Breda Telephone 10K/A 2008 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Amendment No. 1

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

o	TRANSITION REPORT PURSUANT TO 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.

(Exact name of registrant as specified in its charter)

Iowa

(State or other jurisdiction of incorporation or organization)

42-0895882

(I.R.S. Employer Identification No.)

112 East Main, P.O. Box 190, Breda, Iowa	51436
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (712) 673-2311

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yeso No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yeso No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer o	Accelerated filer o

Non-accelerated filer o	Smaller reporting companyx

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $15,505,667 as of March 1, 2009. The registrant's stock is not listed on an exchange or otherwise publicly traded, and the value of the registrant's stock for this purpose has been based upon the $509 per share redemption price of the registrant's stock as determined by its board of directors and that was in effect on March 1, 2009. In determining this value, the registrant has assumed that all of its directors and officers, including 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.

The number of shares outstanding of each of the registrant's classes of common stock as of March 1, 2009 was 30,851.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission with respect to the 2009 annual meeting of the shareholders of the registrant are incorporated by reference into Item 11 of Part III of this Form 10-K.

Explanatory Note

Breda Telephone Corp. (“Breda”) is filing this Amendment No. 1 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2008 which was originally filed with the Securities and Exchange Commission on March 31, 2009 (the “Original 10-K”) to amend the Original 10-K by substituting the “Item 8 Financial Statements” for the financial statements contained in Item 8 in the Original 10-K.

More specifically, this Amendment No. 1:

a) adds and includes the now unqualified audit opinion of Kiesling Associates LLP in place of the qualified opinion filed with the Original 10-K;

b) includes the audit opinion of Deloitte & Touche LLP for Breda’s outside equity investment, RSA #7 Limited Partnership (“RSA #7”), as described in Note 4 to Breda’s financial statements. No opinion was included in the Original 10-K; and

c) includes audited financial statements for Breda’s outside equity investment, Iowa 8 Monona Limited Partnership (“RSA #8”). Breda’s portion of RSA #8 is represented by its investment in West Iowa Cellular, Inc. as described in Note 4 to Breda’s financial statements. No financial statements nor audit opinion for RSA #8 were included in the Original 10-K. Note 4 to Breda’s financial statements reports Breda’s and its subsidiary, Westside Independent Telephone Company’s, combined 25% interest in West Iowa Cellular, Inc. West Iowa Cellular, Inc. is the 51% owner of West Iowa Cellular of Iowa Limited Partnership, which holds a 42.43% general partner interest in RSA #8.

The original Kiesling Associates LLP audit opinion was dated March 27, 2009. The attached unqualified opinion is dated March 31, 2010, except for Note 4, as to which the date is May 28, 2010. In the report dated March 27, 2009, Kiesling expressed an opinion that it was unable to examine evidence regarding the investments and earnings of RSA #7, RSA #8, Iowa RSA No. 9 Limited Partnership (“RSA #9”), and Spiralight Network, L.L.C. (SN). As of the date of this opinion for Note 4, Kiesling was able to obtain audited financial statements for 2008 supporting the Company’s investments in RSA #7, RSA #8, RSA #9, and SN as described in Note 4.

Except with respect to the scope of the opinion, the addition of the Deloitte & Touche LLP auditor opinion for RSA #7, and the addition of the audited financial statements for RSA #8, there were no changes to the financial statements for the years ending December 31, 2008 and December 31, 2007.

This Amendment No. 1 to Form 10K does not modify or update other information in the Original 10-K and does not purport to provide an update of any developments regarding Breda subsequent to the filing of the Original 10-K.

Item 8.

Financial Statements.

Breda Telephone Corp.

And Subsidiaries

Breda, IA

Consolidated Financial Statements

For the Years

Ended December 31, 2008 and 2007

BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

Contents

		Page

Consolidated Financial Statements:

	Independent Auditor’s Report	4

	Independent Auditors Report for RSA #7	6

	Consolidated Balance Sheets	7

	Consolidated Statements of Income	8

	Consolidated Statements of Stockholders’ Equity	9

	Consolidated Statements of Cash Flows	10

	Notes to Consolidated Financial Statements	11-32

Consolidated Financial Statements for RSA #8		33

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Breda Telephone Corp. and Subsidiaries

Breda, Iowa

We have audited the accompanying consolidated balance sheets of Breda Telephone Corp. (the Company) and subsidiaries as of December 31, 2008 and 2007, 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 did not audit the 2008 financial statements of Iowa RSA 7 (Iowa 7), Iowa 8 Monona Limited Partnership (Iowa 8), RSA No. 9 Limited Partnership (Iowa 9), and Spiralight Network LLC (SN) or the 2007 financial statements of Iowa 8, Iowa 9, and SN, the investments in which, as discussed in Note 4 to the financial statements, are accounted for by the equity method of accounting. The aggregate investment in Iowa 7, Iowa 8, Iowa 9, and SN was $3,161,819 as of December 31, 2008, and the equity in their net income was $1,134,097 for the year then ended. The aggregate investment in Iowa 8, Iowa 9, and SN was $2,889,873 as of December 31, 2007, and the equity in their net income was $244,777 for the year then ended. The financial statements of Iowa 7 Iowa 8, Iowa 9, and SN were audited by other auditors whose reports has been furnished to us, and our opinion insofar as it relates to the amounts included for Iowa 7, Iowa 8, Iowa 9, and SN are based solely on the reports of other auditors.

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

In our report dated March 27, 2009 we expressed an opinion that we were unable to examine evidence regarding the investments in and earnings of Iowa 7, Iowa 8, Iowa 9, and SN. As of the date of this opinion we were able to obtain audited financial statements for 2008 supporting the Company’s investments in Iowa 7, Iowa 8, Iowa 9, and SN as described in Note 4.

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In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Breda Telephone Corp. and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Kiesling Associates LLP

West Des Moines, Iowa

March 31, 2010

(except for Note 4, as to which the date is May 28, 2010)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of RSA 7 Limited Partnership:

We have audited the balance sheets of RSA 7 Limited Partnership (the “Partnership”) as of December 31, 2008 and 2007, and the related statements of operations, changes in partners’ capital, and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these 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 financial statements are free of material misstatement. The Partnership 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 Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 opinion, such financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

May 28, 2009

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BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONSOLIDATED BALANCE SHEETS
December 31, 2008 and December 31, 2007

	December 31,		December 31,
	2008		2007
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	1,237,007	$	1,104,327
Marketable securities		604,435		480,311
Accounts receivable, net of allowances of $3,415,824 and $676,422 in 2008 and 2007, respectively		3,290,640		1,740,266
Interest receivable		81,730		98,013
Notes receivable, less impairment of $445,253 in 2008		73,759		734,383
Inventory, at average cost		227,731		152,857
Prepaid income taxes		406,451		-
Other		111,261		17,973
Deferred income taxes		718,595		14,294
		6,751,609		4,342,424

