
| | Assets          | $ | 186,987
| | Liabilities     |   |       
| |                 |   |        
| | Equity          | $ | 186,987
| |                 |   |        
|
| | Revenues        | $ | 11     
| | Expenses        |   | 8,604  
| |                 |   |        
| | Net Income      | $ | (8,593 
| |                 |   |        

| |                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has a 9.94% ownership interest in Bug Tussel Wireless LLC (Bug Tussel) at December 31,
  2006 and 2005. 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, 2006 and 2005 and the twelve months then ended.                                                                                            
| |                                                                                                                                                                                                                                                                            

| |             | Bug Tussel, L.L.C. |          
| | ----------- | ------------------ | ---------
|
| |             |                    |          
|
| | Assets      | $                  | 9,671,295
| | Liabilities |                    | 4,740,197
| |             |                    |          
| | Equity      | $                  | 4,931,098
| |             |                    |          
|
| | Revenues    | $                  | 8,351,715
| | Expenses    |                    | 5,966,644
| |             |                    |          
| | Net Income  | $                  | 2,385,071
| |             |                    |          

|74
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
|-------------------------------------------------------
|                                                       

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|--------------------------------------------------------------------
|                                                                    

| | NOTE 4.                OTHER



INVESTMENTS (Continued)                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                  
| | The Company purchased a 30% interest in a new entity, Spiralight Network, L.L.C.
on December 28, 2006. Spiralight Network, L.L.C. provides fiber transport services in Wisconsin, Illinois and Minnesota. The investment will be accounted for on the equity method
of accounting. No income or loss was recognized in 2006 due to the short period of ownership.
| |                                                                                                                                                                                                                                                                                                                                                                  
| | 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:                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                  

| |                                                    | 2006 |         | 2005 |  
| | -------------------------------------------------- | ---- | ------- | ---- | -
| |                                                    |      |         |      |  
|
| | NECA Services, Inc. - stock                        | $    | 300,000 |      | $
| | Rural Telephone Finance Cooperative - certificates |      | 178,616 |      |  
| | Rural Telephone Bank - stock                       |      |        |      |  
| | Iowa Network Services - stock                      |      | 78,705  |      |  
| | NRTC Patronage Capital - certificates              |      | 54,233  |      |  
| | Other                                              |      | 11,000  |      |  
| |                                                    |      |         |      |  
| |                                                    | $    | 622,554 |      | $
| |                                                    |      |         |      |  

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Other investments include $165,789 at December 31, 2005, related to Rural Telephone Bank (RTB)
  Class B and C stock. The RTB Class B stock was purchased from the RTB as a condition of obtaining
  long-term financing. Holders of RTB Class B stock are entitled to patronage dividends in the form
  of additional Class B stock. Any Class C stock was obtained through purchase or at the Companys
  option, through the conversion of previously acquired Class B Stock as the related loans were repaid.
  In 2005, the RTB board announced plans to redeem the outstanding stock of the bank and liquidate
  the bank. Under the plan, the RTBs outstanding loans will be transferred to the RUS. The RTB
  stock held by the Company was redeemed at par value after the execution of a redemption agreement
  with the RTB in the second quarter of 2006. Proceeds from the redemption totaled $1,336,000.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|NOTE 5.                GOODWILL
Goodwill consists of the following:
|-------------------------------------------------------------------
|                                                                   

| |                            | 2006 |         | 2005 |  
| | -------------------------- | ---- | ------- | ---- | -
| |                            |      |         |      |  
|
| | Balance, beginning of year | $    | 896,812 |      | $
| | Goodwill acquired          |      |        |      |  
| | Goodwill impairment        |      |        |      |  
| |                            |      |         |      |  
| | Balance, end of year       | $    | 896,812 |      | $
| |                            |      |         |      |  

|75
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|----------------------------------------------------------------------------------------------------------------------------
|                                                                                                                            

| | The 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, 2006 and 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                    

| | NOTE 6.                PROPERTY,
PLANT AND EQUIPMENT
| | ----------------------------------------------------
| |                                                     

| | Property, plant and equipment includes the following:
| | -----------------------------------------------------
| |                                                      

| |                                         | 2006 |            | 2005 |  
| | --------------------------------------- | ---- | ---------- | ---- | -
| |                                         |      |            |      |  
|
| | Telephone plant in service:             |      |            |      |  
| | Land                                    | $    | 41,508     |      | $
| | Buildings                               |      | 1,412,256  |      |  
| | Other general support assets            |      | 1,713,384  |      |  
| | Central office assets                   |      | 4,028,301  |      |  
| | Cable and wire facilities               |      | 4,870,035  |      |  
| | Other plant and equipment               |      | 991,668    |      |  
| |                                         |      |            |      |  
| |                                         |      | 13,057,152 |      |  
| |                                         |      |            |      |  
| |                                         |      |            |      |  
| | Cable television plant in service:      |      |            |      |  
| | Land                                    | $    | 8,846      |      | $
| | Buildings                               |      | 132,673    |      |  
| | Other plant and equipment               |      | 222,146    |      |  
| | Towers, antennas and head end equipment |      | 1,603,930  |      |  
| | Cable and wire facilities               |      | 1,573,544  |      |  
| | Franchises                              |      | 30,092     |      |  
| |                                         |      |            |      |  
| |                                         |      | 3,571,231  |      |  
| |                                         |      |            |      |  
| |                                         |      |            |      |  
| | Total property, plant and equipment     |      | 16,628,383 |      |  
| | Less accumulated depreciation           |      | 12,119,234 |      |  
| |                                         |      |            |      |  
| |                                         |      | 4,509,149  |      |  
| | Plant under construction                |      |           |      |  
| |                                         |      |            |      |  
| |                                         | $    | 4,509,149  |      | $
| |                                         |      |            |      |  

| |                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Telephone cable and wire facilities of approximately $688,000 and cable television head end equipment
  of approximately $506,000 were fully depreciated in 2006. Depreciation on depreciable property resulted
  in composite rates of 5.8% and 5.9% for 2006 and 2005, respectively.

