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| **UNITED STATES SECURITIES AND                EXCHANGE COMMISSION** |
| **Washington, D.C.                20549**                           |
|                                                                |
| **Form                10-KSB/A**                                    |
| **Amendment No.                1**                                  |
|                                                                |
| (Mark                One)                                           |
|                                                                |   |
| 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           |
| Securities                registered under Section 12(g) of the Exchange Act:                |
|                                                                                         |
| Common Stock,                no par value                                                    |
| (Title of                class)                                                              |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
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|                 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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|   |
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| **EXPLANATORY                    NOTE**

Breda                    Telephone Corp. (“Breda”) is filing this Amendment No. 1 to its                    Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 which                    was filed with the Securities and Exchange Commission on March 28, 2007 (the                    “Original 10-KSB”) to amend the Original 10-KSB by substituting the                    following “Item 7 Financial Information” for the financial                    statements contained in Item 7 in the Original 10-KSB and, more specifically,                    to add and include the qualified audit opinion of Kiesling Associates LLP.                    Other than the addition of the referenced audit opinion, all of the information                    in the financial statements, and the other information in the Original 10-KSB,                    remains unchanged and is not otherwise amended hereby.

At the                    time of the filing of the Original 10-KSB, certain portions of the audit of                    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 was required to perform certain audit procedures                    or rely on the audits of other auditors to obtain reasonable assurance that the                    investments and related equity income were presented fairly, in all material                    respects, in the consolidated financial statements of Breda as of and for the                    years ended December 31, 2005 and December 31, 2006.

Kiesling                    Associates LLP has performed the necessary audit procedures or relied on the                    audits of other auditors to obtain reasonable assurance that the investments                    and related equity income were presented fairly in all material respects for                    two out of the three outstanding limited partnerships for the year ended                    December 31, 2005. None of these outside investments were material to                    Breda’s financial statements for the year ended December 31,                    2006.

Breda                    received a letter dated August 29, 2007 from the remaining limited partnership,                    Iowa RSA No. 9 Limited Partnership, stating that the audited financial                    statements for December 31, 2005 and December 31, 2006 originally expected to                    be completed by the end of August 2007, would be delayed approximately one                    month due to the amount of time required to prepare audit analyses requested by                    their external auditors, as well as the necessary auditor review time. As of                    the date of this filing, however, Breda has yet to receive the audited                    financial statements for December 31, 2005, and December 31, 2006, for Iowa RSA                    No. 9 Limited Partnership. Breda’s auditor, Kiesling Associates LLP, has                    been informed that while the financial information is not expected to change                    from what has been included in Breda’s consolidated financial statements                    for the years ended December 31, 2005, and December 31, 2006, the auditor for                    Iowa RSA No. 9 Limited Partnership is planning to issue a qualified opinion on                    that entity. Given that fact, and because of the materiality of this outside                    investment to Breda’s financial statements for the year ended December                    31, 2005, Breda’s auditors have now issued a qualified audit opinion on                    the consolidated financial statements for Breda for the year ending December                    31, 2005, and the year ending December 31, 2006. The qualified audit opinion                    and financial statements are set out below. As noted above, although the                    financial statements are included in this Form 10-KSB/A, none of the                    information in the financial statements as included in the Original 10-KSB is                    amended hereby, with the purpose of this Form 10-KSB/A being to add the                    qualified audit opinion of Kiesling Associates LLP as discussed                    above. |
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| This                    Form 10-KSB/A does not modify or update other information in the Original                    10-KSB and does not purport to provide an update of any developments regarding                    Breda subsequent to the filing of the Original 10-KSB. |
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| [THE REST OF                THIS PAGE IS INTENTIONALLY LEFT BLANK] |

| 2 |
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| **Item 7.                                                          Financial Statements**

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

**Consolidated Financial                    Statements****For the Years****Ended December 31, 2006 and 2005** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3 |
|---|

| BREDA                    TELEPHONE CORP. AND SUBSIDIARIES                    BREDA, IOWA

Contents |
|----------------------------------------------------------------------------------------------------|

|                                                                      |        |
|----------------------------------------------------------------------|--------|
|                                                                 |   |
|                                                                 |        |   |
|                                                                 |   |   |
| Independent Auditors’                Report                    | 5      |   |
| Consolidated Financial                Statements:                    |   |   |
| Consolidated                Balance Sheets                           | 6      |   |
| Consolidated                Statements of Income                     | 7      |   |
| Consolidated                Statements of Stockholders’ Equity | 8      |   |
| Consolidated                Statements of Cash Flow                  | 9      |   |
| Notes to                Consolidated Financial Statements            | 10-27  |   |

| 4 |
|---|

| **REPORT                    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of                    DirectorsBreda Telephone Corporation                    and SubsidiariesBreda, Iowa

We have                    audited the accompanying consolidated balance sheets of Breda Telephone                    Corporation (an Iowa corporation) and subsidiaries as of December 31, 2006 and                    2005, and the related consolidated statements of income, stockholders’                    equity and cash flows for the years then ended. These consolidated financial                    statements are the responsibility of the Company’s management. Our                    responsibility is to express an opinion on these consolidated financial                    statements based on our audits.

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

We were                    unable to obtain audited financial statements for 2005 supporting the                    Company’s investment in RSA No. 9 Limited Partnership stated at $920,170                    at December 31, 2005, or its equity in earnings in such Limited Partnership of                    $415,572, which is included in net income for the year ended as described in                    Note 4 to the financial statements; nor were we able to satisfy ourselves about                    the carrying value of the investment or the equity in its earnings by other                    auditing procedures.

In our                    opinion, except for the effects of such adjustments, if any, as might have been                    determined to be necessary had we been able to examine evidence regarding the                    investment and earnings of RSA No. 9 Limited Partnership, the consolidated                    financial statements referred to above present fairly, in all material                    respects, the financial position of Breda Telephone Corporation and                    subsidiaries as of December 31, 2006 and 2005, and the results of their                    operations and their cash flows for the years then ended in conformity with                    accounting principles generally accepted in the United States of                    America.