OTHER NONCURRENT ASSETS
Marketable securities		5,440,550		7,374,754
Investments in unconsolidated affiliates at equity		8,593,958		7,950,825
Other investments at cost		599,131		611,707
Goodwill		896,812		896,812
		15,530,451		16,834,098

PROPERTY, PLANT AND EQUIPMENT		6,809,652		5,015,302

TOTAL ASSETS	$	29,091,712	$	26,191,824


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt	$	200,507	$	187,710
Accounts payable		1,751,821		850,432
Accrued taxes		191,943		390,659
Other		124,536		116,034
		2,268,807		1,544,835

LONG-TERM DEBT, less current portion		750,988		951,495

OTHER NONCURRENT LIABILITIES		1,947,128		1,213,607

STOCKHOLDERS' EQUITY
Common stock, Class A - no par value, 5,000,000 shares authorized, 27,924 and 28,923 shares issued and outstanding at $509 and $457 stated values, respectively		14,213,316		13,217,811
Common stock, Class B - no par value, 5,000,000 shares authorized, 2,927 and 2,013 shares issued and outstanding at $509 and $457 stated values, respectively		1,489,843		919,941
Retained earnings		8,421,630		8,344,135
		24,124,789		22,481,887

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	29,091,712	$	26,191,824

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

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended 2008 and 2007

	For the Years Ended
	2008			2007

OPERATING REVENUES	$	9,641,581		$	10,479,877

OPERATING EXPENSES
Cost of services		5,197,522			5,271,344
Depreciation and amortization		973,789			1,016,247
Selling, general, and administrative		2,360,566			2,227,901
		8,531,877			8,515,492

OPERATING INCOME		1,109,704			1,964,385

OTHER INCOME (EXPENSES)
Interest and dividend income		442,973			486,217
Gain on sale of investments		6,018			68,058
Gain on disposal of assets		15,561			13,958
Interest expense		(77,354	)		(91,871	)
Income from equity investments		1,750,682			1,447,478
Loss on impairment of note receivable		(445,253	)		-
Other, net		(43,477	)		(43,965	)
		1,649,150			1,879,875

INCOME BEFORE INCOME TAXES		2,758,854			3,844,260

INCOME TAXES		830,299			1,365,930

NET INCOME	$	1,928,555		$	2,478,330

NET INCOME PER COMMON SHARE	$	62.50		$	79.94

DIVIDENDS PER COMMON SHARE	$	8.00		$	7.00

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

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Common Stock, A and B Class						Retained
	Shares			Amount			Earnings			Total

Balance at December 31, 2006		31,016		$	12,220,304		$	8,036,925		$	20,257,229

Comprehensive income:
Net Income								2,478,330			2,478,330

Dividends paid								(217,112	)		(217,112	)

Common stock redeemed, net		(80	)		(36,560	)					(36,560	)

Stated value stock adjustment					1,954,008			(1,954,008	)

Balance at December 31, 2007		30,936			14,137,752			8,344,135			22,481,887

Comprehensive income:
Net Income								1,928,555			1,928,555

Dividends paid								(246,808	)		(246,808	)

Common stock redeemed, net		(85	)		(38,845	)					(38,845	)

Stated value stock adjustment					1,604,252			(1,604,252	)

Balance at December 31, 2008		30,851		$	15,703,159		$	8,421,630		$	24,124,789

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

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2008 and 2007


	2008			2007

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,928,555		$	2,478,330
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		973,789			1,016,247
Deferred income taxes		29,220			(148,024	)
Amortization of investment premium/discount - net		43,363			42,832
Equity income in unconsolidated affiliates, net of distributions received of $2,529,549 and $1,228,440 in 2008 and 2007, respectively		778,867			(219,038	)
(Gain) or loss on disposal of property		(15,561	)		(13,958	)
Loss on impairment of note receivable		445,253			-
(Gain) or loss on sale of marketable securities		(6,018	)		(13,063	)
(Gain) or loss on sale of equity investments		-			(97,100	)
Changes in assets and liabilities:
Increase in assets		(2,108,704	)		(731,908	)
Increase in liabilities		703,518			784,745

Net cash provided by operating activities		2,772,282			3,099,063

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(2,763,756	)		(1,319,496	)
Proceeds from the sale of assets		18,835			18,385
Purchase of marketable securities		(419,433	)		(2,040,367	)
Purchase of equity investments		(1,422,000	)		(169,412	)
Purchase of other investments - at cost		(15,621	)		(5,055	)
Proceeds from the sale of marketable securities		2,192,168			1,574,000
Proceeds from the sale of equity investments		-			63,000
Proceeds from the sale of other investments - at cost		28,197			15,902
Proceeds from the receipt of principal on note receivable		254,383			-
Issuance of notes receivable		(39,012	)		(480,000	)
Net cash used in investing activities		(2,166,239	)		(2,343,043	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term debt		(187,710	)		(175,729	)
Common stock redeemed, net		(38,845	)		(36,560	)
Dividends paid		(246,808	)		(217,112	)
Net cash used in financing activities	$	(473,363	)	$	(429,401	)

Net Increase in Cash and Cash Equivalents	$	132,680		$	326,619

Cash and Cash Equivalents at Beginning of Period		1,104,327			777,708

Cash and Cash Equivalents at End of Period	$	1,237,007		$	1,104,327

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	77,354		$	91,871
Income taxes	$	1,388,117		$	1,236,856

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

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

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.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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 and employee benefits.

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.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, Plant and Equipment (Continued)

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.

Long-Lived Assets

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

Income Taxes

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

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

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

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

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

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

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

Reclassifications

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

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 2.

MARKETABLE SECURITIES

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

			Gross		Gross
	Unamortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value

December 31, 2008

Held-to-Maturity:
Municipal bonds	$	3,641,774	$	77,334	$	(37,007	)	$	3,682,101
Government securities		2,403,211		13,959		(181,423	)		2,235,747
	$	6,044,985	$	91,293	$	(218,430	)	$	5,917,848

December 31, 2007

Held-to-Maturity:
Municipal bonds	$	4,848,490	$	59,473	$	(23,457	)	$	4,884,506
Government securities		3,006,575		10,572		(39,972	)		2,977,175
	$	7,855,065	$	70,045	$	(63,429	)	$	7,861,681

	2008		2007
Amounts classified as:
Current	$	604,435	$	480,311
Noncurrent		5,440,550		7,374,754
Total	$	6,044,985	$	7,855,065

The amortized cost and fair value of marketable debt securities at December 31, 2008, 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.

	Unamortized
	Cost		Fair Value
Due in one year or less	$	604,435	$	615,314
Due after one year through three years		1,212,452		1,235,195
Due after three years through five years		1,251,194		1,263,663
Due after five years		2,976,904		2,803,676
	$	6,044,985	$	5,917,848

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 3.