|76
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 7.                INCOME
TAXES
Income taxes reflected in the Consolidated Statements of Income consist of the following:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                          

| |                                        | 2006 |           | 2005
      (Restated) |  
| | -------------------------------------- | ---- | --------- | --------------------- | -
| |                                        |      |           |                       |  
|
| | Federal income taxes:                  |      |           |                       |  
| | Current tax expense                    | $    | 1,208,959 |                       | $
| | Deferred tax expense                   |      | 275,838   |                       |  
| | Amortization of investment tax credits |      |          |                       |  
| | State income taxes:                    |      |           |                       |  
| | Current tax expense                    |      | 324,400   |                       |  
| | Deferred tax expense                   |      | 91,435    |                       |  
| |                                        |      |           |                       |  
| | Total income tax expense               | $    | 1,900,632 |                       | $
| |                                        |      |           |                       |  

| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | Deferred federal and state tax liabilities and assets reflected in the Consolidated Balance Sheets are summarized as follows:
| |                                                                                                                              

| |                                | 2006 |           | 2005
      (Restated) |  
| | ------------------------------ | ---- | --------- | --------------------- | -
| |                                |      |           |                       |  
|
| | Deferred tax liabilities       |      |           |                       |  
| | Federal                        | $    | 1,156,574 |                       | $
| | State                          |      | 356,426   |                       |  
| |                                |      |           |                       |  
| | Total deferred tax liabilities |      | 1,513,000 |                       |  
| |                                |      |           |                       |  
| |                                |      |           |                       |  
| | Deferred tax assets            |      |           |                       |  
| | Federal                        |      | (125,259  | )                     |  
| | State                          |      | (40,404   | )                     |  
| |                                |      |           |                       |  
| | Total deferred tax assets      |      | (165,663  | )                     |  
| |                                |      |           |                       |  
| |                                |      |           |                       |  
| | Net deferred tax liabilities   | $    | 1,347,337 |                       | $
| |                                |      |           |                       |  
| |                                |      |           |                       |  
| | Current portion                | $    | (12,291   | )                     | $
| | Long-term portion              |      | 1,359,628 |                       |  
| |                                |      |           |                       |  
| | Net deferred tax liability     | $    | 1,347,337 |                       | $
| |                                |      |           |                       |  

| |                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The 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, tax-exempt interest, dividends received deduction and the amortization of investment tax
credits.
| |                                                                                                                                                                                                                                                                            
| | Cash paid for income taxes and estimated income taxes for 2006 and 2005 totaled $1,798,064 and $679,800,
  respectively.                                                                                                                                                   

|77
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|----------------------------------------------------------------------------------------------------------------------------

|                                               
|-----------------------------------------------
|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:
| | -------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                

| |                                            | 2006 |      | 2005
      (Restated) | 
| | ------------------------------------------ | ---- | ---- | --------------------- | 
| |                                            |      |      |                       | 
|
| | Statutory federal income tax rate          |      | 34.0 | %                     | 
| | State income taxes, net of federal benefit |      | 10.1 | %                     | 
| | Amortization of investment tax credits     |      |     | %                     | 
| | Dividends received deduction               |      | (0.6 | )%                    | 
| | Tax exempt interest                        |      | (3.7 | )%                    | 
| | Other                                      |      | 0.5  | %                     | 
| |                                            |      |      |                       | 
| | Effective income tax rate                  |      | 40.3 | %                     | 
| |                                            |      |      |                       | 

| |                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company files consolidated tax returns including their subsidiaries, Prairie
Telephone Co., Inc., Westside Independent Telephone Company and Tele-Services,
Ltd. for income tax purpose. For financial reporting purposes, income taxes are
presented as if each member of the consolidated group was a separate taxpayer.

|                                                                 
|-----------------------------------------------------------------
|NOTE 8.                LONG-TERM
DEBT
Long-term debt consists of:
|                                                                 

| | 2006                                |   | 2005      | 
| | ----------------------------------- | - | --------- | 
| |                                     |   |           | 
|
| | Rural Telephone Finance Cooperative |   |           | 
| | 7.35% (Fixed Rate)                  | $ | 1,314,934 | 
| | Less current portion                |   | 175,729   | 
| |                                     |   |           | 
| |                                     | $ | 1,139,205 | 
| |                                     |   |           | 

| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | The annual requirements
  for principal payments on long-term debt for the next five years are as follows:
| |                                                                                                           

| | 2007 | $ | 175,729 |  | 
| | ---- | - | ------- |  | 
| | 2008 |   | 187,710 |  | 
| | 2009 |   | 200,507 |  | 
| | 2010 |   | 214,177 |  | 
| | 2011 |   | 228,779 |  | 

| |                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Substantially 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.