/s/                    Kiesling Associates LLP

West Des                    Moines, Iowa                    May 24, 2007, except for West Iowa Cellular, Inc.                    and RSA #7, Ltd. described in Note 4, for which                    the date is August 23, 2007 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                  |
|-------------------------------------------------------------------------------------------------------|
|                                                                                                  |
| **CONSOLIDATED                BALANCE SHEETS                December 31, 2006 and December 31, 2005** |
|                                                                                                  |

|                                                                                                                                                                                                                                                                                                                                                                                                           | December                31,                2006 |       | December                31,                2005                (Restated) |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------|------------|---------------------------------------------------------------------------|--------|
||
| ASSETS                                                                                                                                                                                                                                                                                                                                                                                                    |                                            |       |                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| CURRENT                ASSETS                                                                                                                                                                                                                                                                                                                                                                             |                                            |            |                                                                      |   |  |   |
|       Cash                and cash equivalents                                                                                                                                                                                                                                                                                                                              | $                                               | 777,708    |                                                                      | $      | 739,741 |   |
|       Marketable                securities                                                                                                                                                                                                                                                                                                                                  |                                            | 643,119    |                                                                      |   | 635,409 |   |
|       Accounts                receivable, net of allowances of $46,750 and $13,700                           in 2006 and 2005,                respectively                                                                                                                                                           |                                            | 995,861    |                                                                      |   | 952,579 |   |
|       Interest                receivable                                                                                                                                                                                                                                                                                                                                    |                                            | 82,241     |                                                                      |   | 107,229 |   |
|       Current                portion of note receivable                                                                                                                                                                                                                                                                                                                     |                                            | 220,283    |                                                                      |   | 144,000 |   |
|       Inventory,                at average cost                                                                                                                                                                                                                                                                                                                             |                                            | 151,659    |                                                                      |   | 122,953 |   |
|       Other                                                                                                                                                                                                                                                                                                                                                                 |                                            | 47,440     |                                                                      |   | 42,196 |   |
|       Deferred                income taxes                                                                                                                                                                                                                                                                                                                                  |                                            | 12,291     |                                                                      |   | 22,794 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                            | 2,930,602  |                                                                      |   | 2,766,901 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| OTHER                NONCURRENT ASSETS                                                                                                                                                                                                                                                                                                                                                                    |                                            |       |                                                                      |   |   |   |
|       Marketable                securities                                                                                                                                                                                                                                                                                                                                  |                                            | 6,775,348  |                                                                      |   | 5,463,298 |   |
|       Investments                in unconsolidated affiliates at equity                                                                                                                                                                                                                                                                                                     |                                            | 7,562,375  |                                                                      |   | 5,883,404 |   |
|       Other                investments at cost                                                                                                                                                                                                                                                                                                                              |                                            | 622,554    |                                                                      |   | 790,066 |   |
|       Goodwill                                                                                                                                                                                                                                                                                                                                                              |                                            | 896,812    |                                                                      |   | 896,812 |   |
|       Note                receivable                                                                                                                                                                                                                                                                                                                                        |                                            | —    |                                                                      |   | 75,469 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                            | 15,857,089 |                                                                      |   | 13,109,049 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| PROPERTY,                PLANT AND EQUIPMENT                                                                                                                                                                                                                                                                                                                                                              |                                            | 4,509,149  |                                                                      |   | 5,215,291 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| TOTAL                ASSETS                                                                                                                                                                                                                                                                                                                                                                               | $                                               | 23,296,840 |                                                                      | $      | 21,091,241 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| LIABILITIES AND                STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                                 |                                            |       |                                                                      |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| CURRENT                LIABILITIES                                                                                                                                                                                                                                                                                                                                                                        |                                            |       |                                                                      |   |   |   |
|       Current                portion of long-term debt                                                                                                                                                                                                                                                                                                                      | $                                               | 175,729    |                                                                      | $      | 164,513 |   |
|       Accounts                payable                                                                                                                                                                                                                                                                                                                                       |                                            | 178,331    |                                                                      |   | 428,211 |   |
|       Accrued                taxes                                                                                                                                                                                                                                                                                                                                          |                                            | 123,301    |                                                                      |   | 378,871 |   |
|       Other                                                                                                                                                                                                                                                                                                                                                                 |                                            | 63,417     |                                                                      |   | 143,582 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                            | 540,778    |                                                                      |   | 1,115,177 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| LONG-TERM                DEBT, less current portion                                                                                                                                                                                                                                                                                                                                                       |                                            | 1,139,205  |                                                                      |   | 1,314,935 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| OTHER                NONCURRENT LIABILITIES                                                                                                                                                                                                                                                                                                                                                               |                                            | 1,359,628  |                                                                      |   | 1,002,858 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
| 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 |                                                                      |   | 11,075,211 |   |
|       Retained                earnings                                                                                                                                                                                                                                                                                                                                      |                                            | 8,036,925  |                                                                      |   | 6,583,060 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                            | 20,257,229 |                                                                      |   | 17,658,271 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |
| TOTAL                LIABILITIES AND STOCKHOLDERS’ EQUITY                                                                                                                                                                                                                                                                                                                                           | $                                               | 23,296,840 |                                                                      | $      | 21,091,241 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                                 |       |                                                                           |   |
|                                                                                                                                                                                                                                                                                                                                                                                                      |                                            |       |                                                                      |   |   |   |
| The                accompanying notes are an integral part of these consolidated financial                statements.                                                                                                                                                                                                                                                                                     |

| 6 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                              |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |
| **CONSOLIDATED                STATEMENTS OF INCOME                For theYears Ended December 31, 2006 and 2005** |
|                                                                                                              |

