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

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Xfone, Inc.                                            |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| Nevada                                                        |   | 11-3618510                          |
|---------------------------------------------------------------|--------|-------------------------------------|
| (State or other jurisdiction ofincorporation or organization) |   | (I.R.S. EmployerIdentification No.) |

| Title of each class registered: |   | Name of each exchange on which registered: |
|---------------------------------|--------|--------------------------------------------|
| Common Stock                    |   | NYSE Amex LLC                              |
| Common Stock                    |   | Tel Aviv Stock Exchange Ltd.               |

| Large accelerated filer o                                                      | Accelerated filer                    o |
|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|
| Non-accelerated filer   o(Do not check if smaller reporting company) | Smaller reporting company þ                                                                                                      |

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|  Part I |                                                                                                               |   |
|--------------|--------------------------------------------------------------------------------------------------------------------|--------|
|         |                                                                                                               |   |
| Item 1.      | Business                                                                                                           | 3      |
| Item 1A.     | Risk Factors                                                                                                       | 13     |
| Item 1B.     | Unresolved Staff Comments                                                                                          | 13     |
| Item 2.      | Properties                                                                                                         | 13     |
| Item 3.      | Legal Proceedings                                                                                                  | 15     |
| Item 4.      | (Removed and Reserved)                                                                                             | 16     |
|         |                                                                                                               |   |
| Part II      |                                                                                                               |   |
|         |                                                                                                               |   |
| Item 5.      | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 17     |
| Item 6.      | Selected Financial Data                                                                                            | 19     |
| Item 7.      | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 20     |
| Item 7A.     | Quantitative and Qualitative Disclosures About Market Risk                                                         | 32     |
| Item 8.      | Financial Statements and Supplementary Data                                                                        | 32     |
| Item 9.      | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                               | 65     |
| Item 9A.     | Controls and Procedures                                                                                            | 65     |
| Item 9B.     | Other Information                                                                                                  | 66     |
|         |                                                                                                               |   |
| Part III     |                                                                                                               |   |
|         |                                                                                                               |   |
| Item 10.     | Directors, Executive Officers, and Corporate Governance                                                            | 67     |
| Item 11.     | Executive Compensation                                                                                             | 73     |
| Item 12.     | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                     | 79     |
| Item 13.     | Certain Relationships and Related Transactions, and Director Independence                                          | 82     |
| Item 14.     | Principal Accounting Fees and Services                                                                             | 89     |
|         |                                                                                                               |   |
| Part IV      |                                                                                                               |   |
|         |                                                                                                               |   |
| Item 15.     | Exhibits, Financial Statement Schedules                                                                            | 91     |
|         |                                                                                                               |   |
| Signatures   |                                                                                                               | 97     |

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| · | Local Services: NTS delivers local telephony service to its customers through an “on-net” UNE-L connection, including voice mail, caller ID, forwarding, 3-way calling, blocking, and PBX services.  In addition, NTS sells "off-net" total service resale lines.  NTS provides UNE-L services in Lubbock, Abilene, Amarillo, Midland, Odessa, Pampa, Plainview, and Wichita Falls, Texas.  NTS provides local services via FTTP in Lubbock Wolfforth, Levelland, and Smyer, Texas.  NTS provides resold local services throughout Texas via its resale agreement with AT&T. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Retail Long Distance Services: NTS offers a full range of long distance services to its customers, including competitively priced switched long distance (including intrastate, interstate, and international), toll-free service, dedicated T-1 long distance and calling cards.  The vast majority of its customers are concentrated in West Texas.  A minority of its long distance customers are in Arizona, New Mexico, Oklahoma, Kansas, and Colorado.                                                                                                                                                     |
| · | Internet Data Services: NTS began offering broadband service in 1999.  Download speeds range from 500 Kilobits to 100 Megabits per second, depending on the end user’s distance from an NTS collocation or the type of facilities used to deliver the service.  NTS launched dial-up service in 1985.  NTS provides broadband and dial-up Internet service in all of its Texas markets.  NTS also offers Web hosting and wide area networking solutions for business applications.                                                                                                     |
| · | Fiber-Based Services (“Fiber to the Premise” or “FTTP”): As an integrated telecom provider, NTS is capable of providing quality triple play (voice, digital video & data) on one bill at competitive prices to its FTTP customers.  NTS offers a full selection of video services, including basic cable, video on demand, HDTV and DVR.  NTS is a member of the National Cable Television Cooperative and as a member obtains favorable programming rates from most major networks.  NTS provides FTTP service in Lubbock, Levelland, Smyer, and Wolfforth, Texas.        |
| · | Customer Premise Equipment (“CPE”): NTS resells a variety of CPE and CPE related services to its customers.  Primarily, these sales involve NTS acting as an authorized dealer for Toshiba phone systems. These systems are sold to customers either on a stand-alone basis, or in conjunction with the purchase of local, long distance, and/or data services from the company. In addition NTS sells a variety of other electronics such as HD displays, surveillance equipment, paging systems, nurse call systems, routers switches and internetworking gear.                                              |