|78
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 8.                LONG-TERM
(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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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, 2006 is 8.2%. No funds were advanced under
  the line at December 31, 2006. 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, 2006 is 8.2%. No funds were advanced under the line at December 31, 2006.                                                                                                                                                             
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Cash paid for interest for 2006 and 2005, net of amounts capitalized, totaled $108,774 and $116,809,
  respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                                     
|-----------------------------------------------------
|NOTE 9.                OPERATING
SEGMENTS INFORMATION
|                                                     

| | The Company organizes its business into three reportable segments: local exchange carrier (LEC)
  services, broadcast services and Internet service provider (ISP) services. The LEC services segment
  provides telephone, data services and other services to customers in local exchanges. The broadcast
  services segment provides cable television services to customers in Iowa and Nebraska. The ISP services
  segment provides Internet access to customers within the local exchanges and the surrounding areas.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | The Companys reportable business segments are strategic business units that offer different products
  and services. Each reportable segment is managed separately primarily because of different products,
  services and regulatory environments. LEC segments have been aggregated because of their similar
  characteristics.                                                                                                                                                                                         

|79
|--



|BREDA TELEPHONE CORPORATION AND SUBSIDIARIESBREDA, IOWA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
NOTE 9.                OPERATING
SEGMENTS INFORMATION (Continued)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                              

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

| | 2006                            |  | Local
      Exchange
      Carrier |            | Broadcast |   | Internet
      Service
      Provider |   | Total |          
| | ------------------------------- |  | ---------------------------------- | ---------- | --------- | - | ------------------------------------- | - | ----- | ---------
|
|
| | Revenues and sales              |  |                                    | 7,315,068  |           |   | 724,957                               |   |       | 627,028  
| | Interest income                 |  |                                    | 372,967    |           |   | 16,385                                |   |       | 2,210    
| | Interest expense                |  |                                    | 108,774    |           |   |                                      |   |       |         
| | Depreciation and amortization   |  |                                    | 668,691    |           |   | 144,894                               |   |       | 147,100  
| | Income tax expense (benefit)    |  |                                    | 2,035,978  |           |   | (132,002                              | ) |       | (3,344   
| | Segment profit (loss)           |  |                                    | 3,510,729  |           |   | (184,972                              | ) |       | (506,880 
| | Segment assets                  |  |                                    | 21,416,179 |           |   | 748,796                               |   |       | 1,131,865
| | Expenditures for segment assets |  |                                    | 246,657    |           |   | 71,548                                |   |       | 72,257   
| |                                 |  |                                    |            |           |   |                                       |   |       |          
| | 2005                            |  |                                    |            |           |   |                                       |   |       |          
| |                                 |  |                                    |            |           |   |                                       |   |       |          
| | Revenues and sales              |  | $                                  | 6,063,713  |           | $ | 803,561                               |   | $     | 579,063  
| | Interest income                 |  |                                    | 446,657    |           |   | 14,924                                |   |       | 801      
| | Interest expense                |  |                                    | 105,409    |           |   |                                      |   |       |         
| | Depreciation and amortization   |  |                                    | 644,533    |           |   | 187,918                               |   |       | 98,843   
| | Income tax expense (benefit)    |  |                                    | 1,000,148  |           |   | (118,130                              | ) |       | (12,667  
| | Segment profit (loss)           |  |                                    | 2,382,331  |           |   | (193,859                              | ) |       | (310,535 
| | Segment assets                  |  |                                    | 19,091,355 |           |   | 826,904                               |   |       | 1,172,982
| | Expenditures for segment assets |  |                                    | 738,485    |           |   | 206,885                               |   |       | 542,758  

|                                                
|------------------------------------------------
|NOTE 10.             NET INCOME PER COMMON SHARE
|                                                

| | Net income per common share for 2006 and 2005 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, 2006 and 2005 were 31,021 and 31,092,
  respectively.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           
|-------------------------------------------
|NOTE 11.             STOCK VALUE ADJUSTMENT
|                                           

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

|80
|--



|BREDA TELEPHONE  CORPORATION AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------------
|                                                        

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|--------------------------------------------------------------------
|                                                                    

|NOTE 12.             STOCK RESTRICTIONS
|---------------------------------------
|                                       

| | The Company has one class of common stock. Each shareholder is entitled to one vote regardless of the
  number of shares owned. Restrictions on the stock include the following:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                 

| |  | Individuals purchasing new shares of stock must be living within the service areas of the Company and
  subscribe to its telephone services. In addition, new stockholders are limited to purchasing no more
  than thirty shares of stock directly from the Company.                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                   
| |  | Stockholders are limited to ownership of not more than one percent of the outstanding shares of stock
  unless ownership was prior to the restated Articles of Incorporation.                                                                                                                                                     
| |   |                                                                                                                                                                                                                                                                                                                                   
| |  | Stockholders shall not sell any shares of stock owned unless the Company has been given first right
  of refusal.                                                                                                                                                                                                                 
| |   |                                                                                                                                                                                                                                                                                                                                   
| |  | In households with multiple individuals, only one person must be deemed the subscriber of Company services.                                                                                                                                                                                                                       
| |   |                                                                                                                                                                                                                                                                                                                                   
| |  | A one-time stock transfer to a family member (spouse, child, grandchild, parent, grandparent, or sibling)
  is allowed for shareholders of record for the shares they held in 1995 even if such transferee resides
  outside of the telephone exchange service area and is not a subscriber of the Companys telephone
  services.
| |   |                                                                                                                                                                                                                                                                                                                                   
| |  | 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 BENEFITS
|                                      

| | The 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 2006 and 2005 were $144,376
  and $149,427, respectively. The Company makes annual contributions to the plan equal to amounts accrued
  for pension expense.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|81
|--



|BREDA TELEPHONE  CORPORATION AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------------
|                                                        