|                                                                                                                  | For the Years                Ended |      |
|-----------------------------------------------------------------------------------------------------------------------|------------------------------------|-----------|
||
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
| OPERATING                REVENUES                                                                                     | $                                  | 8,667,053 |   | $ | 7,446,337 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
| OPERATING                EXPENSES                                                                                     |                               |      |   |   |   |   |
|       Cost                of services                                                   |                               | 4,109,781 |   |   | 3,531,798 |   |
|       Depreciation                and amortization                                      |                               | 960,685   |   |   | 931,294 |   |
|       Selling,                general, and administrative                               |                               | 2,181,342 |   |   | 1,955,379 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                                  |                               | 7,251,808 |   |   | 6,418,471 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
| OPERATING                INCOME                                                                                       |                               | 1,415,245 |   |   | 1,027,866 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
| OTHER INCOME                (EXPENSES)                                                                                |                               |      |   |   |   |   |
|       Interest                and dividend income                                       |                               | 391,562   |   |   | 462,382 |   |
|       Gain                or (loss) on sale of investments                              |                               | 1,165,392 |   |   | (2,754 | ) |
|       Gain                or (loss) on disposal of assets                               |                               | (21,714   | ) |   | 33,385 |   |
|       Interest                expense                                                   |                               | (108,774  | ) |   | (105,409 | ) |
|       Income                from equity investments                                     |                               | 1,872,028 |   |   | 1,341,698 |   |
|       Other,                net                                                         |                               | 5,770     |   |   | (9,880 | ) |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                                  |                               | 3,304,264 |   |   | 1,719,422 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
|       INCOME                BEFORE INCOME TAXES                                         |                               | 4,719,509 |   |   | 2,747,288 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
|       INCOME                TAXES                                                       |                               | 1,900,632 |   |   | 869,351 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
|       NET                INCOME                                                         | $                                  | 2,818,877 |   | $ | 1,877,937 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                             |
|       NET                INCOME PER COMMON SHARE                                        | $                                  | 90.87     |   | $ | 60.40 |   |
|                                                                                                                  |                                    |      |  |   |
|                                                                                                                  |                               |      |   |   |   |   |
| The                accompanying notes are an integral part of these consolidated financial                statements. |

| 7 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA** |
|--------------------------------------------------------------------------------------|
|                                                                                 |
| **CONSOLIDATED                STATEMENTS OF STOCKHOLDERS’ EQUITY**             |
|                                                                                 |

|                                                                                                                       | Common                Stock |   | Retained                Earnings |   | Total      |   |
|-----------------------------------------------------------------------------------------------------------------------|-----------------------------|--------|----------------------------------|--------|------------|--------|
||
||
||
|                                                                                                             |
| Balance at                December 31, 2004 (Restated)                                                                |                        | 31,170 |                             | $      | 10,161,420 |   | $ | 5,889,583 |   | $ | 16,051,003 |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Comprehensive                income:                                                    |                        |   |                             |   |       |   |   |   |   |   |   |   |
|         Net                Income                                             |                        |   |                             |   |       |   |   | 1,877,937 |   |   | 1,877,937 |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Dividends                paid                                                           |                        |   |                             |   |       |   |   | (218,190 | ) |   | (218,190 | ) |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Common                stock redeemed, net                                               |                        | (147   | )                                |   | (52,479    | )      |   |   |   |   | (52,479 | ) |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Stated                value stock adjustment                                            |                        |   |                             |   | 966,270    |   |   | (966,270 | ) |   |   |   |
|                                                                                                                  |                             |   |                                  |   |            |   |  |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
| Balance at                December 31, 2005 (Restated)                                                                |                        | 31,023 |                             |   | 11,075,211 |   |   | 6,583,060 |   |   | 17,658,271 |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Comprehensive                income:                                                    |                        |   |                             |   |       |   |   |   |   |   |   |   |
|         Net                Income                                             |                        |   |                             |   |       |   |   | 2,818,877 |   |   | 2,818,877 |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Dividends                paid                                                           |                        |   |                             |   |       |   |   | (217,161 | ) |   | (217,161 | ) |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Common                stock redeemed, net                                               |                        | (7     | )                                |   | (2,758     | )      |   |   |   |   | (2,758 | ) |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
|      Stated                value stock adjustment                                            |                        |   |                             |   | 1,147,851  |   |   | (1,147,851 | ) |   |   |   |
|                                                                                                                  |                             |   |                                  |   |            |   |  |   |
|                                                                                                             |
| Balance at                December 31, 2006                                                                           |                        | 31,016 |                             | $      | 12,220,304 |   | $ | 8,036,925 |   | $ | 20,257,229 |   |
|                                                                                                                  |                             |   |                                  |   |            |   |  |   |
|                                                                                                                  |                        |   |                             |   |       |   |   |   |   |   |   |   |
| The                accompanying notes are an integral part of these consolidated financial                statements. |

| 8 |
|---|

| **BREDA TELEPHONE CORP.                AND SUBSIDIARIES                BREDA, IOWA**                                   |
|------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                   |
| **CONSOLIDATED                STATEMENTS OF CASH FLOWS                For the Years Ended December 31, 2006 and 2005** |
|                                                                                                                   |

