Breda Telephone 10K/A 2009 Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Amendment No. 2

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

For the fiscal year ended December 31, 2009

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	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, 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.

Yes o 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.

Yes o 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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o 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 company 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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $16,692,252 as of June 30, 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 $547 per share redemption price of the registrant's stock as determined by its board of directors and that was in effect on June 30, 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, 2010 was 26,032 shares of Class A and 4,819 shares of Class B.

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 2010 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. 2 to its Annual Report on Form 10-K for the fiscal year ended December 31, 2009 which was originally filed with the Securities and Exchange Commission on March 31, 2010 (the “Original 10-K") to amend the Original 10-K by substituting the Report of Independent Registered Public Accounting Firm in “Item 8 Financial Statements” for the Report of Independent Registered Public Accounting Firm contained in Item 8 in the Original 10-K.

More specifically, this Amendment No. 2:

adds and includes the now unqualified audit opinion of Kiesling Associates LLP in place of the qualified opinion filed with the Original 10-K. Other than the unqualified audit opinion for the years ending December 31, 2008, and December 31, 2009, there were no changes to the financial statements themselves;

includes the audit opinion of Deloitte & Touche LLP for Breda’s outside equity investment, RSA #7 Limited Partnership (“RSA #7”); includes the 2008 audit opinion of Schenck SC for Breda’s outside equity investment, Spiralight Network, LLC; and includes the 2009 audit opinion of Schenck SC for Hilbert Communications, LLC as described in Note 4 to Breda’s financial statements. No opinion of either Deloitte & Touche LLP or Schenck SC was included in the Original 10-K; and

includes audited financial statements for Breda’s outside equity investments, Iowa 8 Monona Limited Partnership (“RSA #8”), and Iowa RSA No. 9 Limited Partnership (“RSA #9”). 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. 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 audit opinion was dated March 30, 2010. The audit opinion included in Amendment No. 1 to the Original 10-K was dated March 30, 2010 except for Note 4, which was dated May 28, 2010. In the report dated March 30, 2010 Kiesling expressed an opinion that they were unable to examine evidence regarding the investments and earnings of RSA #7, RSA #8, RSA #9, and Hilbert Communications. As of the date of this opinion, Kiesling was able to obtain audited financial statements for 2008 and 2009 supporting the Company’s investments in RSA #7, RSA #8, RSA #9, and Hilbert Communications as described in Note 4.

Except with respect to the scope of the opinion, there were no changes to the March 30, 2010 audit opinion.

Item 8.

Financial Statements.

Breda Telephone Corp.

And Subsidiaries

Breda, IA

Consolidated Financial Statements

For the Years

Ended December 31, 2009 and 2008

BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

Contents

	Page

Consolidated Financial Statements:

Independent Auditor’s Reports	3

Consolidated Balance Sheets	8

Consolidated Statements of Income	9

Consolidated Statements of Stockholders’ Equity	10

Consolidated Statements of Cash Flow	11

Notes to Consolidated Financial Statements	12

Consolidated Financial Statements for RSA #8	31

Consolidated Financial Statements for RSA #9	46

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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, 2009 and 2008, 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 2009 financial statements of Hilbert Communications LLC (HC), Iowa RSA 7 LP (RSA #7), Iowa 8 Monona LP (RSA #8), and RSA No. 9 LP (RSA #9), or the 2008 financial statements of RSA #7, RSA #8, RSA #9, and Spiralight Network LLC (SN), the investments in which, as discussed in Note 4 to the financial statements, are accounted for by the equity method of accounting. The investments in HC, RSA #7, RSA #8, and RSA #9 were $3,446,578 at December 31, 2009 and the equity in their net income was $977,537 for the year then ended. The investments in RSA #7, RSA #8, RSA #9 and SN were $3,161,819 at December 31, 2008, and the equity in their net income was $1,134,097 for the year then ended. The financial statements of HC, RSA #7, RSA #8, RSA #9, and SN were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for HC, RSA #7, RSA #8, RSA #9, and SN, is based solely on the report of the 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 30, 2010 we expressed an opinion that we were unable to examine evidence regarding the 2009 investments and earnings of HC, RSA #7, RSA #8, and RSA #9. As of the date of this opinion we were able to obtain audited financial statements for 2009 supporting the Company’s investments in HC, RSA #7, RSA #8, and RSA #9 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 Corporation and subsidiaries as of December 31, 2009 and 2008, 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 30, 2010

(except for Note 4, as to which the date is December 31, 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, 2009 and 2008, 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, 2009. 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 audits 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, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

August 9, 2010

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INDEPENDENT AUDITORS' REPORT

To the Members

Spiralight Network, LLC

Green Bay, Wisconsin

We have audited the accompanying balance sheets of Spiralight Network, LLC as of December 31, 2008 and 2007 and the related statements of operations, members' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 our audits provide a reasonable basis for our opinion.

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

/s/ Schenck SC

Certified Public Accountants

April 20, 2009

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INDEPENDENT AUDITORS' REPORT

To the Members and Board of Directors

Hilbert Communications, LLC and Subsidiaries

Green Bay, Wisconsin

We have audited the accompanying consolidated balance sheet of Hilbert Communications, LLC and Subsidiaries as of December 31, 2009 and the related consolidated statements of operations and cash flows for the year 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 audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. 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 our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hilbert Communications, LLC and Subsidiaries as of December 31, 2009, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Schenck SC

Certified Public Accountants

March 16, 2010

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BREDA TELEPHONE CORP. AND SUBSIDIARIES

BREDA, IOWA

CONSOLIDATED BALANCE SHEETS

December 31, 2009 and December 31, 2008

	December 31,		December 31,
	2009		2008 (Restated)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	4,987,960	$	1,317,462
Marketable securities		490,724		604,435
Accounts receivable, net of allowances of $159,831 and $3,415,824 in 2009 and 2008, respectively		1,928,483		3,290,640
Interest receivable		62,693		81,730
Notes receivable, less impairment of $445,253 in 2008		-		73,759
Inventory, at average cost		297,678		227,731
Prepaid income taxes		1,310,951		406,451
Other		291,977		112,438
Deferred income taxes		58,862		718,595
		9,429,328		6,833,241

OTHER NONCURRENT ASSETS
Marketable securities		5,223,501		5,440,550
Investments in unconsolidated affiliates at equity		8,537,047		8,525,861
Other investments at cost		655,542		673,590
Goodwill		918,715		896,812
		15,334,805		15,536,813

PROPERTY, PLANT AND EQUIPMENT		8,102,372		6,857,853

TOTAL ASSETS	$	32,866,505	$	29,227,907


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Current portion of long-term debt	$	14,144	$	200,507
Accounts payable		2,091,609		1,751,822
Accrued taxes		157,740		191,943
Other		136,722		124,536
		2,400,215		2,268,808

LONG-TERM DEBT, less current portion		1,548,575		750,988

OTHER NONCURRENT LIABILITIES		2,468,101		1,947,128

STOCKHOLDERS' EQUITY
Common stock, Class A - no par value, 5,000,000 shares authorized, 26,109 and 27,924 shares issued and outstanding at $547 and $509 stated values, respectively		14,281,623		14,213,316
Common stock, Class B - no par value, 5,000,000 shares authorized, 4,742 and 2,927 shares issued and outstanding at $547 and $509 stated values, respectively		2,593,874		1,489,843
Retained earnings		9,508,416		8,421,630
		26,383,913		24,124,789

MINORITY INTEREST		65,701		136,194

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	32,866,505	$	29,227,907

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 2009 and 2008

	For the Years Ended
	2009			2008 (Restated)