| · | Private Line Services: NTS offers aggregation and resale of leased fiber transport network from AT&T and other fiber network operators.  This service is mostly provided for carrier customers that need direct network connectivity, as well as enterprises that require dedicated branch office connections.  Services are generally offered under 1-year contracts for a fixed amount per month.  NTS provides private line service nationwide.                                                                                                       |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Wholesale Switched Termination Services: NTS sells its wholesale-switched minutes to local telecom companies who do not have the volume to warrant attractive pricing from AT&T and other large carriers.  NTS provides multi-regional switched termination, switched toll free origination and wholesale Internet access services to various carrier customers.  Services are generally offered for a fixed amount per minute.  NTS provides wholesale switched termination services to customers via network connections in NTS POPs and switch sites. |

| · | Our Internet based customer service (found at www.ntscom.com) includes full details on all our retail products and services. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

----

| · | Local Telephone Service: Using our own network in concentrated local areas throughout Mississippi and Louisiana and utilizing the underlying network of BellSouth Telecommunications, Inc. (the new ATT), outside of our local areas, we provide local dial tone and calling features, such as hunting, call forwarding and call waiting to both business and residential customers throughout Louisiana and Mississippi, including T-1 and PRI local telephone services to business customers.                                                                                                                                                                                                                                |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Long Distance Service: We use our own network where available and QWEST, a nationwide long distance carrier, as our underlying long distance network provider. In conjunction with Local Telephone Services, we provide Long Distance Services to our residential and business customers. We provide two different categories of long distance services - Switched Services to both residential and small business customers, which include 1+ Outbound Service, Toll Free Inbound Service and Calling Card Service. For larger business customers we also provide Dedicated Services such as T-1 and PRI Services. Our long distance services are only available to customers who use our local telephone services.           |
| · | Internet/Data Service: We provide high-speed broadband Internet access to residential and business customers utilizing our own integrated digital data network and utilizing the broadband gateway network of the new ATT. Our DSL service provides up to 3 Mbps of streaming speed combined with Dynamic IP addresses, as well as multiple mailboxes and Web space. Our DSL services also include spam filter, instant messaging, pop-up blocking, web mail access, and parental controls. We also provide dial-up Internet access service for quick and dependable connection to the web. Our Internet/Data services are stand-alone products or are bundled with our voice services for residential and business customers. |
| · | Customer Service: Customer Service is paramount at Xfone USA and is one of our major differentiating characteristics, thus tantamount to being one of our product offerings. Customers have been conditioned to accept poor customer service from the larger monopoly companies because they have never had any real choice in service providers, especially in the residential market. Our attentive customer service department is an additional “product offering” which sells - as well as retains - customers. The full scope of communications service entails network service, customer service, and repair service.                                                                                        |
| · | Customer Premise Equipment (“CPE”): Xfone USA also resells a variety of CPE and CPE related services to its customers.  Primarily, these sales involve acting with NTS Communications as an authorized dealer for Toshiba phone systems. These systems are sold to customers either on a stand-alone basis, or in conjunction with the purchase of local, long distance, and/or data services from the company. In addition, the company sells a variety of other electronics such as HD displays, surveillance equipment, paging systems, nurse call systems, routers switches and internetworking gear.                                                                                                |