|                                                                                                                                                                                                                                                                                                                                                                                   | 2006   |       | 2005                (Restated) |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|--------------------------------|--------|
||
|                                                                                                                                                                                                                                                                                                                                                                         |
| CASH FLOWS                FROM OPERATING ACTIVITIES                                                                                                                                                                                                                                                                                                                               |   |            |                           |   |  |   |
|       Net                income                                                                                                                                                                                                                                                                                                                     | $      | 2,818,877  |                           | $      | 1,877,937 |   |
|       Adjustments                to reconcile net income       to                cash provided by operating activities:                                                                                                                                                                                          |   |       |                           |   |   |   |
|            Depreciation                and amortization                                                                                                                                                                                                                                                                    |   | 960,685    |                           |   | 931,294 |   |
|            Deferred                income taxes                                                                                                                                                                                                                                                                            |   | 367,274    |                           |   | 50,699 |   |
|            Amortization                of investment tax credits                                                                                                                                                                                                                                                           |   | —    |                           |   | (4,701 | ) |
|            Amortization                of investment premium/discount - net                                                                                                                                                                                                                                                |   | 97,488     |                           |   | 64,521 |   |
|            Equity                income in unconsolidated affiliates, net of distributions            received                of $1,153,057 and $847,902 in 2006 and 2005,            respectively |   | (718,971   | )                              |   | (493,795 | ) |
|            Realized                (gain) or loss on sale of property                                                                                                                                                                                                                                                      |   | 21,714     |                           |   | (33,444 | ) |
|            Note                receivable discount                                                                                                                                                                                                                                                                         |   | (814       | )                              |   | (5,609 | ) |
|            Gain                on sale of investments - at cost                                                                                                                                                                                                                                                            |   | (1,165,392 | )                              |   | — |   |
|       Changes                in assets and liabilities:                                                                                                                                                                                                                                                                                             |   |       |                           |   |   |   |
|            (Increase)                Decrease in assets:                                                                                                                                                                                                                                                                   |   | (52,245    | )                              |   | (342,586 | ) |
|            Increase                (Decrease) in liabilities:                                                                                                                                                                                                                                                              |   | (587,657   | )                              |   | 371,513 |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|            Net                cash provided by operating activities                                                                                                                                                                                                                                                        |   | 1,740,959  |                           |   | 2,415,829 |   |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
| CASH FLOWS                FROM INVESTING ACTIVITIES                                                                                                                                                                                                                                                                                                                               |   |       |                           |   |   |   |
|       Capital                expenditures                                                                                                                                                                                                                                                                                                           |   | (390,462   | )                              |   | (1,488,128 | ) |
|       Proceeds                from the sale of assets                                                                                                                                                                                                                                                                                               |   | 116,247    |                           |   | 53,863 |   |
|       Purchase                of marketable securities                                                                                                                                                                                                                                                                                              |   | (3,177,070 | )                              |   | (1,100,603 | ) |
|       Purchase                of equity investments                                                                                                                                                                                                                                                                                                 |   | (960,000   | )                              |   | (403,264 | ) |
|       Purchase                of other investments - at cost                                                                                                                                                                                                                                                                                        |   | (5,978     | )                              |   | (3,340 | ) |
|       Proceeds                from the sale of property                                                                                                                                                                                                                                                                                             |   | —    |                           |   | 53,863 |   |
|       Proceeds                from the sale of marketable securities                                                                                                                                                                                                                                                                                |   | 1,755,003  |                           |   | 587,190 |   |
|       Proceeds                from the sale of other investments - at cost                                                                                                                                                                                                                                                                          |   | 1,343,701  |                           |   | 7,209 |   |
|       Repayment                of notes receivable                                                                                                                                                                                                                                                                                                  |   | —    |                           |   | 5,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|            Net                cash used in investing activities                                                                                                                                                                                                                                                            |   | (1,318,559 | )                              |   | (2,288,210 | ) |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
| CASH FLOWS                FROM FINANCING ACTIVITIES                                                                                                                                                                                                                                                                                                                               |   |       |                           |   |   |   |
|       Repayment                of long term debt                                                                                                                                                                                                                                                                                                    |   | (164,514   | )                              |   | (154,013 | ) |
|       Common                stock redeemed, net                                                                                                                                                                                                                                                                                                     |   | (2,758     | )                              |   | (52,479 | ) |
|       Dividends                paid                                                                                                                                                                                                                                                                                                                 |   | (217,161   | )                              |   | (218,190 | ) |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|            Net                cash used in financing activites                                                                                                                                                                                                                                                             | $      | (384,433   | )                              | $      | (424,682 | ) |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
| Net Increase                or (Decrease) in Cash and Cash Equivalents                                                                                                                                                                                                                                                                                                            | $      | 37,967     |                           | $      | (297,063 | ) |
|                                                                                                                                                                                                                                                                                                                                                                         |
| Cash and Cash                Equivalents at Beginning of Period                                                                                                                                                                                                                                                                                                                   |   | 739,741    |                           |   | 1,036,804 |   |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
| Cash and Cash                Equivalents at End of Period                                                                                                                                                                                                                                                                                                                         | $      | 777,708    |                           | $      | 739,741 |   |
|                                                                                                                                                                                                                                                                                                                                                                              |        |       |                                |   |
|                                                                                                                                                                                                                                                                                                                                                                         |
| Supplemental                Disclosures of Cash Flow Information      Cash                paid during the period for:                                                                                                                                                                                                                               |   |       |                           |   |   |   |
|            Interest                                                                                                                                                                                                                                                                                                        | $      | 108,774    |                           | $      | 116,809 |   |
|            Income                taxes                                                                                                                                                                                                                                                                                     | $      | 1,798,064  |                           | $      | 679,800 |   |

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

| 9 |
|---|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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.                                                                                                                                                                                                                                                                                                                                                                                                 |

| 10 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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.                                                                                                                                                                                                                                                                                                                                 |

| 11 |
|----|

| **BREDA TELEPHONE                        CORPORATION AND SUBSIDIARIES****BREDA,                        IOWA**
**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

| 12 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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                                                |   | $                         | (54,495 | ) | $ | 4,662,433 |   |
|   |       Government                securities |                          | 2,730,727 |                                                 |   | 9,981                                                 |   |                      | (45,299 | ) |   | 2,695,409 |   |
|   |                                                                     |                               |      |                                                      |   |                                                       |   |                           |    |
|   |                                                                     | $                             | 7,418,467 |                                                 | $      | 39,169                                                |   | $                         | (99,794 | ) | $ | 7,357,842 |   |
|   |                                                                     |                               |      |                                                      |   |                                                       |   |                           |    |
|   |                                                                     |                          |      |                                                 |   |                                                  |   |                      |    |   |   |   |   |
|   | December                31, 2005                                         |                          |      |                                                 |   |                                                  |   |                      |    |   |   |   |   |
|   |                                                                     |                          |      |                                                 |   |                                                  |   |                      |    |   |   |   |   |
|   | Held-to-Maturity:                                                        |                          |      |                                                 |   |                                                  |   |                      |    |   |   |   |   |
|   |       Municipal                bonds       | $                             | 4,735,425 |                                                 | $      | 31,136                                                |   | $                         | (64,618 | ) | $ | 4,701,943 |   |
|   |       Government                securities |                          | 1,363,282 |                                                 |   | 1,177                                                 |   |                      | (32,305 | ) |   | 1,332,154 |   |
|   |                                                                     |                               |      |                                                      |   |                                                       |   |                           |    |
|   |                                                                     | $                             | 6,098,707 |                                                 | $      | 32,313                                                |   | $                         | (96,923 | ) | $ | 6,034,097 |   |
|   |                                                                     |                               |      |                                                      |   |                                                       |   |                           |    |
|   |                                                                     |                          |      |                                                 |   |                                                  |   |                      |    |   |   |   |   |