OPERATING REVENUES	$	9,069,766		$	9,687,237

OPERATING EXPENSES
Cost of services		4,550,643			5,226,498
Depreciation and amortization		1,040,454			979,478
Selling, general, and administrative		2,510,292			2,367,572
		8,101,389			8,573,548

OPERATING INCOME		968,377			1,113,689

OTHER INCOME (EXPENSES)
Interest and dividend income		391,559			442,989
Gain on sale of investments		7,513			6,018
Gain or (Loss) on disposal of assets		(71,883	)		15,561
Interest expense		(26,321	)		(77,354	)
Income from equity investments		1,827,141			1,749,349
Gain or (Loss) on impairment of note receivable		445,253			(443,013	)
Other, net		(39,770	)		(45,717	)
		2,533,492			1,647,833

INCOME BEFORE INCOME TAXES		3,501,869			2,761,522

INCOME TAXES		998,335			830,299

NET INCOME BEFORE MINORITY INTEREST		2,503,534			1,931,223

MINORITY INTEREST		2,398			(2,668	)

NET INCOME	$	2,505,932		$	1,928,555

NET INCOME PER COMMON SHARE	$	81.23		$	62.50

DIVIDENDS PER COMMON SHARE	$	8.00		$	8.00

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, 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

Comprehensive income:
Net Income								2,505,932			2,505,932

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

Common stock redeemed, net											-

Stated value stock adjustment					1,172,338			(1,172,338	)

Balance at December 31, 2009		30,851		$	16,875,497		$	9,508,416		$	26,383,913

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, 2009 and 2008

	2009			2008 (Restated)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,505,932		$	1,928,555
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		1,040,454			979,478
Minority interest		(2,398	)		2,668
Deferred income taxes		1,180,707			29,220
Amortization of investment premium/discount - net		36,764			43,363
Equity income in unconsolidated affiliates, net of distributions received of $1,831,455 and $2,529,549 in 2009 and 2008, respectively		4,314			780,200
(Gain) or loss on disposal of property		71,883			(15,561	)
(Gain) or loss on impairment of note receivable		(445,253	)		445,253
Gain on sale of marketable securities		(7,513	)		(6,018	)
Changes in assets and liabilities:
(Increase) or decrease in assets		205,305			(2,108,704	)
Increase or (decrease) in liabilities		(3,824	)		703,518

Net cash provided by operating activities	$	4,586,371		$	2,781,972

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(2,114,856	)		(2,763,749	)
Proceeds from the sale of assets		79,594			18,835
Purchase of marketable securities		(598,466	)		(419,433	)
Purchase of equity investments		(15,500	)		(1,422,000	)
Purchase of other investments - at cost		(6,055	)		(15,621	)
Purchase of investment in a subsidiary		(68,095	)		-
Proceeds from the sale of marketable securities		899,975			2,192,168
Proceeds from the sale of other investments - at cost		24,103			28,197
Proceeds from the receipt of principal on note receivable		519,011			254,384
Issuance of notes receivable		-			(39,012	)
Net cash used in investing activities	$	(1,280,289	)	$	(2,166,231	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long term debt		(953,105	)		(187,710	)
Proceeds from the issuance of long term debt		1,564,329			-
Common stock redeemed, net		-			(38,845	)
Dividends paid		(246,808	)		(246,808	)
Net cash provided by (used in) financing activities	$	364,416		$	(473,363	)

Net Increase in Cash and Cash Equivalents	$	3,670,498		$	142,378

Cash and Cash Equivalents at Beginning of Period		1,317,462			1,175,084

Cash and Cash Equivalents at End of Period	$	4,987,960		$	1,317,462

Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest	$	26,321		$	77,354
Income taxes	$	722,128		$	1,388,117

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, 2009 and 2008

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. The consolidated financial statements also include the accounts of the Company’s 66 2/3% owned subsidiary, Carroll County Wireless, L.L.C.

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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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

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 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.

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 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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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Long-Lived Assets

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

Income Taxes

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

Revenue Recognition

The Company recognizes revenues when earned regardless of the period in which they are billed. The Company is required to provide telephone service to subscribers within its defined service territory.Local network, Internet and cable television service revenues are recognized over the period a subscriber is connected to the network.Network access and long distance service revenues are derived from charges for access to the Company’s local exchange network. The interstate portion of access revenues is based on an average schedule settlement formula administered by the National Exchange Carrier Association (NECA), which is regulated by the FCC. The intrastate portion of access revenues is billed based upon the Company’s tariff for access charges filed with the Iowa Utilities Board (IUB). The charges developed from these tariffs are used to bill the connecting long distance provider and revenues are recognized in the period the traffic is transported based on the minutes of traffic carried. Long distance revenues are recognized at the time a call is placed based on the minutes of traffic processed at contracted rates.Cellular sales and commission revenues are recognized at the time of customer activation.

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

Fair Value Measurements

Recent accounting guidance for financial assets and liabilities presented at fair value defines “fair value”, establishes a framework for measuring fair value, and expands disclosures related to fair value measurements. The guidance does not expand the use of fair value measurements in financial statements, but rather standardizes its definition and application in generally accepted accounting principles. The guidance provides for the use of three levels of input in determining fair value measurements. (Level 1 – quoted market prices; Level 2 – observable inputs of quoted market prices for similar or inactive items; and Level 3 – unobservable inputs.) The company deferred until January 1, 2009 the adoption of this guidance for all non-financial assets and liabilities that are recognized or disclosed on a non-recurring basis. This includes goodwill, intangibles and non-financial long-lived assets that are measured at fair value in impairment testing.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Reclassifications

Certain reclassifications have been made to the 2008 consolidated financial statements to conform with the 2009 presentation. More specifically, with the purchase of an additional one-third interest in Carroll County Wireless, L.L.C. in January 2009, Breda owns a 66 2/3% interest in Carroll County Wireless, L.L.C as of December 31, 2009. Prior to 2009, this investment had been accounted for using the equity method. In order to conform with the 2009 presentation, Breda’s 33.33% interest in Carroll County Wireless at December 31, 2008 is also presented in the financial statements using the consolidation method.

The table below outlines the effect of these changes to the financial statements:

	Difference
Total assets	$	136,195
Total liabilities and equity		136,195


	Difference
Operating revenues	$	45,656
Operating expenses		41,671
Operating income		3,985
Income before income taxes		2,668

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, 2009

Held-to-Maturity:
Municipal bonds	$	3,581,827	$	131,229	$	(5,206	)	$	3,707,850
Government securities		2,132,398		31,147		(15,761	)		2,147,784
	$	5,714,225	$	162,376	$	(20,967	)	$	5,855,634

December 31, 2008

Held-to-Maturity:
Municipal bonds	$	3,641,774	$	77,334	$	(37,007	)	$	3,682,101
Government securities		2,403,211		13,958		(181,424	)		2,235,745
	$	6,044,985	$	91,292	$	(218,431	)	$	5,917,846

		2009		2008
Amounts classified as:
Current	$	490,724	$	604,435
Noncurrent		5,223,501		5,440,550
Total	$	5,714,225	$	6,044,985

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 2.

MARKETABLE SECURITIES (Continued)

The amortized cost and fair value of marketable debt securities at December 31, 2009, 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	$	490,724	$	502,517
Due after one year through three years		1,249,076		1,299,387
Due after three years through five years		1,116,373		1,160,268
Due after five years		2,858,052		2,893,462
	$	5,714,225	$	5,855,634

Management evaluates the need for recording an other than temporary impairment for these investments annually. Based on the nature and financial information available for each individual investment, the length of time and extent of its fair value being below cost (generally less than twelve months at December 31, 2009) and the Company’s ability and intent to hold the investments for a sufficient time to allow for the recovery of the cost of the investment, an other than temporary impairment has not been recognized as of December 31, 2009.