----

| · | We use full time, Account Executives “AE’s” to sell into Small, Mid-Market & Enterprise business customers in our fiber & legacy CLEC markets. Additionally, a subset of AE’s working within our PRIDE FTTU markets focus on selling directly to consumers. All AE’s carry quota’s which vary based on their responsibilities, titles and type of market assigned to them. AE’s receive a base salary paid bi-monthly in addition to any commissions that may have been earned under the specific compensation plan that AE falls under; |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · |  We actively pursue opportunities with other Carriers; ILEC’s, CLEC’s, ITSP’s, MSO’s and Agents who purchase wholesale Origination & Termination, Point to Point Circuits, Carrier Metro Ethernet, Long Haul, Dedicated Internet Access, Dark Fiber, Interconnect CPE & Internetworking equipment such as routers & switches  directly from us and then resell these wholesale services & products at a mark-up to end-users under their own brand. This is strictly a “white labeled” offering and these entities generate their own invoices from call detail records CDR’s that we provide them. We call this division “National Accounts” and also refer to it as “Carrier Wholesale”. Our National Account Managers are specialist and typically have over 20 years of experience; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · |  We utilize traditional Agents & VAR’s that sell our services directly to end-users at our established prices; these agents receive an ongoing residual commission of approximately 5%-12% of the total monthly recurring charges “MRC’s” based on their individual contracts on collected revenues less any bad debt; |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | We have used and in the future may engage third party direct sales organizations (telesales and door-to-door) to register new customers when internal human capital is not available or when we want to target a specific service area aggressively for a period of time for the purpose of increase market share or a sales blitz around a new product offering; |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | We cooperate with major companies and worker’s councils; |
|--------|----------------------------------------------------------------|

| · | We have retail and wholesale sales offices; employees at these sales offices receive annual salaries and commissions; |
|--------|-----------------------------------------------------------------------------------------------------------------------|

| · |  We deploy direct marketing resources including but not limited to: Internet/Social Networking, Advertising through newspaper, radio, television, outdoor boards, digital signage, direct mail campaigns, door hangers, community events and sponsorships, chambers affinity groups and alumni associations; |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | We attend telecommunications trade shows to network and to promote our products and services; and |
|--------|---------------------------------------------------------------------------------------------------|

| · | We utilize the Internet as an additional distribution channel for our services. |
|--------|---------------------------------------------------------------------------------|

| · | Partner Division - Our Partner Division operates as a separate profit center by attempting to recruit new resellers and agents to market our products and services and to provide support and guidance to resellers and agents. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Customer Service Division - We operate a live customer service center that operates 24 hours a day, 7 days a week. |
|--------|--------------------------------------------------------------------------------------------------------------------|

| · | Operations Division - Our Operations Division provides the following operational functions to our business: (a) 24 hour/7 day a week technical support; (b) inter-company network; (c) hardware and software installations; and (d) operating switch and other platforms. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Administration Division - Our Administration Division provides the billing, collection, credit control, and customer support aspects of our business. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Marketing Division - Our Marketing Division is responsible for our marketing and selling campaigns that target potential and existing retail customers. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | Residential - Pre-subscribed customers, including for local, long distance, internet and cable television services. |
|--------|---------------------------------------------------------------------------------------------------------------------|

| · | Commercial - We serve small to complex business customers within our service areas. |
|--------|-------------------------------------------------------------------------------------|

| · | Governmental agencies - We provide various governmental entities a broad range of servcies, including local, long distance, internet, managed data, and private line services. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Resellers & Wholesale - We provide resellers and other carriers with various switched and non-switched voice and data services on a wholesale basis.  We also provide long haul transport, metro access, and switched termination services to a variety of communications companies throughout the United States. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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ITEM 2.   PROPERTIES