NOTE RECEIVABLE

Notes receivable consist of the following:

	December 31,			December 31,
	2008			2007

Jaguar Communications, Inc. - 4.81%		-			254,383
Spiralight Network, LLC - 8.5%		519,012			480,000
		519,012			734,383
Less impairment		(445,253	)		-
		73,759			734,383
Less current portion		(73,759	)		(734,383	)
	$	-		$	-

The Company, Desktop Media, LLC, and each of Desktop Media, LLC’s members signed a purchase agreement with Jaguar Communications, Inc., on June 28, 2007. Upon the closing of this purchase agreement, the Company surrendered its $439,974 instrument of indebtedness in exchange for a 28% equity interest in Desktop Media, LLC. The company had held a 17% ownership interest. The sale of Desktop Media, LLC, to Jaguar Communications, Inc. was finalized on September 28, 2007. The Company received cash of $63,000 and a short-term promissory note of $254,383, for its 28% ownership interest in Desktop Media, LLC. The promissory note dated September 28, 2007, accrued interest from September 28, 2007, at a rate of 4.81 percent per annum until payment was made in full, which was the earlier of (i) the twelve month anniversary of the date of the note, or (ii) upon the payment to Jaguar of the initial Foundation for Rural Service disbursement with respect to Jaguar’s currently pending loan request with the Rural Utilities Service (RUS). Jaguar paid the note balance and accrued interest in August of 2008.

The Company originated a promissory note to its unconsolidated affiliate, Spiralight Network, LLC, on September 5, 2007. The original amount of the note was $480,000 and accrued interest from September 5, 2007, at a rate of 8.5 percent per annum until payment was scheduled to be made in full on September 14, 2008. On September 14, 2008, the due date was extended one year, and $39,012 of accrued interest from September 5, 2007 through September 14, 2008, was added to the original note, bringing the note balance to $519,012. Interest will continue to accrue at 8.5 percent per annum until the loan is paid in full on September 14, 2009. The note may be prepaid. The Company has a 35.29% ownership interest in Spiralight Network, LLC. On December 31, 2008, the Company recorded an allowance against the note of $445,253, to offset additional losses in 2008 exceeding the company’s equity basis in Spiralight.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

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:

	2008		2007

Alpine Communications, L.C.	$	3,085,415	$	2,227,935
West Iowa Cellular, Inc.		1,632,882		1,492,056
RSA #1, Ltd.		1,561,117		1,395,594
RSA #7, Ltd.		555,730		554,043
RSA #9, Ltd.		973,207		1,024,903
Quad County Communications		37,021		102,928
Carroll County Wireless, L.L.C.		68,097		66,764
Guthrie Group, L.L.C.		31,488		40,222
Bug Tussel Wireless, L.L.C.		649,001		673,466
Spiralight Network, L.L.C.		-		372,914
	$	8,593,958	$	7,950,825

The Company has a 22.27% ownership interest in Alpine Communications, L.C. (Alpine) at December 31, 2008 and a 17.42% ownership interest at December 31, 2007. Alpine owns and operates several wireline telephone exchanges in northeastern Iowa, and also provides 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, 2008 and 2007 and the twelve months then ended.

	Alpine Communications, L.C.

	2008		2007

Assets	$	24,706,029	$	24,059,444
Liabilities		13,928,446		12,223,043
Equity	$	10,777,583	$	11,836,401

Revenues	$	7,981,757	$	7,699,177
Expenses		6,196,723		5,721,682
Net Income	$	1,785,034	$	1,977,495

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 4.

OTHER INVESTMENTS (Continued)

The Company’s percentage ownership interests in partnerships providing cellular telephone services within their respective service areas at December 31, 2008 and 2007 are as follows:

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

The following is a summary of condensed financial information pertaining to the companies described above as of December 31, 2008 and 2007 and the twelve months then ended.

2008
	West Iowa
	Cellular, Inc.		RSA #1		RSA #7		RSA #9

Assets	$	6,942,909	$	15,635,382	$	10,806,436	$	7,822,542
Liabilities		411,378		1,413,854		3,039,166		1,983,413
Equity	$	6,531,531	$	14,221,528	$	7,767,270	$	5,839,129

Revenues	$	3,675,022	$	10,374,220	$	21,795,116	$	13,048,641
Expenses		1,511,719		7,008,521		16,138,900		9,353,024
Net Income	$	2,163,303	$	3,365,699	$	5,656,216	$	3,695,617


2007
	West Iowa
	Cellular, Inc.		RSA #1		RSA #7		RSA #9

Assets	$	6,318,015	$	13,798,319	$	10,852,365	$	7,840,536
Liabilities		349,787		1,171,448		3,108,684		1,691,242
Equity	$	5,968,228	$	12,626,871	$	7,743,681	$	6,149,294

Revenues	$	3,172,534	$	9,546,084	$	19,339,038	$	12,046,486
Expenses		1,290,809		6,573,884		14,396,749		8,811,605
Net Income	$	1,881,725	$	2,972,200	$	4,942,289	$	3,234,881

As discussed previously in Note 3, the Company sold its ownership interest in Desktop Media, LLC (Desktop), on September 28, 2007. The Company had owned a 28% interest in Desktop on September 28, 2007. Desktop operates in southeastern Minnesota and is a provider of Internet and telephone services.

This investment was accounted for under the equity method with the Company recognizing its proportionate share of income and losses to the extent that the investment exceeds losses.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 4.

OTHER INVESTMENTS (Continued)

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

The Company has a 33.33% ownership interest in Quad County Communications (Quad County) at December 31, 2008 and 2007. 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, 2008 and 2007 and the twelve months then ended.

	Quad County Communications

	2008			2007

Assets	$	116,125		$	317,942
Liabilities		5,061			9,159
Equity	$	111,064		$	308,783

Revenues	$	35,407		$	190,867
Expenses		67,330			50,574
Net Income (Loss)	$	(31,923	)	$	140,293

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 4.

OTHER INVESTMENTS (Continued)

The Company’s percentage interests in Carroll County Wireless, L.L.C. and Guthrie Group, L.L.C. are each 33.33% at December 31, 2008 and 2007. Both companies have purchased the licenses to provide personal communication services (PCS); however, neither company has begun providing PCS services as of December 31, 2008.

The following is a summary of condensed financial information pertaining to the companies described above as of December 31, 2008 and 2007 and the twelve months then ended.

2008
	Carroll County		Guthrie
	Wireless, L.L.C.		Group, L.L.C.

Assets	$	204,291	$	94,463
Liabilities		-		-
Equity	$	204,291	$	94,463

Revenues	$	45,671	$	4,814
Expenses		41,671		37,017
Net Income (Loss)	$	4,000	$	(32,203	)

2007
	Carroll County		Guthrie
	Wireless, L.L.C.		Group, L.L.C.

Assets	$	200,291	$	120,667
Liabilities		-		-
Equity	$	200,291	$	120,667

Revenues	$	41,984	$	4,403
Expenses		30,806		47,963
Net Income (Loss)	$	11,178	$	(43,560	)

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 4.