|   |                                                                         | 2006   |      | 2005   |   |      |
|--------|-------------------------------------------------------------------------|--------|-----------|--------|--------|-----------|
||
|   | 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 |   |   |
|   |                                                    |                               |      |                           |   |      |

| 13 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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.                                   |

| 14 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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 |                           | $      | 1,849,883 |   |   |
|         | West Iowa                Cellular, Inc.        |   | 1,321,626 |                           |   | 1,084,694 |   |   |
|         | RSA #1, Ltd.                                   |   | 1,204,368 |                           |   | 1,084,056 |   |   |
|         | RSA #7,                Ltd.                    |   | 451,619   |                           |   | 356,856   |   |   |
|         | RSA #9, Ltd.                                   |   | 769,064   |                           |   | 920,170   |   |   |
|         | Desktop Media,                L.L.C.           |   | —   |                           |   | —   |   |   |
|         | Quad County                Communications      |   | 56,068    |                           |   | 60,341    |   |   |
|         | Carroll County                Wireless, L.L.C. |   | 63,038    |                           |   | 62,329    |   |   |
|         | Guthrie Group,                L.L.C.           |   | 54,619    |                           |   | 57,612    |   |   |
|         | Bug Tussel,                L.L.C.              |   | 617,298   |                           |   | 407,463   |   |   |
|         | Spiralight, L.L.C.                             |   | 960,000   |                           |   | —   |   |   |
|         |                                           |        |      |                                |   |      |
|         |                                           | $      | 7,562,375 |                           | $      | 5,883,404 |   |   |
|         |                                           |        |      |                                |   |      |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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                    | $                                          | 19,104,618 |   | $ | 19,071,667 |   |   |
|         | Liabilities               |                                       | 8,205,197  |   |   | 9,404,785 |   |   |
|         |                      |                                            |       |        |   |   |
|         | Equity                    | $                                          | 10,899,421 |   | $ | 9,666,882 |   |   |
|         |                      |                                            |       |        |   |   |
|    |
|         | Revenues                  | $                                          | 7,614,739  |   | $ | 7,371,191 |   |   |
|         | Expenses                  |                                       | 5,327,827  |   |   | 5,148,710 |   |   |
|         |                      |                                            |       |        |   |   |
|         | Net                Income | $                                          | 2,286,912  |   | $ | 2,222,481 |   |   |
|         |                      |                                            |       |        |   |   |
|         |                      |                                       |       |   |   |   |   |   |

|   | 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 | % |   |

| 15 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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                           |   |      |   |   |       |   |   |       |
|--------------|--------------------------------|--------|-----------|--------|--------|------------|--------|--------|------------|
||
||
||
|    |
|         | Assets                         | $      | 5,627,101 |   | $      | 11,825,263 |   | $      | 9,614,812  |   | $ | 6,239,458 |   |
|         | Liabilities                    |   | 340,599   |   |   | 966,659    |   |   | 3,302,667  |   |   | 1,625,995 |   |
||
|         | Equity                         | $      | 5,286,502 |   | $      | 10,858,604 |   | $      | 6,312,145  |   | $ | 4,613,463 |   |
||
|    |
|         | Revenues                       | $      | 2,328,612 |   | $      | 8,193,772  |   | $      | 16,900,499 |   | $ | 10,828,447 |   |
|         | Expenses                       |   | 980,885   |   |   | 6,021,512  |   |   | 13,176,017 |   |   | 8,318,020 |   |
||
|         | Net                Income      | $      | 1,347,727 |   | $      | 2,172,260  |   | $      | 3,724,482  |   | $ | 2,510,427 |   |
||
|         |                           |   |      |   |   |       |   |   |       |   |   |   |   |
|         | 2005                (Restated) |   |      |   |   |       |   |   |       |   |   |   |   |
|         |                           |   |      |   |   |       |   |   |       |   |   |   |   |

|         |                           | West Iowa                Cellular, Inc. |      | RSA                #1 |   | RSA                #7 |   | RSA                #9 |       |
|--------------|---------------------------|-----------------------------------------|-----------|-----------------------|--------|-----------------------|--------|-----------------------|------------|
||
|    |
|         | Assets                    | $                                       | 4,578,572 |                  | $      | 10,554,590            |   | $                     | 8,398,053  |   | $ | 6,861,727 |   |
|         | Liabilities               |                                    | 239,797   |                  |   | 927,484               |   |                  | 3,410,390  |   |   | 1,341,813 |   |
||
|         | Equity                    | $                                       | 4,338,775 |                  | $      | 9,627,106             |   | $                     | 4,987,663  |   | $ | 5,519,914 |   |
||
|    |
|         | Revenues                  | $                                       | 1,603,705 |                  | $      | 7,360,677             |   | $                     | 14,342,030 |   | $ | 11,242,490 |   |
|         | Expenses                  |                                    | 664,214   |                  |   | 6,117,008             |   |                  | 11,651,894 |   |   | 9,315,996 |   |
||
|         | Net                Income | $                                       | 939,491   |                  | $      | 1,243,669             |   | $                     | 2,690,136  |   | $ | 1,926,494 |   |
||
|         |                      |                                    |      |                  |   |                  |   |                  |       |   |   |   |   |