Investments measured at fair value are valued at level one in the fair value hierarchy.

NOTE 3.

NOTE RECEIVABLE

Notes receivable consist of the following:

	December 31,		December 31,
	2009		2008

Spiralight Network, LLC - 8.5%		-		519,012
Less impairment		-		(445,253	)
		-		73,759
Less current portion		-		(73,759	)
	$	-	$	-

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 was to continue to accrue at 8.5 percent per annum until the loan was paid in full on September 14, 2009. The note could be prepaid. The Company had 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. The note was repaid in September 2009, and the Company reversed the allowance that was recorded in 2008.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

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:

	2009		2008

Alpine Communications, L.C.	$	3,389,504	$	3,085,415
West Iowa Cellular, Inc.		1,547,040		1,632,882
RSA #1, Ltd.		1,660,481		1,561,117
RSA #7, Ltd.		594,949		555,730
RSA #9, Ltd.		1,011,261		973,207
Quad County Communications		14,955		37,021
Guthrie Group, L.L.C.		25,529		31,488
Bug Tussel Wireless, L.L.C.		-		649,001
Spiralight Network, L.L.C.		-		-
Hilbert Communications, L.L.C.		293,328		-
	$	8,537,047	$	8,525,861

The Company has a 22.27% ownership interest in Alpine Communications, L.C. (Alpine) at December 31, 2009 and December 31, 2008. 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, 2009 and 2008 and the twelve months then ended.

	Alpine Communications, L.C.

	2009		2008

Assets	$	23,955,426	$	24,706,029
Liabilities		11,979,642		13,928,446
Equity	$	11,975,784	$	10,777,583

Revenues	$	8,142,250	$	7,981,757
Expenses		6,594,048		6,196,723
Net Income	$	1,548,202	$	1,785,034

The Company’s percentage ownership interests in partnerships providing cellular telephone services within their respective service areas at December 31, 2009 and 2008 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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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

The following is a summary of condensed financial information pertaining to the companies described above as of December 31, 2009 and 2008 and the twelve months then ended.

2009
	West Iowa Cellular, Inc.		RSA #1		RSA #7		RSA #9

Assets	$	6,670,576	$	17,039,404	$	11,163,461	$	8,339,709
Liabilities		482,417		1,860,827		2,848,034		2,272,264
Equity	$	6,188,159	$	15,178,577	$	8,315,427	$	6,067,445

Revenues	$	3,850,976	$	10,800,091	$	22,982,136	$	15,284,205
Expenses		1,594,348		8,238,302		16,454,488		11,616,136
Net Income	$	2,256,628	$	2,561,789	$	6,527,648	$	3,668,069

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

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

The Company has a 33.33% ownership interest in Quad County Communications (Quad County) at December 31, 2009 and 2008. 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, 2009 and 2008 and the twelve months then ended.

	Quad County Communications

	2009			2008

Assets	$	49,189		$	116,125
Liabilities		4,324			5,061
Equity	$	44,865		$	111,064

Revenues	$	24,214		$	35,407
Expenses		116,030			67,330
Net Income	$	(91,816	)	$	(31,923	)

The Company has a 33.33% interest in Guthrie Group, L.L.C. at December 31, 2009 and 2008. The Company’s percentage interest in Carroll County Wireless, L.L.C. was 66.67% at December 31, 2009 and 33.33% at December 31, 2008. As a result of the change in ownership interest, the Company’s investment in Carroll County Wireless, L.L.C. is now accounted for using the consolidation method, beginning January 1, 2009. Both companies have purchased the licenses to provide personal communication services (PCS); however, neither company has begun providing PCS services as of December 31, 2009.

As discussed in Note 1, with the purchase of an additional one-third interest in Carroll County Wireless, L.L.C. in January 2009, Breda owns a 66 2/3% interest in Carroll County Wireless, L.L.C as of December 31, 2009. Prior to 2009, this investment had been accounted for using the equity method. In order to conform with the 2009 presentation, Breda’s 33.33% interest in Carroll County Wireless at December 31, 2008 is also presented in the financial statements using the consolidation method.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

The following is a summary of condensed financial information pertaining to the companies described above as of December 31, 2009 and 2008 and the twelve months then ended.

2009
	Carroll County Wireless, L.L.C.			Guthrie Group, L.L.C.

Assets	$	197,099		$	69,587
Liabilities		-			-
Equity	$	197,099		$	69,587

Revenues	$	33,615		$	3,850
Expenses		40,808			44,217
Net Income	$	(7,193	)	$	(40,367	)

2008
	Carroll County Wireless, L.L.C.		Guthrie 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	$	4,000	$	(32,203	)

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

Effective January 15, 2009, Prairie Telephone and all unit holders in Spiralight Network, L.L.C. and in Bug Tussel Wireless, L.L.C., in addition to all unit holders in various other telecommunications entities, executed an Exchange Agreement with Hilbert Communications, LLC., whereby Prairie Telephone and the other holders received units in Hilbert Communications, LLC in exchange for the units they owned in the various telecommunications entities. The following companies became wholly-owned subsidiaries of Hilbert Communications pursuant to this transaction: Bug Tussel Wireless, LLC; Spiralight Network, LLC; Intelegra, LLC; Dakota Wireless, LLC; Michigan Wireless, LLC; and JustKake Investments, LLC. The transfers of ownership of Dakota Wireless Group, LLC and JustKake Investments ,LLC are subject to FCC approval, and which such approval had not been received as of December 31, 2009. Therefore, Dakota Wireless Group, LLC and JustKake Investments, LLC have not exchanged their member company interests for units in Hilbert Communications and are not considered subsidiaries of Hilbert Communications as of December 31, 2009. Prior to the transaction with Hilbert Communications, Prairie Telephone owned approximately 9.94% of the units of Bug Tussel Wireless, LLC and approximately 35.29% of the interests in Spiralight Network, LLC. Prairie Telephone owned 6.32% of the outstanding units of Hilbert Communications, LLC as of December 31, 2009.

The Company had a 9.94% ownership interest in Bug Tussel Wireless LLC (Bug Tussel) at December 31, 2008, and January 15, 2009. 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 January 15, 2009 and December 31, 2008 and the 15-day period for 2009 and the twelve months then ended for 2008.

	Bug Tussel Wireless, L.L.C.

	2009			2008

Assets	$	17,355,477		$	17,627,571
Liabilities		12,296,277			12,955,330
Equity	$	5,059,200		$	4,672,241

Revenues	$	316,766		$	14,031,407
Expenses		618,104			14,256,407
Net Income	$	(301,338	)	$	(225,000	)

The Company had a 35.29% ownership interest in Spiralight Networks LLC (Spiralight) at December 31, 2008, and January 15, 2009. Spiralight provides fiber optic transport services in Wisconsin, Illinois and Minnesota.

This investment is 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. 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. This note receivable was repaid in September 2009, and the allowance recorded against the receivable was reversed, as noted earlier.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

	Spiralight Network, L.L.C.