OTHER INVESTMENTS (Continued)

The Company has a 9.94% ownership interest in Bug Tussel Wireless L.L.C. (Bug Tussel) at December 31, 2008 and 2007. 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, 2008 and 2007 and the twelve months then ended.

	Bug Tussel Wireless, L.L.C.

	2008			2007

Assets	$	17,627,571		$	14,954,261
Liabilities		12,955,330			9,398,031
Equity	$	4,672,241		$	5,556,230

Revenues	$	14,031,407		$	11,242,608
Expenses		14,256,407			9,838,227
Net Income (Loss)	$	(225,000	)	$	1,404,381

The Company has a 35.29% ownership interest in Spiralight Network L.L.C. (Spiralight) at December 31, 2008 and 2007. Spiralight provides fiber optic transport services in Wisconsin, Illinois and Minnesota.

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 Spiralight was eliminated at June 30, 2008. At December 31, 2008, additional losses in excess of the basis totaling $484,264 were applied against the outstanding note receivable.

The following is a summary of condensed financial information pertaining to the company described above as of December 31, 2008 and 2007 and the twelve months then ended.

	Spiralight Network, L.L.C.

	2008			2007

Assets	$	2,100,128		$	3,342,987
Liabilities		3,251,268			2,286,398
Equity	$	(1,151,140	)	$	1,056,589

Revenues	$	3,236,060		$	2,632,734
Expenses		5,886,060			4,434,893
Net Income (Loss)	$	(2,650,000	)	$	(1,802,159	)

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 4.

OTHER INVESTMENTS (Continued)

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:

	2008		2007

NECA Services, Inc. - stock	$	300,000	$	300,000
Rural Telephone Finance Cooperative - certificates		171,110		173,352
Iowa Network Services - stock		78,705		78,705
NRTC Patronage Capital - certificates		32,390		48,650
Other		16,926		11,000
	$	599,131	$	611,707

NOTE 5.

GOODWILL

Goodwill consists of the following:

	2008		2007

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, 2008 and 2007.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 6.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment includes the following:

	2008		2007

Telephone plant in service:
Land	$	43,408	$	41,408
Buildings		1,488,045		1,406,982
Other general support assets		2,398,948		2,305,688
Central office assets		5,566,624		4,063,231
Cable and wire facilities		6,025,376		5,086,640
Other plant and equipment		1,148,988		1,075,939
		16,671,389		13,979,888

Cable television plant in service:
Land	$	8,847	$	8,846
Buildings		132,673		132,673
Other plant and equipment		182,497		207,753
Towers, antennas and head end equipment		1,613,382		1,613,382
Cable and wire facilities		1,573,544		1,573,544
Franchises		30,092		30,092
		3,541,035		3,566,290

Total property, plant and equipment		20,212,424		17,546,178
Less accumulated depreciation		13,727,112		13,008,767
		6,485,312		4,537,411
Plant under construction		324,340		477,891
	$	6,809,652	$	5,015,302

Telephone cable and wire facilities of approximately $814,000 and cable television head end equipment of approximately $506,000 were fully or nearly fully depreciated in 2008. Depreciation on depreciable property resulted in composite rates of 5.2% and 6.0% for 2008 and 2007, respectively.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 7.

INCOME TAXES

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

	2008			2007

Federal income taxes:
Current tax expense	$	509,074		$	1,147,635
Deferred tax expense		55,623			(112,633	)
State income taxes:
Current tax expense		292,005			366,319
Deferred tax expense		(26,403	)		(35,391	)
Total income tax expense	$	830,299		$	1,365,930

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

	2008			2007

Deferred tax liabilities
Federal	$	1,645,669		$	1,097,484
State		538,397			341,792
Total deferred tax liabilities		2,184,066			1,439,276

Deferred tax assets
Federal		(671,364	)		(178,802	)
State		(284,169	)		(61,161	)
Total deferred tax assets		(955,533	)		(239,963	)

Net deferred tax liabilities	$	1,228,533		$	1,199,313

Current portion	$	(718,595	)	$	(14,294	)
Long-term portion		1,947,128			1,213,607
Net deferred tax liability	$	1,228,533		$	1,199,313

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

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:

	2008			2007

Statutory federal income tax rate		34.0	%		34.0
State income taxes, net of federal benefit		10.1	%		10.1
Amortization of bond premiums		1.0	%		0.4
Dividends received deduction		(8.0	) %		(0.5	)
Tax exempt interest		(9.1	) %		(2.2	)
Other		2.5	%		(6.3	)
Effective income tax rate		30.5	%		35.5

The Company files consolidated tax returns including their subsidiaries, Prairie Telephone Co., Inc., Westside Independent Telephone Company, and Tele-Services, Ltd. BTC, Inc. is a subsidiary of Prairie Telephone Co., Inc.

NOTE 8.

LONG-TERM DEBT

Long-term debt consists of:

	2008		2007

Rural Telephone Finance Cooperative (RTFC)
7.00% (Variable Rate)	$	951,495	$	1,139,205
Less current portion		200,507		187,710
	$	750,988	$	951,495

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

2009	$	200,507
2010		214,177
2011		228,779
2012		244,377
2013		63,655

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 8.

LONG-TERM DEBT (Continued)

On July 17, 2008, interest on the RTFC loan switched from calculating at a fixed rate based on a 360-day year, to calculating at a variable rate based on a 365-day year. At that time the interest rate also changed from 7.35 percent to 6.5 per cent. On October 1, 2008, the interest changed from 6.5 per center to 7.0 per cent. The following is a summary of the changes in the interest rate through December 31, 2008, as described above.

Fixed rate prior to 7/17/2008 - variable rate thereafter	7.35	%
7/17/2008 to 10/01/2008	6.50	%
10/01/2008 to 12/31/2008	7.00	%

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.

The security and loan agreements underlying the RTFC notes contain certain restrictions on distributions to stockholders, investment in, or loans to others, and payment of management fees or an increase in management fees. The Company is restricted from making any distributions, except as might be specifically authorized in writing in advance by the RTFC noteholders, unless minimum net worth exceeds 40% and distributions are limited to certain levels of prior year cash margins. In addition, the Company is required to achieve a debt service coverage ratio of not less than 1.25 and a times interest earned ratio of not less than 1.5. As of December 31, 2008 and December 31, 2007, all loan covenants were met.

The Company has a line of credit with the RTFC for $1,500,000. The approved line of credit is available until November 15, 2010. The interest rate at December 31, 2008 is 8.5%. No funds were advanced under the line at December 31, 2008. 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, 2008 is 8.5%. No funds were advanced under the line at December 31, 2008.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

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.