|   | 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. |

| 16 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA, IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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                    | $                                    | 516,434    |   | $ | 541,973 |   |   |
|         | Liabilities               |                                 | 1,926,356  |   |   | 1,821,559 |   |   |
||
|         | Equity                    | $                                    | (1,409,922 | )      | $ | (1,279,586 | ) |   |
||
|    |
|         | Revenues                  | $                                    | 2,230,723  |   | $ | 2,273,744 |   |   |
|         | Expenses                  |                                 | 2,443,209  |   |   | 2,493,224 |   |   |
||
|         | Net                Income | $                                    | (212,486   | )      | $ | (219,480 | ) |   |
||
|         |                      |                                 |       |   |   |   |   |   |

|   | 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                    | $                                         | 174,882 |   | $ | 188,842 |   |   |
|         | Liabilities               |                                      | 6,677   |   |   | 7,818 |   |   |
||
|         | Equity                    | $                                         | 168,205 |   | $ | 181,024 |   |   |
||
|    |
|         | Revenues                  | $                                         | 24,088  |   | $ | 12,250 |   |   |
|         | Expenses                  |                                      | 51,831  |   |   | 52,047 |   |   |
||
|         | Net                Income | $                                         | (27,743 | )      | $ | (39,797 | ) |   |
||
|         |                      |                                      |    |   |   |   |   |   |

|   | 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. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 17 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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        |   |    |   |   |    |
|--------------------------------------------------------|-------------|--------|---------|--------|--------|---------|
||
||
||
|           |
|                                                   | Assets      | $      | 189,113 |   | $      | 163,856 |   |   |
|                                                   | Liabilities |   | — |   |   | — |   |   |
|                                                   |             |   |         |        |        |
|                                                   | Equity      | $      | 189,113 |   | $      | 163,856 |   |   |
|                                                   |             |   |         |        |        |
|           |
|                                                   | Revenues    | $      | 29,685  |   | $      | 3,089   |   |   |
|                                                   | Expenses    |   | 27,559  |   |   | 12,069  |   |   |
|                                                   |             |   |         |        |        |
|                                                   | Net Income  | $      | 2,126   |   | $      | (8,980  | ) |   |
|                                                        |             |   |         |        |        |

|                                                   |                           |   |    |   |   |
|--------------------------------------------------------|--------------------------------|--------|---------|--------|--------|
|                                                   | 2005                (Restated) |
||
||
|                                                   |                                |        |         |        |        |
|           |
|                                                   | Assets                         | $      | 186,987 |   | $      | 181,618 |   |   |
|                                                   | Liabilities                    |   | — |   |   | 8,782 |   |   |
|                                                   |                                |   |         |   |   |
|                                                   | Equity                         | $      | 186,987 |   | $      | 172,836 |   |   |
|                                                   |                                |   |         |   |   |
|           |
|                                                   | Revenues                       | $      | 11      |   | $      | — |   |   |
|                                                   | Expenses                       |   | 8,604   |   |   | 4,319 |   |   |
|                                                   |                                |   |         |   |   |
|                                                   | Net                Income      | $      | (8,593  | )      | $      | (4,319 | ) |   |
|                                                   |                                |   |         |   |   |

|   |                                                                                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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.** |        |                                    |
|--------------------------------------------------------|---------------------------------------|--------|------------------------------------|
|                                                   | **2006**                              |        | **2005                (Restated)** |  |  |
|                                                   |                                       |        |                                    |  |  |
|           |
|                                                   | Assets                                | $      | 9,671,295                          |   | $ | 4,892,164 |   |   |
|                                                   | Liabilities                           |   | 4,740,197                          |   |   | 2,035,188 |   |   |
|                                                   |                                       |        |                                    |  |  |
|                                                   | Equity                                | $      | 4,931,098                          |   | $ | 2,856,976 |   |   |
|                                                   |                                       |        |                                    |  |  |
|                                                        |                                       |        |
|           |
|                                                   | Revenues                              | $      | 8,351,715                          |   | $ | 2,814,063 |   |   |
|                                                   | Expenses                              |   | 5,966,644                          |   |   | 1,946,990 |   |   |
|                                                   |                                       |        |                                    |  |  |
|                                                   | Net Income                            | $      | 2,385,071                          |   | $ | 867,073 |   |   |
|                                                   |                                       |        |                                    |  |  |

| 18 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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  |   | $      | 300,000 |   |   |
|                                                   | Rural Telephone Finance                Cooperative - certificates |   | 178,616  |   |   | 182,193 |   |   |
|                                                   | Rural Telephone Bank -                stock                       |   | —  |   |   | 165,789 |   |   |
|                                                   | Iowa Network Services -                stock                      |   | 78,705   |   |   | 78,705 |   |   |
|                                                   | NRTC Patronage Capital -                certificates              |   | 54,233   |   |   | 52,379 |   |   |
|                                                   | Other                                                             |   | 11,000   |   |   | 11,000 |   |   |
|                                                   |                                                                   |        |          |        |        |
|                                                   |                                                              | $      | 622,554  |   | $      | 790,066 |   |   |
|                                                   |                                                                   |        |          |        |        |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 |   | $ | 896,812 |   |   |
|                                                         |       Goodwill                acquired   |   |     | — |   |   | — |   |   |
|                                                         |       Goodwill                impairment |   |     | — |   |   | — |   |   |
|                                                         |                                                                        |        |          |         |        |
|                                                         | Balance, end of                year                                    |   | $        | 896,812 |   | $ | 896,812 |   |   |
|                                                         |                                                                        |        |          |         |        |