	2009			2008

Assets	$	2,787,947		$	2,100,128
Liabilities		4,704,486			3,251,268
Equity	$	(1,916,539	)	$	(1,151,140	)

Revenues	$	136,469		$	3,236,060
Expenses		250,049			5,886,060
Net Income	$	(113,580	)	$	(2,650,000	)

The Company had a 6.32% ownership interest in Hilbert Communications, LLC (Hilbert) at December 31, 2009. Hilbert provides fiber optic transport services in Wisconsin, Illinois and Minnesota; provides roaming services to cellular carriers on their wireless network in Wisconsin; provides cellular services to retail customers in Wisconsin; provides wireless industry consulting services to carriers at any location; and provides all services as previously provided by the wholly-owned subsidiaries.

	Hilbert Communications, L.L.C.

	2009			2008

Assets	$	32,474,471		$
Liabilities		5,468,799
Equity	$	27,005,672		$	-

Revenues	$	15,973,227		$
Expenses		20,832,084
Net Income	$	(4,858,857	)	$	-

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%.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 4.

OTHER INVESTMENTS (Continued)

LONG-TERM INVESTMENTS AT COST

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

	2009		2008

Solix, Inc.	$	300,000	$	300,000
Rural Telephone Finance Cooperative - certificates		164,823		171,110
Iowa Network Services - stock		78,706		78,705
NRTC Patronage Capital - certificates		20,339		32,390
Other		91,674		91,385
	$	655,542	$	673,590

As of December 31, 2009, the Company had $655,542 in cost method investments. Management determined it is not practical to estimate fair value, or it was unnecessary to evaluate these investments for impairment as no identified adverse event or changes in circumstances were observed. In accordance with generally accepted accounting principles the Company is not required to estimate fair value under these conditions.

Because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs, management has determined it is not practical to estimate the fair value of these cost and equity method investments. However, management believes that the carrying amount of these investments at December 31, 2009, included in other investments is not impaired.

NOTE 5.

GOODWILL

Goodwill consists of the following:

	2009		2008

Balance, beginning of year	$	896,812	$	896,812
Goodwill acquired		21,903		-
Goodwill impairment		-		-
Balance, end of year	$	918,715	$	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, 2009 and 2008. The goodwill acquired in 2009 came from the Company’s purchase of an additional one-third interest in Carroll County Wireless, L.L.C.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 6.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment includes the following:

	2009		2008

Telephone plant in service:
Land	$	42,817	$	43,408
Buildings		1,601,653		1,488,045
Other general support assets		2,310,370		2,433,732
Central office assets		5,356,121		5,566,624
Cable and wire facilities		6,254,357		6,025,376
Other plant and equipment		1,159,874		1,148,988
		16,725,192		16,706,173

Cable television plant in service:
Land	$	1,000	$	8,846
Buildings		43,313		132,673
Other plant and equipment		172,522		182,497
Towers, antennas and head end equipment		321,877		1,613,382
Cable and wire facilities		330,138		1,573,544
Franchises		5,992		30,092
		874,842		3,541,034

Total property, plant and equipment		17,600,034		20,247,207
Less accumulated depreciation		11,571,548		13,744,653
		6,028,486		6,502,554
Plant under construction		2,073,886		355,299
	$	8,102,372	$	6,857,853

Telephone cable and wire facilities of approximately $852,000 were fully or nearly fully depreciated in 2009. Depreciation on depreciable property resulted in composite rates of 5.5% and 5.2% for 2009 and 2008, respectively.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 7.

INCOME TAXES

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

	2009			2008

Federal income taxes:
Current tax expense	$	(161,525	)	$	509,074
Deferred tax expense		823,893			55,623
State income taxes:
Current tax expense		(20,847	)		292,005
Deferred tax expense		356,814			(26,403	)
Total income tax expense	$	998,335		$	830,299

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

	2009			2008

Deferred tax liabilities
Federal	$	1,860,341		$	1,645,669
State		637,491			538,397
Total deferred tax liabilities		2,497,832			2,184,066

Deferred tax assets
Federal		(62,143	)		(671,364	)
State		(26,450	)		(284,169	)
Total deferred tax assets		(88,593	)		(955,533	)

Net deferred tax liabilities	$	2,409,239		$	1,228,533

Current portion	$	(58,862	)	$	(718,595	)
Long-term portion		2,468,101			1,947,128
Net deferred tax liability	$	2,409,239		$	1,228,533

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

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:

	2009			2008

Statutory federal income tax rate		34.0	%		34.0	%
State income taxes, net of federal benefit		10.1	%		10.1	%
Amortization of bond premiums		4.9	%		1.0	%
Dividends received deduction		-8.0	%		-8.0	%
Tax exempt interest		-9.1	%		-9.1	%
Other		-3.4	%		2.1	%
Effective income tax rate		28.5	%		30.1	%

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:

	2009		2008

Rural Telephone Finance Cooperative (RTFC)
7.00% (Variable Rate)		-		951,495
Rural Utilities Service (RUS)		1,562,719		-
		1,562,719		951,495
			$
Less current portion		14,144		200,507
		1,548,575	$	750,988

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

2010	$	14,144
2011		59,145
2012		60,294
2013		62,958
2014		65,562
2015 and After		1,300,616

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 8.

LONG-TERM DEBT (Continued)

Prepayment of all remaining principal and interest on the RTFC loan was made on April 30, 2009, in addition to a prepayment fee of $4,513.01.

The Company has two lines of credit with the RTFC. The first line of credit is for $1,500,000 and is available until November 15, 2010. The second line of credit with the RTFC is for $500,000 and is available until November 30, 2010. The interest rate at December 31, 2009 for both lines of credit is 4.75%. No funds were advanced under either line of credit at December 31, 2009.

As of December 31, 2009, BTC, Inc. had outstanding $1,562,719 of long-term debt with the Rural Utilities Service. Each advance on this pre-approved $10,000,000 rural broadband access loan carries its own interest rate for the term of the individual loan advance. BTC, Inc. received its first loan advance in the amount of $1,000,000 on October 2, 2009, and this loan advance carries a fixed interest rate of 3.918%. BTC, Inc.’s second loan advance in the amount of $564,329 was received on December 11, 2009, and carries a fixed interest rate of 4.315%. The RUS advances are to be paid in monthly installments covering principal and interest beginning twelve months from the date of receipt of the first loan advance. The principal and interest will be paid in full on all advances at April 28, 2029. During the first twelve months after the receipt of the first loan advance, monthly payments of interest only are required. Principal of $1,610 was paid on the first RUS loan advance as of December 31, 2009.

The security and loan agreements underlying the Rural Utilities Service notes contain certain restrictions on distributions to stockholders, investment in or loans to others, payment of management fees or issuance of any new or preferred stock. BTC, Inc. is restricted from making any distributions, except as might be specifically authorized in writing in advance by the Rural Utilities Service note holders. The borrower may make a distribution after 75% of the loan funds have been expended as approved if after such distribution, the Borrower’s Net Worth is equal to at least twenty percent (20%) of its Total Assets and the amount of all such distributions during the calendar year does not exceed twenty-five percent (25%) of the borrower’s net income or net margins for the prior calendar year. BTC, Inc. is required to achieve a times interest earned ratio of not less than 2.0 beginning December 31, 2010.

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.

Table of Contents

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

NOTE 9.