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| ·                                       | Our corporate offices, Network Control Center, Customer Care, and Internet help desk are located at 5307 W. Loop 289, Lubbock, TX, measuring 45,072 sq. ft. on three floors with annual triple net base rent of $518,328.  The lease expires July 31, 2013 and contains three options for five year renewal terms. We believe the building has sufficient space for our operations. |
|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Local sales offices located at 801 S. Fillmore, Suite 130, Amarillo, TX, measuring 3,958 sq. ft. with annual rent of $45,516.  The lease expires on November 30, 2015 and has no renewal option.                                                                                                                                                                                              |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Point of Presence (“POP”) site and fiber node located at 201 E Main, Ste. 104, El Paso Texas, measuring 950 sq. ft. (including 850 linear feet of conduit) with annual rent of $54,070.  The lease expires on March 31, 2015 and contains no option to renew.                                                                                                                |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Local sales office located at 450E 10 Desta Drive Midland, TX, measuring 2,981 sq. ft. with annual rent of $27,574. The lease expires on February 28, 2011 and contains one option for a two year renewal term.                                                                                                                                                                               |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP, switch site and fiber node located at 500 Chestnut, Suite 936, Abilene, TX, measuring 4,763 sq. ft. (including roof space for one (1) GPS antenna) with annual rent of $49,896.  The lease expires on December 31, 2013 and contains two options for three year renewal terms.                                                                                                           |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Local sales office located at 400 Pine Street, Suite 980, Abilene, TX measuring 2,205 sq. ft. with annual rent of $28,872. The lease will expire in August 2011, with an option to renew for one additional year.                                                                                                                                                                                       |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP located at 201 Robert S. Kerr, Suite 1070, Oklahoma City, OK, measuring 4,092 sq. ft. with annual rent of $16,926.  The lease expires on April 30, 2011.                                                                                                                                                                                                                                       |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Equipment room located at 8212 Ithaca, Room W-12, Lubbock, TX, of approximately 16 sq. ft. of wall space with annual rent of $480. The lease is on a month-to-month term.                                                                                                                                                                                                                          |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Local sales and technician offices located at 4214 Kell, Suite 104 Wichita Falls, TX, measuring 2,400 sq. ft. with annual rent of $39,600. The lease expires in August 2011 and has options to renew for two additional 36 month terms.                                                                                                                                             |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP site located at United Center, 1049 N. 3rd, Abilene, TX, measuring approximately 300 sq. ft. with annual rent of $6,600.  The lease is on a month-to-month term.                                                                                                                                                                                                                     |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP, switch site, and fiber node located at Petroleum Building, 203 W. 8th Street Suite 102, Amarillo, TX, measuring 3,056 sq. ft. with annual rent of $36,672.  The lease is on a month-to-month term.                                                                                                                                                                                  |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP, switch site, and fiber node located at 710 Lamar Street, Suite 10-25, Wichita Falls, TX, measuring approximately 890 sq. ft. plus 200 sq. ft. to house a gas generator at 714 Travis, 6th Floor, Wichita Falls. Annual rent for both spaces totals $12,833.40.  The lease expires April 30, 2015 and has one option for a five year renewal term.                                   |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | POP and switch site located at 4316 Bryan, Dallas, TX, measuring 3,816 sq. ft. with annual base rent of $196,860.  The lease expires on October 31, 2012 and has two options for renewal terms of three years.                                                                                                                                                                                |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| Real Property Leased through Xfone USA  |
| ·                                       | Local sales and operations center located at 2506 Lakeland Drive, Flowood, Mississippi 39232, measuring 4,753 sq. ft. The lease will expire on September 30, 2011 with no option to renew. The monthly base rent is $5,941.                                                                                                                                                                   |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Equipment storage located at Suite 1015 at 650 Poydras Office Building. The lease expires on May 15, 2011. The monthly lease payments are $16,750.                                                                                                                                                                                                                                                 |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Sales office located at 3636 S. I-10 Service Road, Suite 214, Metairie, Louisiana. The premises measures 2,022 sq. ft. The lease will expire on September 30, 2011, with one option to renew for an additional three-year term. The monthly base rent is $2,907.                                                                                                                                        |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Baton Rouge Sales Office and sales support is located at 3636 South Sherwood Forest Boulevard, measuring 2,100 sq. ft. The lease is on a month-to-month term. The yearly lease payments are $28,644.                                                                                                                                                                                                    |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | Housing of communication equipment is located at 408 West Thomas Street, Hammond, Louisiana, measuring 2,500 sq. ft.  The term of the lease is August 1, 2008 through July 31, 2013, and the payments are $4,400 per month.                                                                                                                                                                        |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | We lease a fiber riser at 1515 Poydras in New Orleans, LA for $1,000 per month. The term of the lease is month-to-month.                                                                                                                                                                                                                                                                                |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | We lease a fiber riser at 650 Poydras in New Orleans, Louisiana for $730.00 per month. The lease expires on September 30, 2013.                                                                                                                                                                                                                                                                         |
|                                         |                                                                                                                                                                                                                                                                                                                                                                                                    |
| ·                                       | We hold 21 collocations facilities in Texas through NTS, and 8 collocations facilities in Mississippi and 6 collocations facilities in Louisiana through Xfone USA.                                                                                                                                                                                                                                |