| 19 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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     |   | $      | 41,508 |   |   |
|                                                   |       Buildings                                              |   | 1,412,256  |   |   | 1,588,518 |   |   |
|                                                   |       Other                general support assets            |   | 1,713,384  |   |   | 1,708,212 |   |   |
|                                                   |       Central                office assets                   |   | 4,028,301  |   |   | 3,965,624 |   |   |
|                                                   |       Cable and                wire facilities               |   | 4,870,035  |   |   | 4,670,268 |   |   |
|                                                   |       Other                plant and equipment               |   | 991,668    |   |   | 902,127 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|                                                   |                                                                                       |   | 13,057,152 |   |   | 12,876,257 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|                                              |
|                                                   | Cable                television plant in service:                                          |   |            |   |   |  |   |   |
|                                                   |       Land                                                   | $      | 8,846      |   | $      | 11,661 |   |   |
|                                                   |       Buildings                                              |   | 132,673    |   |   | 132,673 |   |   |
|                                                   |       Other                plant and equipment               |   | 222,146    |   |   | 159,304 |   |   |
|                                                   |       Towers,                antennas and head end equipment |   | 1,603,930  |   |   | 1,592,410 |   |   |
|                                                   |       Cable and                wire facilities               |   | 1,573,544  |   |   | 1,573,544 |   |   |
|                                                   |       Franchises                                             |   | 30,092     |   |   | 30,092 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|                                                   |                                                                                       |   | 3,571,231  |   |   | 3,499,684 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|           |
|                                                   |       Total                property, plant and equipment     |   | 16,628,383 |   |   | 16,375,941 |   |   |
|                                                   |       Less                accumulated depreciation           |   | 12,119,234 |   |   | 11,202,573 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|                                                   |                                                                                       |   | 4,509,149  |   |   | 5,173,368 |   |   |
|                                                   |       Plant                under construction                |   | —    |   |   | 41,923 |   |   |
|                                                   |                                                                                            |        |            |        |        |
|                                                   |                                                                                       | $      | 4,509,149  |   | $      | 5,215,291 |   |   |
|                                                   |                                                                                            |        |            |        |        |

|   |                                                                                                                                                                                                                                                                                                                                                                           |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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. |

| 20 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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 |                           | $      | 596,898 |   |   |
|                                                   |       Deferred                tax expense                   |   | 275,838   |                           |   | 35,264  |   |   |
|                                                   |       Amortization                of investment tax credits |   | —   |                           |   | (4,701  | ) |   |
|                                                   | State income                taxes:                                                        |   |           |                           |   |         |   |   |
|                                                   |       Current                tax expense                    |   | 324,400   |                           |   | 226,455 |   |   |
|                                                   |       Deferred                tax expense                   |   | 91,435    |                           |   | 15,435  |   |   |
|                                                   |                                                                                           |        |           |                                |        |
|                                                   | Total income tax                expense                                                   | $      | 1,900,632 |                           | $      | 869,351 |   |   |
|                                                   |                                                                                           |        |           |                                |        |

|   |                                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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 |                           | $      | 894,953   |   |   |
|                                                   |       State                                                                       |   | 356,426   |                           |   | 276,287   |   |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                   |            Total                deferred tax liabilities |   | 1,513,000 |                           |   | 1,171,240 |   |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                        |                                                                                                                 |        |
|           |
|                                                   | Deferred                tax assets                                                                              |   |           |                           |   |           |   |   |
|                                                   |       Federal                                                                     |   | (125,259  | )                              |   | (143,679  | ) |   |
|                                                   |       State                                                                       |   | (40,404   | )                              |   | (47,497   | ) |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                   |            Total                deferred tax assets      |   | (165,663  | )                              |   | (191,176  | ) |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                        |                                                                                                                 |        |
|           |
|                                                   |       Net                deferred tax liabilities                                 | $      | 1,347,337 |                           | $      | 980,064   |   |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                        |                                                                                                                 |        |
|           |
|                                                   | Current portion                                                                                                 | $      | (12,291   | )                              | $      | (22,794   | ) |   |
|                                                   | Long-term                portion                                                                                |   | 1,359,628 |                           |   | 1,002,858 |   |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                   |       Net                deferred tax liability                                   | $      | 1,347,337 |                           | $      | 980,064   |   |   |
|                                                   |                                                                                                                 |        |           |                                |        |
|                                                        |                                                                                                                 |        |

|   |                                                                                                                                                                                                                                                                                                                                                                    |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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.                                                                                                                                                                                                    |

| 21 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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    |   | %                              |   | 34.0   |   | % |   |
|         | State income taxes, net of                federal benefit                    |   |   | 10.1    |   | %                              |   | 10.1   |   | % |   |
|         | Amortization of investment                tax credits                        |   |   | — |   | %                              |   | (0.1   | )      | % |   |
|         | Dividends received                deduction                                  |   |   | (0.6    | )      | %                              |   | (1.5   | )      | % |   |
|         | Tax exempt                interest                                           |   |   | (3.7    | )      | %                              |   | (5.0   | )      | % |   |
|         | Other                                                                        |   |   | 0.5     |   | %                              |   | (5.9   | )      | % |   |
|         |                                                                              |        |        |         |        |                                |        |
|         |       Effective                income tax rate |   |   | 40.3    |   | %                              |   | 31.6   |   | % |   |
|         |                                                                              |        |        |         |        |                                |        |

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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** |
|                                                                                                                                                                     |

|   |                                                                                                  |   | 2006   |      | 2005   |   |      |
|--------|-------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------|
||
|   | Long-term debt consists                of:                                                            |   |   |           |   |   |           |   |   |
|   | Rural Telephone Finance                Cooperative                                                    |   |
|   |       7.35%                (Fixed Rate)                                 |   | $      | 1,314,934 |   | $      | 1,479,448 |   |   |
|   |            Less                current portion |   |   | 175,729   |   |   | 164,513   |   |   |
|   |                                                                                                       |        |        |           |        |
|   |                                                                                                  |   | $      | 1,139,205 |   | $      | 1,314,935 |   |   |
|   |                                                                                                       |        |        |           |        |

|   |                                                                                                                                                   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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. |

| 22 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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.                                                                                                                                                                                                                                     |