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|--------------------------------------------------------------------
|                                                                    

|NOTE 14.              ASSET RETIREMENT OBLIGATION
|-------------------------------------------------
|                                                 

| | Generally 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, 2006 and
  2005.                                                                                                                                                                                                                                                                                                                                                     

|                                               
|-----------------------------------------------
|NOTE 15.             RELATED PARTY TRANSACTIONS
|                                               

| | The 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, 2006 and 2005 were approximately $1,111,000 and $1,144,000,
  respectively. At December 31, 2006 and 2005, $147,351 and $125,260 were due from RSA #9 for commissions.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  
|--------------------------------------------------
|NOTE 16.             CONCENTRATIONS OF CREDIT RISK
|                                                  

| | The 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 51% of its 2006 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.                                                                                                   

|                                                
|------------------------------------------------
|NOTE 17.             CHANGE IN ACCOUNTING METHOD
|                                                

| | The Company has restated its income from equity investments for the year ended December 31, 2005. The
  Company determined to restate its income from equity investments from the accepted method of a twelve-month
  period ending September 30th to a better method of a twelve-month period ending December 31st, when calendar year financial statements became available for each of the years ending 2005 and 2006
  for these investments. The Company determined to make the change in accounting method to have uniformity
  in its reporting period for all of the financial information presented in its financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|82
|--



|BREDA TELEPHONE  CORPORATION AND SUBSIDIARIESBREDA, IOWA
|--------------------------------------------------------
|                                                        

|NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2006 and 2005
|--------------------------------------------------------------------
|                                                                    

| | The
        change in accounting method in 2005 resulted in a $103,976 increase in
        income from equity investments. Net of the income tax expense increase
        of $40,775, the 2005 net income increased $63,201. Net income per common
        share increased to $60.40 per share from $58.37 per share.
        The result of the change in accounting method is a change in retained
        earnings at December 31, 2004 of $153,315.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 
|-------------------------------------------------
|NOTE 18.             NONCASH INVESTING ACTIVITIES
|                                                 

| | Noncash investing activities included $2,042 during the year ended December 31, 2006 relating to plant
  and equipment additions placed in service during 2006, which are reflected in accounts payable at
  year end.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|83
|--



|Item 8. | Changes
    In and Disagreements With Accountants on Accounting andFinancial 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
  Item
|        |                                                                                                                                                                                                                             

|Item 8A. | Controls and Procedures.                                                                                                                                                                                                                                                                                             
|-------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                                                                                                                      
|         | The principal financial officer of Breda has evaluated the effectiveness of Bredas disclosure controls and
  procedures as of the end of the period covered by this annual report, and has concluded that the
  disclosure controls and procedures have been effective for the purposes for which they are intended.
|         |                                                                                                                                                                                                                                                                                                                      
|         | No change in Bredas internal control over financial reporting occurred during Bredas fourth fiscal quarter
  of 2006 that has materially affected, or is reasonably likely to materially affect, Bredas
  internal control over financial reporting.                                                              

|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 8B. | Other Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Breda filed Form 8-K on November 15, 2006 as notification of its November 15, 2006 filing of both an amended 10-QSB
  for the period ended March 31, 2006, and an amended 10-QSB for the period ended June 30, 2006. On
  November 14, 2006, in connection with the preparation of Bredas Quarterly Report on Form 10-QSB
  for the period ended September 30, 2006, Breda determined the need to restate its financial results
  for the three-month period ended March 31, 2006 and its financial results for the three-month period
  ended June 30, 2006, and to accordingly amend Bredas quarterly reports for those periods and
  the related financial statements.                                                                                                                                                     
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Bredas Form 10-QSB for the period ended March 31, 2006 was amended to restate Bredas income
  from equity investments derived from an investment in a cellular partnership, Iowa 8 Monona Limited
  Partnership (RSA #8). Two of Bredas subsidiaries each own an approximately 5.84% interest in
  RSA #8. Twelve-months income figures for RSA #8, instead of three-month income figures, were used
  to compute Bredas pro-rata share of the income generated by RSA #8 for the three-month period
  ended March 31, 2006, resulting in a $378,228 overstatement of income from equity investments in
  Bredas Form 10-QSB for the period ended March 31, 2006. After adjustment for that overstatement,
  net of income taxes, Bredas amended net income as of March 31, 2006 decreased $223,154, or
  $7.19 per share.
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|         | Bredas year to
    date income from equity investments for the six-months ended June 30, 2006 consequently
    decreased by the same $378,228. After adjustment for that overstatement, net of income taxes, Bredas
    amended year to date net income as of June 30, 2006 decreased $223,154 from $1,889,447 to $1,666,293,
    and net income per common share decreased $7.19 from $60.90 per share to $53.71 per share.                                                                                                                                                                                                                                                                                                                                                                                                  

|84
|--



|PART II
|-------
|       
|Item 9.
|       
|       
|       
|       
|       

| | Name              | Age | Position(s)                
| | ----------------- | --- | ---------------------------
| |                   |     |                            
|
| | Charles Thatcher  | 55  | President and Director     
| |                   |     |                            
| | Dave Grabner      | 58  | Vice President and Director
| |                   |     |                            
| | Rick Anthofer     | 50  | Treasurer and Director     
| |                   |     |                            
| | Clifford Neumayer | 57  | Director                   
| |                   |     |                            
| | Robert Buelt      | 48  | Director                   
| |                   |     |                            
| | Neil Kanne        | 60  | Secretary and Director     
| |                   |     |                            
| | Daniel Nieland    | 50  | Director                   

