Breda Telephone 10-K/A 2006 FY Annual report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB/A

Amendment No. 2

(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)

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

EXPLANATORY NOTE

Breda Telephone Corp. ("Breda") is filing this Amendment No. 2 to its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006 which was originally filed with the Securities and Exchange Commission on March 28, 2007 (the "Original 10-KSB") and amended December 20, 2007 (“Amendment No. 1”) to amend the Original 10-KSB by substituting the "Item 7 Financial Information" for the financial statements contained in Item 7 in the Original 10-KSB. Amendment No. 2 substitutes “Item 7 Financial Information” for Item 7 of Amendment No. 1 (being the audited financial statements of Breda for the year ended December 31, 2006) and, more specifically, adds and includes the now unqualified 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.

The original audit opinion was dated May 24, 2007.  The attached unqualified opinion is dated November 17, 2008.  In the attached opinion, the auditors state that in their report dated January 27, 2006 (except for West Iowa Cellular, Inc. and RSA #7, Ltd. described in Note 4, for which the date is August 23, 2007), they had expressed an opinion that they were unable to examine evidence regarding the investment and earnings of RSA No. 9 Limited Partnership.  As of the date of this opinion the auditors were able to obtain audited financial statements for 2005 supporting the Company's investment in RSA No. 9 Limited Partnership as described in Note 4 to the financial statements.

Except with respect to the scope of the opinion, there were no changes to the financial statements for the years ending December 31, 2006 and December 31, 2005.

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.

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

Item 7. Financial Statements

Breda Telephone Corp.

And Subsidiaries

Breda, IA

Consolidated Financial Statements

For the Years

Ended December 31, 2006 and 2005

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BREDA TELEPHONE CORPORATION

BREDA, IOWA

Contents

	Page
Independent Auditors’ Report	4
Consolidated Financial Statements:
Consolidated Balance Sheets	5 – 6
Consolidated Statements of Income	7
Consolidated Statements of Stockholders’ Equity	8
Consolidated Statements of Cash Flows	9
Notes to Consolidated Financial Statements	10– 27

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Breda Telephone Corporation and Subsidiaries

Breda, Iowa

We have audited the accompanying consolidated balance sheets of Breda Telephone Corporation (an Iowa corporation) and subsidiaries as of December 31, 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.

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

In our report dated January 27, 2006, except for West Iowa Cellular, Inc. and RSA #7, Ltd. described in Note 4, for which the date is August 23, 2007, we expressed an opinion that we were unable to examine evidence regarding the investment and earnings of RSA No. 9 Limited Partnership.  As of the date of this opinion we were able to obtain audited financial statements for 2005 supporting the Company’s investment in RSA No. 9 Limited Partnership as described in Note 4.

In our opinion, 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.

West Des Moines, Iowa

May 24, 2007, except for West Iowa Cellular, Inc.

and RSA #7, Ltd., for which the date is August 23,

2007, and RSA No. 9 Limited Partnership, for which

the date is November 17, 2008, described in Note 4.

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2006 and 2005

	December 31,		December 31,
	2006		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

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

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONDENSED CONSOLIDATED BALANCE SHEETS

December 31, 2006 and 2005

	December 31,		December 31,
	2006		2005
			(Restated)
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.

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31, 2006 and 2005

	For the Years Ended
	2006			2005
				(Restated)
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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

	Common Stock						Retained
	Shares			Amount			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.

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONDENSED 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

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

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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.

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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.

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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.

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

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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Certain reclassifications have been made to the 2005 consolidated financial statements to conform with the 2006 presentation.

NOTE 2. MARKETABLE SECURITIES

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

			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			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

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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.

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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:

			2005
	2006		(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.
			2005
	2006		(Restated)
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	%

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NOTE 4. OTHER INVESTMENTS (Continued)

The following is a summary of condensed financial information pertaining to the companies described above as of December 31, 2006 and 2005 and the twelve months then ended.

2006
	West Iowa
	Cellular, Inc.		RSA #1		RSA #7		RSA #9
Assets	$	5,627,101	$	11,825,263	$	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.