OPERATING SEGMENTS INFORMATION (Continued)

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

	Local						Internet
	Exchange						Service
2009	Carrier			Broadcast			Provider			Total

Revenues and sales	$	7,917,048		$	382,498		$	770,220		$	9,069,766
Interest income		348,770			10,348			32,441			391,559
Interest expense		(26,317	)		-			(4	)		(26,321	)
Depreciation and amortization		890,583			24,561			125,310			1,040,454
Income tax expense (benefit)		874,067			(144,616	)		268,884			998,335
Segment profit (loss)		2,976,009			(178,202	)		(291,875	)		2,505,932
Segment assets		27,682,775			458,343			4,725,387			32,866,505
Expenditures for segment assets		1,355,088			6,341			753,427			2,114,856

2008

Revenues and sales	$	8,322,715		$	651,163		$	713,359		$	9,687,237
Interest income		407,154			16,962			18,873			442,989
Interest expense		(77,354	)		-			-			(77,354	)
Depreciation and amortization		802,801			35,478			141,199			979,478
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		24,845,441			536,311			3,846,155			29,227,907
Expenditures for segment assets		3,021,452			(75,806	)		(181,897	)		2,763,749

NOTE 10.

NET INCOME PER COMMON SHARE

Net income per common share for 2009 and 2008 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, 2009 and 2008 were 30,851 and 30,859, respectively.

NOTE 11.

STOCK VALUE ADJUSTMENT

During April 2009, the board of directors authorized a $38 increase in the stated value of each share of common stock from $509 to $547. There were 30,851 shares outstanding at the time of the value adjustment, which reduced retained earnings by $1,172,338.

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.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

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.

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 2009 and 2008 were $133,248 and $128,624, respectively. The Company makes annual contributions to the plan equal to amounts accrued for pension expense.

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BREDA TELEPHONE CORPORATION AND SUBSIDIARIES

BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2009 and 2008

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, 2009 and 2008.

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, 2009 and 2008 were approximately $1,269,259 and $1,281,000, respectively. At December 31, 2009 and 2008, $136,131 and $172,796 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 52% of its 2009 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 has reached agreements with two of its major carriers and the Company is currently corresponding with the remaining 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, 2009 is $1,346,320. The Company has accrued additional accounts payable for related costs associated with the conference bridge minutes of $1,295,378 as of December 31, 2009.

NOTE 17.

NONCASH INVESTING ACTIVITIES

Noncash investing activities included $321,594 during the year ended December 31, 2009 relating to plant and equipment additions placed in service during 2009, which are reflected in accounts payable at year-end.

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Iowa 8 Monona Limited Partnership

Financial Statements

As of December 31, 2009 and 2008, and for the years ended

December 31, 2009 and 2008, and Report of

Independent Registered Public Accounting Firm

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IOWA 8 MONONA LIMITED PARTNERSHIP

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	Page

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	33


Balance Sheets	34
As of December 31, 2009 and 2008

Statements of Operations	35
For the years ended December 31, 2009 and 2008

Statements of Changes in Partners’ Capital	36
For the years ended December 31, 2009 and 2008

Statements of Cash Flows	37
For the years ended December 31, 2009 and 2008

Notes to Financial Statements	38

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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, 2009 and 2008, 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, 2009. 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

August 9, 2010

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IOWA 8 MONONA LIMITED PARTNERSHIP

BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
(Dollars in Thousands)


ASSETS	2009		2008

CURRENT ASSETS:
Accounts receivable, net of allowance of $62 and $68	$	1,602	$	1,645
Unbilled revenue		237		202
Due from affiliate		2,099		2,609
Prepaid expenses and other current assets		4		3

Total current assets		3,942		4,459

PROPERTY, PLANT AND EQUIPMENT—Net		6,947		5,911

TOTAL ASSETS	$	10,889	$	10,370

LIABILITIES AND PARTNERS’ CAPITAL

CURRENT LIABILITIES:
Accounts payable and accrued liabilities	$	475	$	497
Advance billings and customer deposits		596		514

Total current liabilities		1,071		1,011

LONG TERM LIABILITIES		21		20

Total liabilities		1,092		1,031

COMMITMENTS AND CONTINGENCIES (see Notes 6 and 7)

PARTNERS’ CAPITAL		9,797		9,339

TOTAL LIABILITIES AND PARTNERS' CAPITAL	$	10,889	$	10,370

See notes to financial statements.

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IOWA 8 MONONA LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2009 AND 2008
(Dollars in Thousands)

	2009		2008

OPERATING REVENUES
Service revenues, net	$	18,656	$	17,932
Equipment, net and other revenues		4,470		5,289

Total operating revenues		23,126		23,221

OPERATING COSTS AND EXPENSES:
Cost of service (excluding depreciation and amortization related to network assets included below)		6,209		6,685
Cost of equipment		3,241		3,034
Selling, general and administrative		5,411		5,557
Depreciation and amortization		1,005		857

Total operating costs and expenses		15,866		16,133

OPERATING INCOME		7,260		7,088


INTEREST INCOME, NET		198		123

NET INCOME	$	7,458	$	7,211


Allocation of Net Income:
Limited Partners	$	4,294	$	4,151
General Partner	$	3,164	$	3,060

See notes to financial statements.

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IOWA 8 MONONA LIMITED PARTNERSHIP

STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
YEARS ENDED DECEMBER 31, 2009 AND 2008
(Dollars in Thousands)

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

BALANCE—January 1, 2008	$	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

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

Net income		3,164			2,190			1,799			305			7,458

BALANCE—December 31, 2009	$	4,156		$	2,877		$	2,364		$	400		$	9,797


See notes to financial statements.

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IOWA 8 MONONA LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2009 AND 2008
(Dollars in Thousands)
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,458		$	7,211
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,005			857
Provision for losses on accounts receivable		126			166
Changes in certain assets and liabilities:
Accounts receivable		(83	)		(234	)
Unbilled revenue		(36	)		(23	)
Prepaid expenses and other current assets		(1	)		-
Accounts payable and accrued liabilities		-			19
Advance billings and customer deposits		81			59
Other long term liabilities		2			3

Net cash provided by operating activities		8,552			8,058

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net		(2,062	)		(1,592	)
Change in due from affiliate, net		510			534

Net cash used in investing activities		(1,552	)		(1,058	)

CASH FLOWS FROM FINANCING ACTIVITIES:

Distributions to partners		(7,000	)		(7,000	)

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

CHANGE IN CASH		-			-

CASH—Beginning of year		-			-
CASH—End of year	$	-		$	-

NONCASH TRANSACTIONS FROM INVESTING AND FINANCING ACTIVITIES:
Accruals for capital expenditures	$	-		$	21

See notes to financial statements.

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Iowa 8 Monona Limited Partnership

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2009 AND 2008

(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, 2009 and 2008 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.

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).

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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 2009 and 2008, the Partnership recorded $1,765 and $2,646, 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).

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.

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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 2019. 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.

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, 2009 and December 15, 2008. 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.

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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.

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 5.8% and 4.0% for the years ended December 31, 2009 and 2008, respectively. Included in net interest income is interest income of $200 and $124 for the years ended December 31, 2009 and 2008, 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 - The adoption of the following accounting standards and updates during 2009 did not result in a significant impact to the Partnership 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.

On June 15, 2009, the Partnership adopted the accounting standard regarding the general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before the financial statements are issued. This standard was effective prospectively for all annual reporting periods ending after June 15, 2009.

On June 15, 2009, the Partnership adopted the accounting standard that amends the requirements for disclosures about fair value of financial instruments. This standard was effective prospectively for all annual reporting periods ending after June 15, 2009.

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On June 15, 2009, the Partnership adopted the accounting standard regarding estimating fair value measurements when the volume and level of activity for the asset or liability has significantly decreased which also provides guidance for identifying transactions that are not orderly. This standard was effective prospectively for all annual reporting periods ending after June 15, 2009.