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Charles (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 2007. He has also served as a director of each of Bredas subsidiaries since May, 2001. Mr. Thatcher was elected as the President of Breda and of each of Bredas subsidiaries on June 14, 2005. Mr. Thatcher has been an owner of Midwest Wholesale Building Products in Carroll, Iowa for approximately the last 22 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. He was re-elected as a director at the May 17, 2005 annual meeting of the shareholders, and 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, 2001 until June 14, 2005, at which time he was elected as the Vice President of Breda and of each of Bredas subsidiaries. Mr. Grabner has been self-employed as an electrician for approximately 35 years. He was also previously self-employed as a farmer.

|85
|--



| | 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 was elected as the Treasurer
  of Breda and each of Bredas subsidiaries on June 14, 2005. Mr. Anthofer has been the vice president
  of Breda Savings Bank, 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 thirteen years prior to that time. Mr. Anthofer has also 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 2007. Mr. Kanne also became a director of each
  of Bredas subsidiaries in May, 2004. Mr. Kanne was elected as Secretary of Breda and each of
  Bredas subsidiaries on October 30, 2006. Mr. Kanne has been self-employed as a farmer for approximately
  the last 35 years.                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Daniel Nieland has been a director of Breda since May 17, 2005 and his term as a director will end
  at the annual shareholders meeting which is held in 2008. Mr. Nieland also became a director of each
  of Bredas subsidiaries in 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.                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Clifford Neumayer was elected as a director of Breda at the October 25, 2006 annual meeting of Bredas
  shareholders, and his term as a director will end at the annual shareholders meeting which is held
  in 2009. Mr. Neumayer also bcame a director of each of Bredas subsidiaries in October 2006.
  Mr. Neumayer had previously served three, 3-year terms as a director of Breda from 1999 to May 2005,
  and had served as its President from June 2003 to June 2005. Mr. Neumayer has been a self-employed
  farmers since 1970.                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Robert Buelt was elected as a director of Breda at the October 25, 2006 annual meeting of Bredas
  shareholders, and his term as a director will end at the annual shareholders meeting which is held
  in 2009. Mr. Buelt has been employed as the Assistant Manager of Carroll Car Credit Company since
  November 1, 2001, and has been the owner/operator of Buelt Hatchery and Storage since January 1,
  1985.                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | The number of directors for Breda is currently fixed at seven. Each of Bredas directors is elected
  to a three year term and until his or her successor is elected. The terms 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. If a person has served for three consecutive terms as a director, that
  person must be off the board for at least one year before the person can again be elected as a director.
  Each director of Breda must also be a shareholder of Breda, and a director will automatically cease
  to be a director if he or she sells or transfers all of his or her shares of common stock in                                           

|86
|--



| | Breda.  Each director must also be at least 18 years of age.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | The officers of Breda are elected annually by the board of directors at its annual organization meeting,
      and hold office until the next annual organization meeting of the board of directors and until their
      respective successors are chosen. The annual organization meeting is the first regularly scheduled
      meeting of the board of directors which follows the annual shareholders meeting, and is generally
      held in June. Any officer may be removed by the board of directors at any time, with or without cause.
      Each officer must also be a director and a shareholder of Breda.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | During 2006 the following three employees made significant contributions to Bredas business:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

| |                    |     |                         
| | ------------------ | --- | ------------------------
| | Name               | Age | Position                
| |                    |     |                         
|
| | Steve Frickenstein | 54  | Chief
Executive Officer 
| |                    |     |                         
| | Charles Deisbeck   | 40  | Chief
Operations Officer
| |                    |     |                         
| | Jane A. Morlok     | 53  | Chief
Financial Officer 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | During part of 2006, Ms. Morlok was employed pursuant to an employment agreement with Breda which expired
  December 31, 2005. A new employment agreement for Jane Morlok was entered into on November 13, 2006
  which was retroactive to July 1, 2006. That employment agreement is discussed in Item 10 of this
  annual report. In addition to the above three (3) individuals, Robert J. Boeckman served as chief
  operations officer until his resignation on March 14, 2006. Ms. Morlok was designated as Interim
  Chief Executive Officer by Bredas Board of Directors on April 11, 2006. Ms. Morlok continues
  to serve as Chief Financial Officer.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | 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,
  and he began his career as a lineman for Illinois Bell. He has also had assignments in Europe 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 became the chief financial officer of Breda on March 20, 1998. Her title                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|87
|--



| | was chief financial officer and co-chief executive officer from March 20, 1998 to July 1, 2006. She
  served as Bredas interim chief executive officer from April 11, 2006 until July 1, 2006. Her
  current title is chief financial officer. Ms. Morlok was the Assistant Administrator/CFO of Manning
  Regional Healthcare Center in Manning, Iowa from July, 1987 until March 20, 1998. Her responsibilities
  in that position included budgeting, reimbursement and rate setting for the hospital and nursing
  home run by the Manning Regional Healthcare Center, as well as daily general ledger operations and
  IRS filings. She also provided similar services to several other affiliated corporations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | 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 a separately-designated
  standing 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 401(e)(2) 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 is a shareholder
  of Breda, and an individual can only be a shareholder of Breda if the individual is a resident of
  the Breda or Lidderdale telephone exchange areas served by Breda and subscribes to Bredas telephone
  services. There is therefore a very limited pool of individuals who are even eligible to be considered
  for a director position with Breda. Also, no shareholder may own more than 1% of the total issued
  and outstanding common stock of Breda (with certain very limited exceptions), there are various restrictions
  on a shareholders right to sell and assign shares of common stock in Breda, and 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | There were no material changes in 2006 to the procedures by which the shareholders of Breda may recommend
  nominees to Bredas board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Breda had not, at the time of the preparation of this annual report, 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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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|         | the need for a code of ethics and may adopt one at some point, Breda currently believes that a code
  of ethics policy is not necessary given Bredas size and its other existing internal processes
  and procedures.
|-------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|         |                                                                                                                                                                                                                       
|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, to Jane Morlok, Bredas chief financial officer,
  in the 2006, 2005 and 2004 fiscal years, and to new chief executive officer Steve Frickenstein and
  new chief operations officer Charles Diesbeck during 2006. As noted above, Ms. Morlok also served
  as interim chief executive officer from April 11, 2006 until July 1, 2006. During his tenure, Mr.
  Boeckmans services as the chief operations officer of Breda were similar to those normally
  provided by the chief executive officer of an Iowa corporation.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