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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.
				2005
	2006			(Restated)
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
				2005
	2006			(Restated)
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-

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
	Carroll County			Guthrie
	Wireless, L.L.C.			Group, L.L.C.
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)
	Carroll County			Guthrie
	Wireless, L.L.C.			Group, L.L.C.
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.
			2005
	2006		(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

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.

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NOTE 4. OTHER INVESTMENTS (Continued)

Partnershipinvestments 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

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.

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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.

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NOTE 7. INCOME TAXES

Income taxes reflected in the Consolidated Statements of Income consist of the following:

			2005
	2006		(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		324,399		226,455
Deferred tax expense		91,436		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:

				2005
	2006			(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.

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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:

				2005
	2006			(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 purposes.  For financial reporting purposes, income taxes are presented as if each member of the consolidated group were a separate taxpayer.

NOTE 8. LONG-TERM DEBT

Long-term debt consists of:

	2006		2005
Rural Telephone Finance Cooperative
7.35% (Fixed Rate)	$	1,314,934	$	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.

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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-

NOTE 9. OPERATING SEGMENTS INFORMATION (Continued)

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

	Local					Internet
	Exchange					Service
2006	Carrier		Broadcast			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 (Restated)
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-

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.

-25-

NOTE 14. ASSET RETIREMENT OBLIGATION

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

The Company has determined it does not have a material legal obligation to remove long-term assets and accordingly, there have been no liabilities recorded for the years ended December 31, 2006 and 2005.

NOTE 15. RELATED PARTY TRANSACTIONS

The Company receives commission revenue from RSA #9, Ltd. Partnership (RSA #9) based on cellular service activation and retention.  The Company has a 16.7% ownership interest in RSA #9.  Commissions received by the Company for the years ended December 31, 2006 and 2005 were approximately $1,111,000 and $1,144,000, respectively.  At December 31, 2006 and 2005, $147,351 and $125,260 were due from RSA #9 for commissions.

NOTE 16. CONCENTRATIONS OF CREDIT RISK

The Company grants credit to local service customers, all of whom are located in the service area, broadcast customers, Internet customers and telecommunications intrastate and interstate long distance carriers.

The Company received 51% of its 2006 revenues from access revenues and assistance provided by the Federal Universal Service Fund.  As a result of the Telecommunications Act of 1996, the manner in which access revenues and Universal Service Funds are determined is currently being modified by regulatory bodies.

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

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

NOTE 17. CHANGE IN ACCOUNTING METHOD

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

-26-

NOTE 17. CHANGE IN ACCOUNTING METHOD (Continued)

The change in accounting method in 2005 resulted in a $103,976 increase in income from equity investments.  Net of the income tax expense increase of $40,775, the 2005 net income increased $63,201.  Net income per common share increased to $60.40 per share from $58.37 per share.

The result of the change in accounting method is a change in retained earnings at December 31, 2004 of $153,315.

NOTE 18. NONCASH INVESTING ACTIVITIES

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

-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 14, 2009	By:	/s/ Charles Deisbeck
		Charles Deisbeck, 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, Vice President and Director		Neil Kanne, Secretary and Director
	Date:  December 14, 2009		Date:  December 14, 2009
By:	/s/ Rick Anthofer	By:	/s/ Dr. Dan McDermott
	Rick Anthofer, Treasurer and Director		Dr. Dan McDermott, Director
	Date:  December 14, 2009		Date:  December 14, 2009
By:	/s/ Clifford Neumayer	By:	/s/ Dean Shettler
	Clifford Neumayer, Director		Dean Shettler, Director
	Date:  December 14, 2009		Date:  December 14, 2009
By:	/s/ Charles Thatcher	By:	/s/ Jane Morlok
	Charles Thatcher, President and Director		Jane Morlok, Chief Financial Officer
	Date:  December 14, 2009		Date: December 14, 2009
By:	/s/ Charles Deisbeck
	Charles Deisbeck, Chief Executive Officer
	Date: December 14, 2009

-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.