On August 28, 2009, the Partnership adopted the accounting standard update regarding the measurement of liabilities at fair value. This standard update provides techniques to use in measuring fair value of a liability in circumstances in which a quoted price in an active market for the identical liability is not available. This standard update is effective prospectively for all annual reporting periods upon issuance.

Other Recent Accounting Standard - In September 2009, the accounting standard regarding multiple deliverable arrangements was updated to require the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This standard update must be adopted no later than January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all period presented. The Partnership is currently evaluating the impact this standard update will have on its financial statements.

3.	PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following as of December 31, 2009 and 2008:

	Useful Lives	2009		2008

Land		$	75	$	75
Buildings and improvements	10-40 years		2,784		2,141
Cellular plant equipment	3-15 years		9,797		8,510
Leasehold improvements	5 years		264		176

			12,920		10,902

Less accumulated depreciation and amortization			5,973		4,991

Property, plant and equipment, net		$	6,947	$	5,911

Capitalized network engineering costs of $143 and $54 were recorded during the years ended December 31, 2009 and 2008 respectively. Construction-in-progress included in certain of the classifications shown above, principally cellular plant equipment, amounted to $177 and $165 at December 31, 2009 and 2008 respectively.

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4.	CURRENT LIABILITIES

Accounts payable and accrued liabilities consist of the following as of December 31, 2009 and 2008:

	2009		2008

Accounts payable	$	404	$	427
Accrued liabilities		71		70
Accounts payable and accrued libilities	$	475	$	497

Advance billings and customer deposits consist of the following as of December 31, 2009 and 2008:

	2009		2008

Advance billings	$	555	$	455
Customer deposits		41		59
Advance billings and customer deposits	$	596	$	514

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, 2009 and 2008:

	2009			2008

Service revenues (a)	$	4,321		$	4,277
Equipment and other revenues (b)		(68	)		(22	)
Cost of service (c)		5,687			5,568
Cost of equipment (d)		293			292
Selling, general and administrative (e)		3,469			3,484

(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.

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(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 $2,948 and $2,742 during 2009 and 2008, 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. Cell sharing revenues were $112 and $72 for the years ended December 31, 2009 and December 31, 2008, 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, 2009 and 2008, the Partnership recognized a total of $130 and $104, 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 noncancelable operating leases, excluding renewal options that are not reasonably assured, for the years shown are as follows:

Years	Amount

2010	$	165
2011		165
2012		156
2013		110
2014		83
2015 and thereafter		146

Total minimum payments	$	825

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

7.	CONTINGENCIES

Cellco is subject to various lawsuits and other claims including class actions, product liability, patent infringement, 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 breached contracts with consumers, violated certain state consumer protection laws and other statutes and defrauded customers through concealed or misleading billing practices. Certain of these lawsuits and other claims may impact the Partnership. These litigation 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.

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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, 2009 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.

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:
2009	$	68	$	126	$	(132	)	$	62
2008		46		166		(144	)		68

******

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Iowa RSA No. 9 Limited Partnership

Financial Statements

December 31, 2009 and 2008

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Iowa RSA No. 9 Limited Partnership

Index

December 31, 2009 and 2008

	Page(s)

Report of Independent Auditors	48

Financial Statements

Balance Sheets	49

Statements of Operations	50

Statements of Cash Flows	51

Statements of Changes in Partners’ Capital	52

Notes to Financial Statements	53

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Report of Independent Auditors

To the Partners of

Iowa RSA No. 9 Limited Partnership:

In our opinion, the accompanying balance sheets and the related statements of operations, of cash flows, and of changes in partners' capital present fairly, in all material respects, the financial position of Iowa RSA No. 9 Limited Partnership (an Iowa limited partnership) (the “Partnership”), at December 31, 2009 and 2008, and the results of its operations, cash flows, and changes in partners' capital for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. 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 of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1, the financial statements of the Partnership have been derived from the accounting records of United States Cellular Corporation ("USCC") and reflect certain assumptions and allocations. The Partnership relies on USCC for technical and administrative services. The financial position, results of operations, and cash flows of the Partnership could differ from those that would have resulted had Iowa RSA No. 9 Limited Partnership operated autonomously or independently of USCC.

/s/ Pricewaterhouse Coopers LLP

October 15, 2010

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Iowa RSA No. 9 Limited Partnership

Balance Sheets

December 31, 2009 and 2008

	2009		2008
Assets
Cash	$	229,890	$	126,668
Deposits with affiliate		2,090,444		1,141,183
Accounts receivable
Customers, less allowance of $24,069 and $3,010 at
December 31, 2009 and 2008, respectively		729,927		722,044
Affiliates		177,181		111,422
Other		153,350		166,775
Other current assets		58,407		45,424
Total current assets		3,439,199		2,313,516
Property, plant and equipment, net		4,891,462		5,502,312
Other deferred charges		37,032		35,302
Total assets	$	8,367,693	$	7,851,130
Liabilities and Partners' Capital
Accounts payable and accrued expenses	$	234,320	$	202,577
Accounts payable - affiliates		850,241		650,385
Deferred revenues		344,935		337,165
Customer deposits		22,025		32,975
Accrued taxes		302,811		192,310
Other current liabilities		259,687		415,614
Total current liabilities		2,014,019		1,831,026
Deferred credits		41,616		36,186
Asset retirement obligation		305,613		284,542
Partners’ capital		6,006,445		5,699,376
Total liabilities and partners’ capital	$	8,367,693	$	7,851,130

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

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Iowa RSA No. 9 Limited Partnership

Statements of Operations

Years Ended December 31, 2009 and 2008

	2009			2008

Revenues	$	15,289,132		$	14,905,616
Operating expenses
Cost of equipment sold		65,622			57,276
System operations		4,731,047			4,735,879
Selling, general and administrative		6,046,817			5,773,255
Depreciation and accretion		814,416			753,469
Loss on asset disposals		7,075			8,023
Total operating expenses		11,664,977			11,327,902
Operating income		3,624,155			3,577,714
Other expense, net		(17,086	)		(21,848	)
Net income	$	3,607,069		$	3,555,866

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

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Iowa RSA No. 9 Limited Partnership

Statements of Cash Flows

Years Ended December 31, 2009 and 2008

	2009			2008

Cash flows from operating activities
Net Income	$	3,607,069		$	3,555,866
Add (deduct) adjustments to reconcile net income to net cash provided by operating activities
Depreciation and accretion		814,416			753,469
Bad debts expense		103,644			70,407
Loss on asset disposals		7,075			8,023
Changes in assets and liabilities from operations
Change in accounts receivable		(163,861	)		45,543
Change in accounts payable and accrued expenses		231,599			(148,753	)
Change in deferred revenues		7,770			29,825
Change in deferred charges and credits		3,700			1,273
Change in customer deposits		(10,950	)		1,225
Change in accrued taxes		110,501			67,233
Change in other assets and liabilities		(168,899	)		170,179
Net cash provided by operating activities		4,542,064			4,554,290

Cash flows from investing activities
Purchases of property, plant, and equipment		(191,543	)		(1,623,270	)
Proceeds from the sale of property, plant, and equipment		1,962			22,335
Deposits (to) from affiliate, net		(949,261	)		725,421
Net cash required for investing activities		(1,138,842	)		(875,514	)

Cash flows from financing activities
Distributions to partners		(3,300,000	)		(3,700,000	)
Net cash required for financing activities		(3,300,000	)		(3,700,000	)

Net increase/(decrease) in cash		103,222			(21,224	)
Cash
Beginning of period		126,668			147,892
End of period	$	229,890		$	126,668

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

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Iowa RSA No. 9 Limited Partnership