| | Summary Compensation Table | 
| | -------------------------- | 
|
|
|
|
| |                           
| | Robert J.                  | 
| | Boeckman,                  | 
| | Chief Operations           | 
| | Officer(4)                 | 
| |                            | 
| | Steve                      | 
| | Frickenstein               | 
| | Chief Executive            | 
| | Officer(5)                 | 
| |                            | 
| | Charles Deisbeck           | 
| | Chief Operations           | 
| | Officer(5)                 | 
| |                            | 
| | Jane Morlok,               | 
| | Chief Financial            | 
| | Officer                    | 
| |                            | 

| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1)This amount includes contributions of 3% of annual gross salary pursuant to Bredas defined benefit
      retirement and security program, which is sponsored by the National Telephone Cooperative Association.
      As a condition of participation in that program, participants must contribute a minimum of 3% of
      annual gross salary. See also the All Other Compensation column above.
| |                                                                                                                                                                                                                                                                                                                                                                                                          
| | (2)This amount includes payments by Breda from a fund established by Breda based upon sales of cell phones.
      The fund is allocated equally among the employees employed at Breda. All employees share                                                                                                                                                                                               

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| | in the fund even if they are not involved in the sale of cell phones. None of the above officers were
  involved in those sales. The amounts also include a yearly clothing allowance and the estimated yearly
  value of services provided to the above officers by Breda or its subsidiaries at no cost. Those services
  are local telephone service, basic cable service, Internet access, and cellular phone service.                                                                                                                                                                                                                                                                                                                                                                                                                
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (3)This amount represents contributions by Breda to Bredas defined benefit retirement and security
  program, which is sponsored by the National Telephone Cooperative Association. The program requires
  Breda to contribute an amount equal to 8.6% of a participants annual gross salary. Breda is
  also required to contribute a 2.32% surcharge on all employee and employer contributions for plan
  years 2004 through 2007 in order to meet current and projected funding requirements. See also footnote
  1 above regarding participants contributions to the program. This amount also includes a long-term
  disability contribution of 1.76% of salary and employer-paid premiums on health, life and accidental
  death and dismemberment insurance as well as health insurance premiums, and deductible reimbursement.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (4) Mr. Boeckman resigned his position effective March 14, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | (5) Mr. Frickenstein and Mr. Deisbeck were employed beginning July 1, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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. Clifford Neumayer also served as the president of Breda
  for a portion of 2005, but no information is provided for Mr. Neumayer in the summary compensation
  table for the same reason as set forth for Mr. Thatcher.                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Director Compensation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Since October 30, 2006, all of Bredas directors have received $200 for each regular, special
  and conference call meeting of the board of directors. 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 made to those individuals in their capacities as directors, and are based upon their
  additional duties at the meetings of the board of directors.                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Bredas directors received $175 for each regular, special and conference call meeting of the board
  of directors from June 1, 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 made to those individuals in their capacities as directors, and are based upon their
  additional duties at the meetings of the board of directors.                                                                                                                                                                                                                                               