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

	Local						Internet
	Exchange						Service
2008	Carrier			Broadcast			Provider			Total

Revenues and sales	$	8,277,059		$	651,163		$	713,359		$	9,641,581
Interest income		407,138			16,962			18,873			442,973
Interest expense		(77,354	)		-			-			(77,354	)
Depreciation and amortization		797,112			35,478			141,199			973,789
Income tax expense (benefit)		866,403			(174,132	)		138,028			830,299
Segment profit (loss)		2,453,972			(193,502	)		(331,915	)		1,928,555
Segment assets		24,603,860			478,407			3,817,502			28,899,769
Expenditures for segment assets		3,021,459			(75,806	)		(181,897	)		2,763,756

2007

Revenues and sales	$	9,109,763		$	711,461		$	658,653		$	10,479,877
Interest income		464,530			14,442			7,245			486,217
Interest expense		(91,871	)		-			-			(91,871	)
Depreciation and amortization		787,176			69,421			159,650			1,016,247
Income tax expense (benefit)		1,306,950			(145,410	)		204,390			1,365,930
Segment profit (loss)		3,319,045			(202,015	)		(638,700	)		2,478,330
Segment assets		23,798,048			651,181			1,742,595			26,191,824
Expenditures for segment assets		1,356,649			(78,056	)		40,903			1,319,496

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 10.

NET INCOME PER COMMON SHARE

Net income per common share for 2008 and 2007 was computed by dividing the weighted average number of shares of common stock outstanding into the net income. The weighted average number of shares of common stock outstanding for the years ended December 31, 2008 and 2007 were 30,859 and 31,003, respectively.

NOTE 11.

STOCK VALUE ADJUSTMENT

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

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

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 12.

STOCK RESTRICTIONS

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

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

(i)	Series 1 – these shares represent Class A shares issued after March 29, 2007. These shares have voting rights of one vote per shareholder, regardless of the number of Class A shares held.

(ii)

Series 2 – these shares were issued and outstanding immediately prior to the March 29, 2007 effective date and with respect to which the holders of such shares had one vote per shareholder, regardless of the number of Class A shares held. The shares had previously been shares of the former Class A stock of the Corporation that were issued and outstanding on February 28, 1995.

(iii)

Series 3 – these shares were issued and outstanding immediately prior to the March 29, 2007 effective date and with respect to which the holders of such shares had one vote for each such share. The shares had previously been shares of the former Class A stock of the Corporation that were issued and outstanding on February 28, 1995. These shares have voting rights of one vote per share.

The Class B Common Stock represent non-voting shares issued after March 29, 2007.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 12.

STOCK RESTRICTIONS (Continued)

Restrictions on the stock include the following:

·	Individuals purchasing Class A, Series 1 stock must be living within the Breda and Lidderdale service areas of the Company and subscribe to its telephone services. Individuals or entities can purchase Class B, non-voting stock without service area or service participation restrictions.

Shareholders are individually limited to ownership of not more than one percent of the joint outstanding Class A and Class B stock unless ownership was prior to the Articles of Restatement. There may be two stockholders per household and their joint ownership may not exceed two percent of the joint outstanding Class A and Class B stock.

·	Shareholders shall not sell any shares of stock owned unless the Company has been given first right of refusal.

·	Stock transfers require consent of the board of directors.

·	The Company may adopt bylaws, which may further restrict the transfer or ownership of capital stock of the Company.

NOTE 13.

EMPLOYEE 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 2008 and 2007 were $128,624 and $158,110, 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, 2008 and 2007.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

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, 2008 and 2007 were approximately $1,281,000 and $1,143,000, respectively. At December 31, 2008 and 2007, $172,796 and $156,870 were due from RSA #9 for commissions.

NOTE 16.

CONCENTRATION 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 53% of its 2008 revenues from access revenues and assistance provided by the Federal Universal Service Fund. As a result of the Telecommunications Act of 1996, the manner in which access revenues and Universal Service Funds are determined is currently being modified by regulatory bodies.

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

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

The Company routes conference bridging minutes of use through its switch in Carroll, Iowa. The Company generates revenues from this service based on tariffed rates per minutes of use, which is charged to interexchange carriers. In April 2007 certain interexchange carriers began disputing the charges and the volume of minutes on which the charges were billed, and stopped payment until the dispute could be settled. The Company is currently corresponding with the interexchange carriers regarding the payment of the unpaid access charges. The Company’s estimated unpaid access charges resulting from conference bridge services as of December 31, 2008 is $5,844,593. The Company has recorded an estimated allowance of $3,131,299 for non-payment of these charges as of December 31, 2008, and has accrued additional accounts payable for related costs associated with the conference bridge minutes of $1,545,294.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008 and 2007

NOTE 17.

NONCASH INVESTING ACTIVITIES

Noncash investing activities included $7,657 and $207,331 during the years ended December 31, 2008 and 2007, respectively, relating to plant and equipment additions placed in service during the years then ended, which are reflected in accounts payable at year-end.

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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Iowa 8 Monona Limited Partnership

Financial Statements

As of December 31, 2008 and 2007, and for the years ended December 31, 2008 and 2007, and Report of Independent Registered Public Accounting Firm

The information contained herein is confidential and is not to be reproduced or published without the express authorization of Verizon Wireless. It is intended solely for the use by authorized Verizon Wireless and Iowa 8 Monona Limited Partnership personnel.

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Iowa 8 Monona Limited Partnership

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		35

	Balance Sheets As of December 31, 2008 and 2007	36

	Statements of Operations For the years ended December 31, 2008 and 2007	37

	Statements of Changes in Partners’ Capital For the years ended December 31, 2008 and 2007	38

	Statements of Cash Flows For the years ended December 31, 2008 and 2007	39

	Notes to Financial Statements	40-48

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners of Iowa 8 Monona Limited Partnership:

We have audited the accompanying balance sheets of Iowa 8 Monona Limited Partnership (the “Partnership”) as of December 31, 2008 and 2007, and the related statements of operations, changes in partners’ capital, and cash flows for each of the two years in the period ended December 31, 2008. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

/s/ Deloitte & Touche LLP

Atlanta, GA

May 28, 2010

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Iowa 8 Monona Limited Partnership

Balance Sheets - As of December 31, 2008 and 2007

(Dollars in Thousands)

ASSETS	2008		2007

CURRENT ASSETS:
Accounts receivable, net of allowance of $68 and $46	$	1,645	$	1,577
Unbilled revenue		202		179
Due from affiliate		2,609		3,143
Prepaid expenses and other current assets		3		3

Total current assets		4,459		4,902

PROPERTY, PLANT AND EQUIPMENT―Net		5,911		5,157

TOTAL	$	10,370	$	10,059

LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	497	$	459
Advance billings and customer deposits		514		455

Total current liabilities		1,011		914

LONG TERM LIABILITIES		20		17

Total liabilities		1,031		931

COMMITMENTS AND CONTINGENCIES (see Notes 6 and 7)

PARTNERS' CAPITAL		9,339		9,128

TOTAL	$	10,370	$	10,059

See notes to financial statements.