Statements of Changes in Partners’ Capital

Years Ended December 31, 2009 and 2008

	Jefferson Cellular Telephone Company, Inc.			Jefferson Telephone Company			Iowa RSA #9, Inc.			Breda Telephone Corporation			Cell Co.			Scranton Telephone Company			Webster Calhoun Cooperative Telephone Association
	General			Limited			Limited			Limited			Limited			Limited			Limited
	Partner			Partner			Partner			Partner			Partner			Partner			Partner			Total
Partners' capital, December 31, 2007	$	58,432		$	944,080		$	945,246		$	973,938		$	973,938		$	973,938		$	973,938		$	5,843,510
2008 Distributions to partners		(37,000	)		(597,772	)		(598,512	)		(616,679	)		(616,679	)		(616,679	)		(616,679	)		(3,700,000	)
2008 Net income		35,559			574,486			575,197			592,656			592,656			592,656			592,656			3,555,866
Partners’ capital, December 31, 2008	$	56,991		$	920,794		$	921,931		$	949,915		$	949,915		$	949,915		$	949,915		$	5,699,376
2009 Distributions to partners		(33,000	)		(533,148	)		(533,808	)		(550,011	)		(550,011	)		(550,011	)		(550,011	)		(3,300,000	)
2009 Net income		36,072			582,758			583,479			601,190			601,190			601,190			601,190			3,607,069
Partners’ capital, December 31, 2009	$	60,063		$	970,404		$	971,602		$	1,001,094		$	1,001,094		$	1,001,094		$	1,001,094		$	6,006,445

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

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1.	Organization and Basis of Presentation

Iowa RSA No. 9 Limited Partnership (the “Partnership”) was formed on August 15, 1989, under the laws of the State of Iowa for the purpose of providing cellular telephone service in the Iowa Rural Service Area (“RSA”) No. 9. The Partnership commenced operations in July 1991. On November, 30, 2008, Iowa RSA No. 9 Limited Partnership changed its name to Muskrat Wireless, L.P. On December 18, 2009, the Partnership changed its name back to Iowa RSA No. 9 Limited Partnership.

The partners and their respective partnership interests at December 31, 2009 and 2008 are:

General Partner
Jefferson Cellular Telephone Company, Inc	1.000	%

Limited Partners
Jefferson Telephone Company	16.156	%
Iowa RSA #9, Inc.	16.176	%
Breda Telephone Corporation	16.667	%
Cell Co.	16.667	%
Scranton Telephone Company	16.667	%
Webster-Calhoun Cooperative Telephone Association	16.667	%

Profits and losses are allocated to the partners based on respective partnership interests.

Jefferson Cellular Telephone Company, Inc. (“Jefferson Cellular”) is a joint venture corporation in which United States Cellular Corporation (“USCC”) owns 49% and Jefferson Telephone Company owns 51%. USCC is an 82%-owned subsidiary of Telephone and Data Systems, Inc. (“TDS”).

Under the Management Agreement dated August 15, 1989 and last amended August 15, 1999 (the “Management Agreement”), USCC is the manager responsible for the daily authority and conduct of the Partnership’s operations. The Management Agreement will terminate not less than six months after written notice has been provided by either party of the decision to terminate this agreement.

These financial statements have been derived from the accounting records of USCC and reflect certain assumptions and allocations. The financial position, results of operations, and cash flows of the Partnership could differ from reported results had the Partnership operated autonomously or as an entity independent of USCC. The allocation methodologies have been described within the respective notes to the financial statements, where appropriate. USCC, as manager of the Partnership, has made the allocations in accordance with the Management Agreement.

2.	Summary of Significant Accounting Policies

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2009 financial statement presentation. These reclassifications did not affect consolidated net income, assets, liabilities, cash flows or partners’ capital for the year presented.

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Deposits with Affiliate

Included in deposits with affiliate are amounts due from CommVest, Inc., which is a wholly-owned subsidiary of TDS. CommVest, Inc. is a fund that purchases government and high grade investment securities for the benefit of fund participants. Interest income is earned by the fund, net of direct expenses, and is passed through to the Partnership based upon the Partnership’s average daily balance in the fund.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates are included in asset retirement obligations, depreciation, allowance for doubtful accounts, accrued expenses and accrued liabilities.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consists of amounts owed by customers pursuant to service contracts and equipment sales, by affiliated entities, by other wireless cellular carriers whose customers have used the Partnership’s wireless systems and the other cellular carriers co-locating on the Partnership’s towers.

The Partnership assesses its accounts receivable for collectability on an ongoing basis. The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related to existing accounts receivable. The allowance is estimated based on historical experience and other factors that could affect collectability. Account receivable balances are reviewed on either an aggregate or individual basis for collectability depending on the type of receivable. When it is probable the account balance will not be collected, the account balance is charged against the allowance for doubtful accounts. The Partnership does not have any off-balance sheet credit exposure related to its customers.

Property, Plant and Equipment

The Partnership’s Property, plant and equipment is stated at the original cost of construction or purchase including capitalized costs of certain taxes, payroll-related expenses, interest and estimated costs to remove the assets.

Expenditures that enhance the productive capacity of assets in service or extend their useful lives are capitalized and depreciated. Expenditures for maintenance and repairs of assets in service are charged to System operations expense or Selling, general and administrative expense, as applicable. Retirements and disposals of assets are recorded by removing the original cost of the asset (along with the related accumulated depreciation) from plant in service and charging it, together with removal cost less any salvage realized, to Loss on asset disposals.

Depreciation

Depreciation is provided using the straight-line method over the estimated useful life of the asset.

The Partnership depreciates leasehold improvement assets associated with leased properties over periods ranging from one to ten years; such periods approximate the shorter of the assets’ economic lives or the specific lease terms.

Useful lives of specific assets are reviewed throughout the year to determine if changes in technology or other business changes would warrant accelerating the depreciation of those specific assets. The Partnership did not materially change the useful lives of its property, plant and equipment in 2009.

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Long-Lived Assets

The Partnership reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment losses are recognized when the expected future cash flows are less than the asset’s carrying value.

Asset Retirement Obligation

The Partnership accounts for asset retirement obligations in accordance with GAAP, which requires 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. At the time the liability is incurred, the Partnership records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Statement of Operations

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.

The change in asset retirement obligation for the years ended December 31, 2009 and 2008 was as follows:

	2009		2008
Beginning Balance	$	284,542	$	213,348
Additional liabilities accrued		-		22,057
Revision in estimated cash outflows		16		32,252
Accretion expense		21,055		16,885
Ending Balance	$	305,613	$	284,542

Deferred Revenues

Deferred revenues primarily represent monthly access fees billed in advance. Such revenues are recognized in the following month when service is provided. The Partnership also defers recognition of certain activation fees and recognizes these revenues on a straight-line basis over the estimated customer life.

Financial Instruments

The Partnership’s financial instruments, which include trade and affiliate accounts payable, are short-term in nature. Accordingly, the Partnership believes the balance sheet amounts approximate the fair value of the financial instruments.

Partnership Distributions

Distributions are made at the discretion of the general partner based upon respective partnership interests.

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Revenues

Revenues primarily consist of:

Charges for access, airtime, roaming, long distance, data and other value added services provided to the Partnership’s customers;

Charges to carriers whose customers use the Partnership’s systems when roaming;

Sales of equipment and accessories; and

Amounts received from the Universal Service Fund where the Partnership has been designated an Eligible Telecommunications Carrier (“ETC”).