| 23 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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   |   | $ | 8,667,053 |   |
| Interest income                                |   |                                                     | 372,967    |          |   | 16,385                                                      |   |      | 2,210     |   |   | 391,562 |   |
| Interest expense                               |   |                                                     | 108,774    |          |   | —                                                     |   |      | —   |   |   | 108,774 |   |
| Depreciation and                amortization   |   |                                                     | 668,691    |          |   | 144,894                                                     |   |      | 147,100   |   |   | 960,685 |   |
| Income tax expense                (benefit)    |   |                                                     | 2,035,978  |          |   | (132,002                                                    | )      |      | (3,344    | ) |   | 1,900,632 |   |
| Segment profit                (loss)           |   |                                                     | 3,510,729  |          |   | (184,972                                                    | )      |      | (506,880  | ) |   | 2,818,877 |   |
| Segment assets                                 |   |                                                     | 21,416,179 |          |   | 748,796                                                     |   |      | 1,131,865 |   |   | 23,296,840 |   |
| Expenditures for segment                assets |   |                                                     | 246,657    |          |   | 71,548                                                      |   |      | 72,257    |   |   | 390,462 |   |
|                                           |   |
| **2005**                                       |   |
|                                                |   |                                                     |       |          |   |                                                        |   |      |      |   |   |   |   |
| Revenues and                sales              |   | $                                                        | 6,063,713  |          | $      | 803,561                                                     |   | $         | 579,063   |   | $ | 7,446,337 |   |
| Interest income                                |   |                                                     | 446,657    |          |   | 14,924                                                      |   |      | 801       |   |   | 462,382 |   |
| Interest expense                               |   |                                                     | 105,409    |          |   | —                                                     |   |      | —   |   |   | 105,409 |   |
| Depreciation and                amortization   |   |                                                     | 644,533    |          |   | 187,918                                                     |   |      | 98,843    |   |   | 931,294 |   |
| Income tax expense                (benefit)    |   |                                                     | 1,000,148  |          |   | (118,130                                                    | )      |      | (12,667   | ) |   | 869,351 |   |
| Segment profit                (loss)           |   |                                                     | 2,382,331  |          |   | (193,859                                                    | )      |      | (310,535  | ) |   | 1,877,937 |   |
| Segment assets                                 |   |                                                     | 19,091,355 |          |   | 826,904                                                     |   |      | 1,172,982 |   |   | 21,091,241 |   |
| Expenditures for segment                assets |   |                                                     | 738,485    |          |   | 206,885                                                     |   |      | 542,758   |   |   | 1,488,128 |   |

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

| 24 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 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. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 25 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****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. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

| 26 |
|----|

| **BREDA                    TELEPHONE CORPORATION AND SUBSIDIARIES****BREDA,                    IOWA**

**NOTES                    TO CONSOLIDATED FINANCIAL STATEMENTS****December 31, 2006 and                    2005** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                      |

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

|                                                                   |
|------------------------------------------------------------------------|
| [THE REST                    OF THIS PAGE IS INTENTIONALLY LEFT BLANK] |

| 27 |
|----|

| **Item 13.                                                   Exhibits**

A list                    of the exhibits included as part of this Form 10-KSB/A is set forth in the                    Exhibit Index which immediately precedes such exhibits and is incorporated                    herein by this reference.

[THE REST                    OF THIS PAGE IS INTENTIONALLY LEFT BLANK] |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 28 |
|----|

| **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: December 20,                2007 | By:    | /s/ Steve                Frickenstein                      |
|                                   |   |                                                            |
|                                   |   | Steve Frickenstein, Chief                Executive Officer |
|                                   |   |                                                       |
|                                   | By:    | /s/ Jane Morlok                                            |
|                                   |   |                                                            |
|                                   |   | 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:  December                20, 2007          |   |   | Date: December 20,                2007              |
|   |                                                       |   |   |                                                     |
| By:    | /s/ Rick                Anthofer                           |   | By:    | /s/ Robert                Buelt                          |
|   |                                                            |   |   |                                                          |
|   | Rick Anthofer, Treasurer                and Director       |   |   | Robert Buelt,                Director                    |
|   | Date:  December                20, 2007          |   |   | Date: December 20,                2007              |
|   |                                                       |   |   |                                                     |
| By:    | /s/ Clifford                Neumayer                       |   | By:    | /s/ Dave                Grabner                          |
|   |                                                            |   |   |                                                          |
|   | Clifford Neumayer,                Director                 |   |   | Dave Grabner, Vice                President and Director |
|   | Date:  December                20, 2007          |   |   | Date: December 20,                2007              |
|   |                                                       |   |   |                                                     |
| By:    | /s/ Charles                Thatcher                        |   | By:    | /s/ Jane Morlok                                          |
|   |                                                            |   |   |                                                          |
|   | Charles Thatcher, President                and Director    |   |   | Jane Morlok, Chief                Financial Officer      |
|   | Date:  December                20, 2007          |   |   | Date: December 20,                2007                   |
|   |                                                       |   |   |                                                     |
| By:    | /s/ Steve                Frickenstein                      |   |   |                                                     |
|   |                                                            |   |   |                                                     |
|   | Steve Frickenstein, Chief                Executive Officer |   |   |                                                     |
|   | Date: December 20,                2007                     |   |   |                                                     |

| 29 |
|----|

| **EXHIBIT                    INDEX****Exhibits to Form                    10-KSB/A of Breda Telephone Corp.****for the Fiscal Year                    Ended December 31, 2006** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                            |
| **Description of                Exhibit****.**                                                                                                                                  |
|                                                                                                                                                                            |

|   | ***31.** | **Rule                13a-14(a)/15d-14(a) Certifications** |
|--------|----------|------------------------------------------------------------|
|   |     |                                                       |   |   |
|   |     | 31.1                                                       | Rule                13(a)-14(a) Certification of Chief Executive Officer | E-1 |
|   |     |                                                       |   |   |
|   |     | 31.2                                                       | Rule                13(a)-14(a) Certification of Chief Financial Officer | E-2 |
|   |     |                                                       |   |   |
|   | ***32.** | **Section 1350                Certifications**             |
|   |     |                                                       |   |   |
|   |     | 32.1                                                       | Section                1350 Certification of Chief Executive Officer | E-3 |
|   |     |                                                       |   |   |
|   |     | 32.2                                                       | Section                1350 Certification of Chief Financial Officer  | E-4 |

|                                            |
|-------------------------------------------------|
| *                    Included with this filing. |

|  |
|--|