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Iowa 8 Monona Limited Partnership

Statements of Operations - Years Ended December 31, 2008 and 2007

(Dollars in Thousands)

	2008		2007

OPERATING REVENUES (see Note 5 for transactions with affiliates and related parties):
Service revenues, net	$	17,932	$	15,940
Equipment, net and other revenues		5,289		4,624

Total operating revenues		23,221		20,564

OPERATING COSTS AND EXPENSES (see Note 5 for transactions with affiliates and related parties):
Cost of service (excluding depreciation and amortization
related to network assets included below)		6,685		6,213
Cost of equipment		3,034		2,184
Selling, general and administrative		5,557		5,207
Depreciation and amortization		857		899

Total operating costs and expenses		16,133		14,503

OPERATING INCOME		7,088		6,061

INTEREST INCOME, NET		123		154

NET INCOME	$	7,211	$	6,215

ALLOCATION OF NET INCOME:
Limited partners	$	4,151	$	3,579
General Partner		3,060		2,636

See notes to financial statements.

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Iowa 8 Monona Limited Partnership

Statements of Changes in Partners’ Capital - Years Ended December 31, 2008 and 2007

(Dollars in Thousands)

	General
	Partner			Limited Partners
	West Iowa			West Iowa
	Cellular of			Cellular of												Total
	Iowa Limited			Iowa Limited			West Iowa			Commnet			Cellco			Partners'
	Partnership			Partnership			Cellular, Inc.			Cellular, Inc.			Partnership			Capital

BALANCE―January 1, 2007	$	3,357		$	1,259		$	1,682		$	1,292		$	323		$	7,913

Distributions		(2,121	)		(795	)		(1,063	)		(817	)		(204	)		(5,000	)

Net Income		2,636			742			1,446			1,137			254			6,215

Distribution of Partnership Interest on September 30, 2007		-			(1,206	)		615			591			-			-

BALANCE―December 31, 2007		3,872			-			2,680			2,203			373			9,128

Distributions		(2,970	)		-			(2,055	)		(1,689	)		(286	)		(7,000	)

Net Income		3,060			-			2,117			1,740			294			7,211

BALANCE―December 31, 2008	$	3,962		$	-		$	2,742		$	2,254		$	381		$	9,339

See notes to financial statements.

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Iowa 8 Monona Limited Partnership

Statements of Cash Flows - Years Ended December 31, 2008 and 2007

(Dollars in Thousands)

	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	7,211		$	6,215
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		857			899
Provision for losses on accounts receivable		166			109
Changes in certain assets and liabilities:
Accounts receivable		(234	)		(206	)
Unbilled revenue		(23	)		29
Prepaid expenses and other current assets		-			2
Accounts payable and accrued liabilities		19			(6	)
Advance billings and customer deposits		59			51
Other long term liabilities		3			1

Net cash provided by operating activities		8,058			7,094

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net		(1,592	)		(1,201	)
Change in due from affiliate, net		534			(893	)

Net cash used in investing activities		(1,058	)		(2,094	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners		(7,000	)		(5,000	)

Net cash used in financing activities		(7,000	)		(5,000	)

CHANGE IN CASH		-			-

CASH―Beginning of year		-			-

CASH―End of year	$	-		$	-

NONCASH TRANSACTIONS FROM INVESTING ACTIVITIES:

Accruals for Capital Expenditures	$	21		$	2

See notes to financial statements.

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Iowa 8 Monona Limited Partnership

Notes to Financial Statements - Years Ended December 31, 2008 and 2007

(Dollars in Thousands)

1.	ORGANIZATION AND MANAGEMENT

Iowa 8 Monona Limited Partnership – Iowa 8 Monona Limited Partnership (the “Partnership”) was formed in 1989. The principal activity of the Partnership is providing cellular service in the Iowa 8 rural service area.

The partners and their respective ownership percentages as of December 31, 2008 and 2007 are as follows:

General Partner:
West Iowa Cellular of Iowa Limited Partnership	42.4242	%

Limited Partners:
West Iowa Cellular, Inc.	29.3637	%
CommNet Cellular, Inc.*	24.1288	%
Cellco Partnership	4.0833	%

*CommNet Cellular, Inc. (“Managing Partner”), is a wholly-owned subsidiary of Cellco Partnership (“Cellco”) doing business as Verizon Wireless and holds a 49% ownership interest in West Iowa Cellular of Iowa Limited Partnership.

On September 30, 2007, West Iowa Cellular of Iowa Limited Partnership distributed its 15.9092% limited partnership interest in the partnership to West Iowa Cellular, Inc. (8.1137%) and CommNet Cellular, Inc. (7.7955%).

The partners and their respective ownership percentages prior to September 30, 2007 were as follows:

General Partner:
West Iowa Cellular of Iowa Limited Partnership	42.4242	%

Limited Partners:
West Iowa Cellular of Iowa Limited Partnership	15.9092	%
West Iowa Cellular, Inc.	21.2500	%
CommNet Cellular, Inc. *	16.3333	%
Cellco Partnership	4.0833	%

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2.	SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates—The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Estimates are used for, but not limited to, the accounting for: allocations, allowance for uncollectible accounts receivable, unbilled revenue, depreciation and amortization, useful lives and impairment of assets, accrued expenses, and contingencies. Estimates and assumptions are periodically reviewed and the effects of any material revisions are reflected in the financial statements in the period that they are determined to be necessary.

Revenue Recognition— The Partnership earns revenue by providing access to our network (access revenue) and for usage of our network (usage revenue), which includes voice and data revenue. Customers are associated with the partnership based upon mobile identification number. In general, access revenue is billed one month in advance and is recognized when earned; the unearned portion is classified in advance billings in the balance sheet. Usage revenue is recognized when service is rendered and included in unbilled revenue until billed. Equipment sales revenue associated with the sale of wireless devices is recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. Customer activation fees are considered additional consideration, and to the extent that we incur costs in excess of fees, these fees are recorded as equipment and other revenue at the time of customer acceptance. For agreements involving the resale of third-party services in which we are considered the primary obligor in the arrangements, we record revenue gross. The roaming rates charged by the Partnership to Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic basis (see Note 5).

The Partnership reports taxes imposed by governmental authorities on revenue-producing transactions between us and our customers that are within the scope of the accounting standard related to how taxes collected from customers and remitted to governmental authorities should be presented in the statement of operations on a gross basis.

Cellular service revenues resulting from cell site agreements with affiliates of Cellco are recognized based upon a rate per minute of use. (see Note 5).

During 2008 and 2007, the Partnership recorded $2,646 and $2,635, respectively, within Equipment and other revenues associated with certain funds approved by the Universal Service Administrative Company (“USAC”), an independent, not-for-profit corporation designated as the administrator for the federal Universal Service Fund (“USF”) by the Federal Communications Commission (“FCC”).

Operating Costs and Expenses—Operating expenses include expenses incurred directly by the Partnership, as well as an allocation of certain selling, general and administrative, and operating costs incurred by Cellco or its affiliates on behalf of the Partnership. Employees of Cellco provide services performed on behalf of the Partnership. These employees are not employees of the Partnership and therefore, operating expenses include direct and allocated charges of salary and employee benefit costs for the services provided to the Partnership. Cellco believes such allocations, principally based on the Partnership’s percentage of total customers, customer gross additions or minutes of use, are reasonable. The roaming rates charged to the Partnership by Cellco do not necessarily reflect current market rates. The Partnership will continue to re-evaluate the rates on a periodic basis (see Note 5).