Revenues related to wireless services are recognized as services are rendered. Revenues billed in advance or in arrears of the services being provided are estimated and deferred or accrued, as appropriate. Revenues from sales of equipment and accessories are recognized when title passes to the customer. Unbilled revenues, resulting from wireless service provided from the billing cycle date to the end of each month and from other wireless carriers’ customers using the Partnership’s systems for the last half of each month, are estimated and recorded. Revenues earned but unbilled at December 31, 2009 and 2008 were $71,522 and $35,794 respectively.

The Partnership offers certain rebates to customers who purchase new handsets. The revenue from a handset sale which includes such a rebate is recorded net of the rebate.

The activation fee charged with the sale of equipment and service is allocated to the equipment and service based upon the relative fair values of each item. This generally results in the recognition of the activation fee as additional handset revenue at the time of sale.

ETC revenues recognized in the reporting period represent the amounts which the Partnership is entitled to receive for such period, as determined and approved in connection with the Partnership’s designation as an ETC in Iowa.

Operating Leases

The Partnership is a party to various lease agreements for cell sites that are accounted for as operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. The Partnership accounts for certain operating leases that contain fixed rental increases by recognizing lease revenue and expense on a straight-line basis over the lease term.

Advertising

The Partnership expenses advertising costs as incurred. Advertising costs were $148,307 and $131,334 for the years ended December 31, 2009 and 2008 respectively.

Income Taxes

No provision has been made for federal and state income taxes since these taxes are the responsibility of the individual partners.

3.	Property, Plant and Equipment

Property, plant and equipment in service, net of accumulated depreciation consists the following components (respective useful lives shown in parentheses):

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	2009			2008
Land and land improvements (10-25 years)	$	163,428		$	163,428
Leasehold improvements (1-10 years)		1,552,479			1,539,349
Buildings and equipment (5-25 years)		7,861,931			8,545,778
Furniture and office equipment (3-5 years)		23,678			60,146
Work in process		18,352			204,735
		9,619,868			10,513,436
Less accumulated depreciation		(4,728,406	)		(5,011,124	)
Net property, plant and equipment	$	4,891,462		$	5,502,312

For the years ended December 31, 2009 and 2008, the loss on asset disposals included charges of $7,075 and $8,023, respectively, related to disposals of assets, trade-ins of older assets for replacement assets and other retirements of assets from service.

4.	Line of Credit

On December 31, 2007, the Partnership executed a revolving note payable agreement (the “Agreement”) with USCC Financial L.L.C., a wholly-owned subsidiary of USCC. The Agreement has an original expiration date of January 1, 2011 and allows for borrowings up to $1,000,000. Borrowings under the Agreement are payable upon demand and bear interest at a rate of prime rate plus 0.75%. There were no outstanding borrowings as of December 31, 2009.

5.	Lease Commitments

The Partnership leases its cell site locations, office locations, and retail locations under operating leases. Certain leases have renewal options and/or fixed rental increases. Renewal options that are reasonably assured of exercise are included in determining the lease term. Rent expense totaled $84,764 and $81,844 for the years ended December 31, 2009 and 2008, respectively. Rent expense for cell site locations is included in system operations expenses, and rent expense for office and retail locations is included in selling, general and administrative expenses.

Future minimum rental payments required under operating leases and rental receipts expected under operating leases that have noncancelable lease terms in excess of one year as of December 31, 2009 are as follows:

	Operating Leases		Operating Leases
	Future Minimum Rental Payments		Future Minimum Rental Receipts
2010	$	89,588	$	14,143
2011		88,188		-
2012		79,082		-
2013		74,902		-
2014		74,877		-
Thereafter		1,457,898		-
	$	1,864,535	$	14,143

6.	Concentration of Credit Risk

The Partnership provides cellular service and sells cellular telephones to a diverse group of consumers within a concentrated geographical area. The Partnership performs credit evaluations of the Partnership’s customers and requires deposits as needed. Receivables are generally due within 30 days. Credit losses related to customers have been within management’s expectations.

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7.	Transactions with Related Parties

USCC provides certain services necessary for the operation, management and administration of the Partnership. Services provided to the Partnership include accounting, cash management, strategic planning, human resources, legal, marketing, customer service, information systems, network and engineering. In accordance with the terms of the Management Agreement, USCC is reimbursed for its costs incurred on behalf of the Partnership in providing these services. Costs are allocated to the Partnership in such a manner as USCC, as the manager, in its reasonable judgment deems fair and equitable. Total allocated costs from USCC and TDS to the Partnership for management and administrative services discussed above amounted to $2,734,020 and $2,516,647 for the years ended December 31, 2009 and 2008, respectively.

Certain affiliates also provide the Partnership with operational, management and administrative services, the costs of which are allocated to the Partnership in the manner discussed above. Costs incurred for such services amounted to $232,264 and $220,969 for the years ended December 31, 2009 and 2008, respectively. These affiliates also provide the Partnership with access to its switch equipment. For the years ended December 31, 2009 and 2008, the cost for the use of the switch was allocated to the Partnership based on minutes of use. These costs totaled $411,906 and $294,111 for the years ended December 31, 2009 and 2008, respectively, and were included in system operations expense in the accompanying statements of operations.

The Partnership purchases substantially all infrastructure, equipment and materials and supplies from USCC Purchase, LLC, which is a wholly owned subsidiary of USCC. For the years ended December 31, 2009 and 2008 intercompany purchases by the Partnership totaled $58,339 and $1,121,448 respectively.

Included in the purchases of property, plant and equipment are transfers from affiliates of USCC, which had a net book value of $44,198 and $12,917 for the year ended December 31, 2009 and 2008, respectively.

The Partnership has reciprocal roaming agreements with other cellular markets managed by USCC. Under these agreements, the Partnership recorded roaming revenue from affiliated cellular carriers related to the carriers’ customers placing or receiving calls in the Partnership’s service area which totaled $1,915,655 and $2,015,375 for the years ended December 31, 2009 and 2008, respectively. Roaming expenses, representing roaming costs charged by affiliated cellular carriers for the Partnership’s customers placing and receiving calls in the affiliates’ service areas, totaled $2,265,928 and $2,524,864 for the years ended December 31, 2009 and 2008, respectively.

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Jefferson Telephone Company and Breda Telephone Corporation are agents of the Partnership and earn commissions based on the number of customer activations. Commissions paid by the Partnership for the years ended December 31, 2009 and 2008 were $1,550,597 and $1,237,538 to Jefferson Telephone Company and $1,307,843 and $1,260,864 to Breda Telephone Corporation, respectively.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BREDA TELEPHONE CORP.


Date: December 31, 2010	By:	/s/ Charles Deisbeck
		Charles Deisbeck, Chief Executive Officer

	By:	/s/ Jane Morlok
		Jane Morlok, Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, 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 31, 2010		Date: December 31, 2010

By:	/s/ Rick Anthofer	By:	/s/Daniel McDermott
	Rick Anthofer, Treasurer and Director		Daniel McDermott, Director
	Date: December 31, 2010		Date: December 31, 2010

By:	/s/ Clifford Neumayer	By:	/s/ Dean Schettler
	Clifford Neumayer, Director		Dean Schettler, President and Director
	Date: December 31, 2010		Date: December 31, 2010

By:	/s/ David Grabner	By:	/s/ Jane Morlok
	David Grabner, Director		Jane Morlok, Chief Financial Officer
	Date: December 31, 2010		Date: December 31, 2010

By:	/s/ Charles Deisbeck
	Charles Deisbeck, Chief Executive Officer
	Date: December 31, 2010

Breda Telephone Inactive 10-K/A2009 FY Annual report (amended)