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| | Bredas directors received $150 for each regular, special and conference call meeting from June
2003 through May 2005. Bredas directors received $125 for each regular, special and conference
call meeting from June, 2001 through May, 2003. Bredas directors received $100 for each regular,
special and conference call meeting in 1999 and through May, 2001. The vice president, secretary
and treasurer also received an additional $25 per meeting from May, 1999 through May, 2001. The president
received an additional $50 per meeting from May, 1999 through May, 2001.
Since 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. From June 2005 through
September 2006, Bredas directors received $175 for each of these meetings. Bredas directors
received $150 per day for attending all day industry meetings related to Bredas or its subsidiaries
businesses from June 2001 through May 2005. 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 received $125 per day for such all day meetings from May, 1999 through May, 2001.
Since October 2006 all of Bredas directors have received $200 for each outside meeting attended
by a director and which lasts over three hours. From June 2005 through September 2006, Bredas
directors received $175 for each of these meetings. Bredas directors received $150 for each
outside meeting attended by a director and which lasts over three hours from June 2001 through May
2005. The directors received $125 for each such meeting in 1999 and through May, 2001. 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. Examples of outside meetings
include conventions and city council meetings and meetings for purposes of ballot counting. Since
October 2006, directors who service on a committee have received $200 for each committee meeting
which does not coincide with another meeting of the board of directors. Directors who serve on a
committee received $175 from June 2005 through September 2006, and $150 from October 2001 through
May 2005, for each committee meeting which does not coincide with another meeting of the board of directors.
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.
Bredas directors may also receive dial-up or high-speed Internet access from Breda or its subsidiaries
at no cost. The current estimated yearly value of Internet access is $300 for dial-up and $600 for
high-speed. They have been entitled to receive Internet access since 1999.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | The directors also became entitled to receive local telephone service from Breda or its subsidiaries
  at no cost, effective as of June 1, 2003. The current estimated yearly value of local telephone service
  is $228.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Significant Employees;Employment Agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | As noted in Item 9 above, Breda has three employees who Breda believes make a significant contribution
  to its business. Those employees are Steve Frickenstein, Charles Deisbeck, and Jane Morlok. Breda
  has employment agreements with each of those individuals, which agreements are discussed below. Breda
  does not have any written employment agreements with any other employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 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s annual salary will be $135,000 during the first year of the employment agreement.
  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. 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. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| | 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 20 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | 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s annual salary will be $100,000 during the first year of the employment agreement.
  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. 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. 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.                                                                                                                                                                                                                   
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Mr. Deisbeck may also terminate the employment agreement by giving 60 days notice to Breda.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Breda entered into an Employment Agreement with Jane Morlok on November 13, 2006, pursuant to which
  Ms. Morlok is employed as the chief financial officer of Breda.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 will be $92,000 during the first year of the Employment Agreement.
  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. Ms. Morlok will also be entitled to a bonus
  for the calendar 2006, and Bredas board of directors and chief executive officer are to set
  up a procedure for the determination of the bonus. The final determination as to the amount of the
  bonus rests, however, solely with the board of directors. Ms. Morlok is also entitled to a bonus
  for the calendar years 2007 and 2008, and the structure for determining the bonus and the amount
  of the bonus is to be determined by Bredas board of directors and chief executive officer.
  The final decision regarding bonuses for those calendar years rests, however, with the board of directors.
  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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 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 remaining to be paid under the Employment Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | Ms. Morlok may also terminate the Employment Agreement by giving 60 days notice to Breda.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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| | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Robert Boeckman was the chief operations officer and co-chief executive officer of Breda during 2005.
  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 other employees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                                                                                                                  
|------------------------------------------------------------------------------------------------------------------
|Item 11.           Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|                                                                                                                  

| | The following table sets forth the percentage ownership of Bredas Common Stock as of March 1,
  2007 by:
| | ---------------------------------------------------------------------------------------------------------
| |                                                                                                          

| |  | Each of Bredas directors;                     
| | - | -----------------------------------------------
| |   |                                                
| |  | Each of Bredas officers; and                  
| |   |                                                
| |  | All directors and officers of Breda as a group.

|95
|--



|Security Ownership Table
|------------------------
|                        

| | Name and Address of
      Beneficial Owner |  | Number of Shares |  | Percent of Class | 
| | ------------------------------------------ |  | ---------------- |  | ---------------- | 
| |                                            |  |                  |  |                  | 
|
| | Dave Grabner                               |  | 55*              |  | .177%            | 
| | 11098 130th Street                         |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Rick Anthofer                              |  | 13               |  | .042%            | 
| | 301 N. 4th                                 |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Charles Thatcher                           |  | 32**             |  | .103%            | 
| | 15053 Granite Avenue                       |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Daniel Nieland                             |  | 1                |  | .003%            | 
| | 12192 Ivy Avenue                           |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Neil Kanne                                 |  | 2                |  | .006%            | 
| | 12828 Phoenix Avenue                       |  |                  |  |                  | 
| | Carroll, Iowa 51401                        |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Clifford Neumayer                          |  | 181              |  | .584%            | 
| | 11846 Ivy Avenue                           |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | Robert Buelt                               |  | 133***           |  | .429%            | 
| | 106th S. 3rd St.                           |  |                  |  |                  | 
| | Breda, Iowa 51436                          |  |                  |  |                  | 
| |                                            |  |                  |  |                  | 
| | All directors and officers                 |  |                  |  |                  | 
| | as a group (7 persons)                     |  | 417              |  | 1.34%            | 

| |     |                                                       
| | --- | ------------------------------------------------------
| | *   | One of these shares
is held by Mr. Grabners spouse.  
| |     |                                                       
| | **  | One of these shares is held by
Mr. Thatchers spouse. 
| |     |                                                       
| | *** | Ten
of these shares are held by Mr. Buelts minor son.
| |     |                                                       

| | All of the above shares of Common Stock are directly owned by the listed individuals, except only as
  noted with respect to Mr. Grabner, Mr. Thatcher and Mr. Buelt.                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                             
| | Steve Frickenstein, Charles Deisbeck and Jane Morlok, who are, respectively, employed as Bredas
  chief executive officer, chief operations officer and chief financial officer, do not own

|96
|--



| | any shares of Common Stock.                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                                                           
| | To Bredas knowledge, no person or group is the beneficial owner of more than 5% of Bredas
  Common Stock, and no person or group holds more than 5% of Bredas Common Stock under a voting
  trust or similar agreement.