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Income Taxes—The Partnership is not a taxable entity for federal and state income tax purposes. Any taxable income or loss is apportioned to the partners based on their respective partnership interests and is reported by them individually.

Inventory—Inventory is owned by Cellco and is not recorded on the Partnership’s financial statements. Upon sale, the related cost of the inventory is transferred to the Partnership at Cellco’s cost basis and included in the accompanying statements of operations.

Allowance for Doubtful Accounts—The Partnership maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of customers to make required payments. Estimates are based on the aging of the accounts receivable balances and the historical write-off experience, net of recoveries.

Property, Plant and Equipment—Property, plant and equipment primarily represents costs incurred to construct and expand capacity and network coverage on mobile telephone switching offices and cell sites. The cost of property, plant and equipment is depreciated over its estimated useful life using the straight-line method of accounting. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease. Major improvements to existing plant and equipment are capitalized. Routine maintenance and repairs that do not extend the life of the plant and equipment are charged to expense as incurred.

Upon the sale or retirement of property, plant and equipment, the cost and related accumulated depreciation or amortization is eliminated from the accounts and any related gain or loss is reflected in the statements of operations. All property, plant and equipment purchases are made through an affiliate of Cellco. Transfers of property, plant and equipment between Cellco and affiliates are recorded at net book value.

Network engineering and interest costs incurred during the construction phase of the Partnership’s network and real estate properties under development are capitalized as part of property, plant and equipment and recorded as construction-in-progress until the projects are completed and placed into service.

FCC Licenses - The FCC issues licenses that authorize cellular carriers to provide service in specific cellular geographic service areas. The FCC grants licenses for terms of up to ten years. In 1993 the FCC adopted specific standards to apply to cellular renewals, concluding it will reward a license renewal to a cellular licensee that meets certain standards of past performance. Historically, the FCC has granted license renewals routinely and at nominal costs, which are expensed as incurred. All wireless licenses issued by the FCC that authorize the Partnership to provide cellular services are recorded on the books of Cellco. The current term of the Partnership’s FCC license expires in October 2009. Cellco believes it will be able to meet all requirements necessary to secure renewal of the Partnership’s cellular license.

Valuation of Assets— Long-lived assets, including property, plant and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Cellco re-evaluates the useful life determination for wireless licenses at least annually to determine whether events and circumstances continue to support an indefinite useful life. Moreover, Cellco has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Partnership’s wireless licenses.

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Cellco tests its wireless licenses for potential impairment annually, and more frequently if indications of impairment exist. Cellco evaluates its licenses on an aggregate basis, using a direct income-based value approach. This approach estimates fair value using a discounted cash flow analysis to estimate what a marketplace participant would be willing to pay to purchase the aggregated wireless licenses as of the valuation date. If the fair value of the aggregated wireless licenses is less than the aggregated carrying amount of the wireless licenses, an impairment is recognized. In addition, Cellco believes that under the Partnership agreement it has the right to allocate, based on a reasonable methodology, any impairment loss recognized by Cellco for all licenses included in Cellco’s national footprint. Cellco does not charge the Partnership for the use of any FCC license recorded on its books. Cellco evaluated its wireless licenses for potential impairment as of December 15, 2008 and December 15, 2007. These evaluations resulted in no impairment of wireless licenses.

Fair Value Measurements – In accordance with the accounting standard regarding fair value measurements, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. This accounting standard also establishes a three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities

Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 - No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Concentrations—To the extent the Partnership’s customer receivables become delinquent, collection activities commence. No single customer is large enough to present a significant financial risk to the Partnership. The Partnership maintains an allowance for losses based on the expected collectibility of accounts receivable.

Cellco and the Partnership rely on local and long distance telephone companies, some of whom are related parties, and other companies to provide certain communication services. Although management believes alternative telecommunications facilities could be found in a timely manner, any disruption of these services could potentially have an adverse impact on the Partnership’s operating results.

Although Cellco attempts to maintain multiple vendors for its network assets and inventory, which are important components of its operations, they are currently acquired from only a few sources. Certain of these products are in turn utilized by the Partnership and are important components of the Partnership’s operations. If the suppliers are unable to meet Cellco’s needs as it builds out its network infrastructure and sells service and equipment, delays and increased costs in the expansion of the Partnership’s network infrastructure or losses of potential customers could result, which would adversely affect operating results.

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Financial Instruments—The Partnership’s trade receivables and payables are short-term in nature, and accordingly, their carrying value approximates fair value.

Due from affiliate—Due from affiliate principally represents the Partnership’s cash position. Cellco manages, on behalf of the Partnership, all cash, inventory, investing and financing activities of the Partnership. As such, the change in due from affiliate is reflected as an investing activity or a financing activity in the statements of cash flows depending on whether it represents a net asset or net liability for the Partnership.

Additionally, administrative and operating costs incurred by Cellco on behalf of the Partnership, as well as property, plant and equipment transactions with affiliates, are charged to the Partnership through this account. Interest income or interest expense is based on the average monthly outstanding balance in this account and is calculated by applying the Cellco’s average cost of borrowing from Verizon Communications, Inc., which was approximately 4.0% and 5.4% for the years ended December 31, 2008 and 2007, respectively. Included in net interest income is interest income of $124 and $154 for the years ended December 31, 2008 and 2007, respectively, related to the due from affiliate.

Distributions – Distributions are made to partners at the discretion of the General Partner based upon the Partnership’s operating results, cash availability and financing needs as determined by the General Partner at the date of distribution.

Recently Adopted Accounting Pronouncements - In December 2007, the FASB issued the standard establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the retained interest and gain or loss when a subsidiary is deconsolidated. This statement is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 prospectively, except for the presentation and disclosure requirements which will be applied retrospectively for all periods presented. The adoption of this standard on January 1, 2009 did not have an impact on the financial statements.

In December 2007, the FASB issued the accounting standard that requires the use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and broadens the scope to all transactions and other events in which one entity obtains control over one or more other businesses. This statement is effective for business combinations or transactions entered into for fiscal years beginning on or after December 15, 2008. The adoption of this standard on January 1, 2009 did not have an impact on the financial statements.

In March 2008, the FASB issued the accounting standard that requires additional disclosures for derivative instruments and hedging activities that include how and why an entity uses derivatives, how these instruments and the related hedged items are accounted for under this standard and related interpretations, and how derivative instruments and related hedged items affect the entity’s financial position, results of operations and cash flows. This standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of this standard on January 1, 2009 did not have an impact on the financial statements.

On January 1, 2009, the Partnership adopted the accounting standard regarding the determination of the useful life of intangible assets that removes the requirement to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions, and replaces it with a requirement that an entity consider its own historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical experience. This standard also requires entities to disclose information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangements. The adoption did not result in a significant impact to the Partnership financial statements.

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3.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following as of December 31, 2008 and 2007:

	Useful Lives	2008		2007

Land		$	75	$	75
Buildings and improvements	10-40 years		2,141		1,675
Cellular plant equipment	3-15 years		8,510		8,221
Leasehold improvements	5 years		176		116

			10,902		10,087

Less accumulated depreciation and amortization			4,991		4,930

Property, plant and equipment, net		$	5,911	$	5,157

Capitalized network engineering costs of $54 and $87 were recorded during the years ended December 31, 2008 and 2007, respectively. Construction-in-progress included in certain classifications shown above, principally cellular plant equipment, amounted to $165 and $63 at December 31, 2008 and 2007, respectively.

4.	CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following as of December 31, 2008 and 2007:

	2008		2007

Accounts payable	$	427	$	395
Accrued liabilities		70		64
Accounts payable and accrued libilities	$	497	$	459

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Advance billings and customer deposits consist of the following as of December 31, 2008 and 2007:

	2008		2007

Advance billings	$	455	$	404
Customer deposits		59		51
Advance billings and customer deposits	$	514	$	455

5.	TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

In addition to fixed asset purchases and equipment cost of sales (see Note 2), affiliate transactions include, but are not limited to, allocations, intra-company roaming, the salaries and related expenses of employees of Cellco, and direct payments to a related party of the Partnership, such as rent or commissions. Revenues and expenses were allocated based on the Partnership’s percentage of customers or gross customer additions or minutes of use, where applicable. Cellco believes the allocations are reasonable. The affiliate transactions are not necessarily conducted at arm’s length.

Significant transactions with affiliates (Cellco and its related entities) and other related parties, including allocations and direct charges, are summarized as follows for the years ended December 31, 2008 and 2007:

	2008			2007
Service revenues (a)	$	4,277		$	3,895
Equipment and other revenues (b)		(22	)		(7	)
Cost of service (c)		5,568			5,043
Cost of equipment (d)		292			250
Selling, general and administrative (e)		3,484			3,227

(a)	Service revenues include roaming revenues relating to customers of other affiliated markets, long distance, data and allocated contra-revenues including revenue concessions.

(b)	Equipment and other revenues include cell sharing revenues, sales of handsets and accessories and allocated contra-revenues including equipment concessions and coupon rebates.

(c)	Cost of service includes roaming costs relating to customers roaming in other affiliated markets, switch costs and allocated cost of telecom, long distance, and handset applications.

(d)	Cost of equipment includes allocations of handsets, accessories and other costs incurred by Cellco on behalf of the Partnership and excludes the cost of inventory transferred to the Partnership of $2,742 and $1,934 during 2008 and 2007, respectively, as discussed in Note 2.

(e)	Selling, general and administrative expenses includes allocations and/or directly charged commissions, customer billing, office telecom, customer care, salaries, sales and marketing and advertising.

The Partnership is involved in a cell sharing agreement with a related affiliate in which the Partnership receives revenues from the affiliate for the use of the affiliate’s cell site.

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Cell sharing revenues were $72 and $66 for the years ended December 31, 2008 and December 31, 2007, respectively.

6.	COMMITMENTS

Cellco, on behalf of the Partnership, and the Partnership itself have entered into operating leases for facilities, equipment and spectrum used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments. Rent expense is recorded on a straight-line basis. The noncancelable lease term used to calculate the amount of the straight-line rent expense is generally determined to be the initial lease term, including any optional renewal terms that are reasonably assured. Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the noncancelable lease term. For the years ended December 31, 2008 and 2007, the Partnership recognized a total of $104 and $98, respectively, as rent expense related to payments under these operating leases, which was included in cost of service in the accompanying statements of operations.

Aggregate future minimum rental commitments under noncancellable operating leases, excluding renewal options that are not reasonably assured, for the years shown are as follows:

Years	Amount

2009	$	101
2010		97
2011		96
2012		86
2013		72
2014 and thereafter		214

Total minimum payments	$	666

From time to time Cellco enters into purchase commitments, primarily for network equipment, on behalf of the Partnership.

7.	CONTINGENCIES

Cellco is subject to lawsuits and other claims including class actions, product liability, patent infringement, intellectual property, antitrust, partnership disputes, and claims involving relations with resellers and agents. Cellco is also defending lawsuits filed against itself and other participants in the wireless industry alleging various adverse effects as a result of wireless phone usage. Various consumer class action lawsuits allege that Cellco violated certain state consumer protection laws and other statutes and defrauded customers through misleading billing practices or statements. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against Cellco and the Partnership and/or insurance coverage. All of the above matters are subject to many uncertainties, and outcomes are not predictable with assurance.

The Partnership may be allocated a portion of the damages that may result upon adjudication of these matters if the claimants prevail in their actions. Consequently, the ultimate liability with respect to these matters at December 31, 2008 cannot be ascertained. The potential effect, if any, on the financial statements of the Partnership, in the period in which these matters are resolved, may be material.

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In addition to the aforementioned matters, Cellco is subject to various other legal actions and claims in the normal course of business. While Cellco’s legal counsel cannot give assurance as to the outcome of each of these matters, in management’s opinion, based on the advice of such legal counsel, the ultimate liability with respect to any of these actions, or all of them combined, will not materially affect the financial statements of the Partnership.

8.	RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

	Balance at		Additions		Write-offs			Balance at
	Beginning		Charged to		Net of			End
	of the Year		Operations		Recoveries			of the Year

Accounts Receivable Allowances:
2008	$	46	$	166	$	(144	)	$	68
2007		38		109		(101	)		46

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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: May 28, 2010	By:	/s/ Charles J. Deisbeck
	Charles J. 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: May 28, 2010		Date: May 28, 2010

By:	/s/ Rick Anthofer	By:	/s/ Dr. Dan McDermott
	Rick Anthofer, Treasurer and Director		Dr. Dan McDermott, Director
	Date: May 28, 2010		Date: May 28, 2010

By:	/s/ Clifford Neumayer	By:	/s/ Dean Schettler
	Clifford Neumayer, Director		Dean Schettler, Director
	Date: May 28, 2010		Date: May 28, 2010

By:	/s/ Charles Thatcher	By:	/s/ Jane Morlok
	Charles Thatcher, President and Director		Jane Morlok, Chief Financial Officer
	Date: May 28, 2010		Date: May 28, 2010

By:	/s/ Charles J. Deisbeck	By:	/s/ Kevin Batcher
	Charles J. Deisbeck, Chief Executive Officer		Kevin Batcher, Chief Operations Officer
	Date: May 28, 2010		Date: May 28, 2010

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EXHIBIT INDEX

Exhibits to Form 10-K of Breda Telephone Corp.

for the Fiscal Year Ended December 31, 2008

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

Breda Telephone Inactive 10-K/A2008 FY Annual report (amended)