|         |                                                                                                                                                                                                                                                                                                                                                                               
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Item 12. | Certain
Relationships and Related Transactions, and Director Independence.                                                                                                                                                                                                                                                                                                    
|         |                                                                                                                                                                                                                                                                                                                                                                               
|         | Breda has not been a party to any transaction during the last two years, or proposed transaction, of the type required
  to be disclosed under this Item. The transactions to which this Item applies are transactions to
  which Breda was or is to be a party and in which any of the following types of persons had or is
  to have a direct or indirect material interest:
|         |                                                                                                                                                                                                                                                                                                                                                                               
|         | any director or officer of Breda,                                                                                                                                                                                                                                                                                                                                             
|         |                                                                                                                                                                                                                                                                                                                                                                               
|         | any nominee for election as a director of Breda,                                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                               
|         | any beneficial owner of more than 5% of Bredas common stock, or                                                                                                                                                                                                                                                                                                              
|         |                                                                                                                                                                                                                                                                                                                                                                               
|         | any member of the immediate family of any person referred to above.                                                                                                                                                                                                                                                                                                           
|         |                                                                                                                                                                                                                                                                                                                                                                               
|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.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|         |                                                                                                                                                                                     
|-------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 Twelve months, 2005 and Twelve months, 2006.
|         |                                                                                                                                                                                     

| | Audit Fees.                                                                                                                                                                                                                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Breda was billed $58,525 and $44,041 for, respectively, the fiscal years ended Twelve months, 2005 and Twelve months,
  2006 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
  in connection with statutory and regulatory filings or engagements for those two fiscal years.
| |                                                                                                                                                                                                                                                                                                                                                                                                                        

| | Audit Related Fees.                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Breda was billed $17,400 and $24,100 for, respectively, the fiscal years ended Twelve months, 2005 and Twelve months,
  2006 for assurance and related services that were 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

|97
|--



| | compliance, assurance and review work in connection with SEC filings.
Tax Fees.Breda was billed $4,100 and $4,625 for, respectively, the fiscal years ended Twelve months, 2005 and
Twelve months, 2006 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 $7,599 and $1,138 for, respectively, the fiscal years ended Twelve months, 2005 and
Twelve months, 2006 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. Bredas board of directors has considered whether
the provision of those services is compatible with maintaining Kiesling Associates, LLPs independence.
Kiesling Associates, LLP did not render any professional services relating to financial information
systems design and implementation during either of the fiscal years ended Twelve months, 2005 or
Twelve months, 2006.
Each specific engagement of Kiesling Associates, LLP is approved by the board of directors of Breda,
and the board of directors does not have any pre-approval policies or procedures with respect to
the provision of any services by 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 17 CFR 210.2-01(c)(7)(i)(C).
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|98
|--



|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, 2007 |  | By:                                        
|                     |  |                                            
|                     |  | Steve Frickenstein, Chief Executive Officer
|                     |  |                                            
|                     |  | By:                                        
|                     |  |                                            
|                     |  | Jane Morlok, Chief Financial Officer       

|                                                                                                                                                                                   
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|In 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 Kanne  
|--- | ------------------------------------------- |  | ----------------------------------------- | ----------------
|    |                                             |  |                                           |                 
|    | Daniel Nieland, Director                    |  | Neil Kanne, Secretary and Director       
|    | Date: March 28, 2007                        |  | Date: March 28, 2007                     
|    |                                             |  |                                           |                 
|By: | /s/ Rick Anthofer                           |  | By:                                       | /s/ Robert Buelt
|    |                                             |  |                                           |                 
|    | Rick Anthofer, Treasurer and Director       |  | Robert Buelt, Director                   
|    | Date: March 28, 2007                        |  | Date: March 28, 2007                     
|    |                                             |  |                                           |                 
|By: | /s/ Clifford Neumayer                       |  | By:                                       | /s/ Dave Grabner
|    |                                             |  |                                           |                 
|    | Clifford Neumayer, Director                 |  | Dave Grabner, Vice President and Director
|    | Date: March 28, 2007                        |  | Date: March 28, 2007                     
|    |                                             |  |                                           |                 
|By: | /s/ Charles Thatcher                        |  | By:                                       | /s/ Jane Morlok 
|    |                                             |  |                                           |                 
|    | Charles Thatcher, President and Director    |  | Jane Morlok, Chief Financial Officer     
|    | Date: March 28, 2007                        |  | Date: March 28, 2007                     
|    |                                             |  |                                           |                 
|By: | /s/ Steve Frickenstein                      |  |                                           |                 
|    |                                             |  |                                           |                 
|    | Steve Frickenstein, Chief Executive Officer |  |                                           |                 
|    | Date: March 28, 2007                        |  |                                           |                 

|99
|--



|EXHIBIT INDEXExhibits to Form 10-KSB of Breda Telephone Corp.for the Fiscal Year Ended December 31, 2006
Description of Exhibit.
|--------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                

| | 3.  | Articles of Incorporation and Bylaws                                                                                                                                                        
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                             
| |     | (a)                                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| |     | (b)                                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| | 10. | Material Contracts.                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| |     | (a)                                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| |     | (b)                                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| |     | (c)                                                                                                                                                                                         
| |     |                                                                                                                                                                                             
| | 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) Certifications |                                                          
|---------------------------- | ---- | --------------------------------------- | ---------------------------------------------------------
|                             |      |                                         |                                                          
|                             |      | 31.1                                    | Rule 13(a)-14(a) Certification of Chief Executive Officer
|                             |      |                                         |                                                          
|                             |      | 31.2                                    | Rule 13(a)-14(a) Certification of Chief Financial Officer
|                             |      |                                         |                                                          
|                             | *32. | Section 1350 Certifications             |                                                          
|                             |      |                                         |                                                          
|                             |      | 32.1                                    | Section 1350 Certification of Chief Executive Officer    
|                             |      |                                         |                                                          
|                             |      | 32.2                                    | Section 1350 Certification of Chief Financial Officer    
|                             |      |                                         |                                                          
|* Included with this filing. |     

|
|