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| · | Perpetual Construction and Utility Easement from Benny Judah for facility hut at 10508 Topeka, Lubbock, Texas, 79424.                                       |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                        |
| · | Perpetual Construction and Utility Easement from CDC-Lubbock, LLC, for a manhole at 10th & T in Lubbock, Texas.                                         |
|   |                                                                                                                                                        |
| · | Perpetual Facilities Easement from Stellar Land Company, Ltd., for a facilities cabinet in the Vintage Township Addition to the City of Lubbock, Texas.     |
|   |                                                                                                                                                        |
| · | Perpetual Underground Utility Easement from Stellar Land Company, Ltd., for underground facilities in the Vintage Township Addition to the City of Lubbock. |
|   |                                                                                                                                                        |
| · | Right of Way Use Permit: City of Midland, Texas, Right of Way Use Permit for S. Marienfeld Street and W. Missouri Avenue.                                   |

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| Period               |   |   | Low    |   |   |   | High   |   |
|----------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| 2010                 |   |   |   |   |   |   |   |   |
| Fourth Quarter  |   | $      | 1.08   |   |   | $      | 1.49   |   |
| Third Quarter        |   | $      | 1.04   |   |   | $      | 1.30   |   |
| Second Quarter       |   | $      | 0.99   |   |   | $      | 1.49   |   |
| First Quarter        |   | $      | 0.60   |   |   | $      | 1.85   |   |

| 2009           |   |   |   |   |   |   |   |   |
|----------------|--------|--------|--------|--------|--------|--------|--------|--------|
| Fourth Quarter |   | $      | 0.66   |   |   | $      | 0.99   |   |
| Third Quarter  |   | $      | 0.79   |   |   | $      | 1.08   |   |
| Second Quarter |   | $      | 0.50   |   |   | $      | 1.12   |   |
| First Quarter  |   | $      | 0.47   |   |   | $      | 0.81   |   |

----

| Plan category                                              |   | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights |       | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights |   | Number of Securities Remaining Available for Future Issuance under the Plan |
|------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
|                                                       |   | (a)                                                                                         |       | (b)                                                                         |   | (c)                                                                         |
| Compensation plans approved by security holders(1) (2) (3) |   |                                                                                        | 11,470,368 |                                                                        |   | $                                                                           | 2.54 |   | 7,743,095 |
| Compensation plans not approved by security holders        |   |                                                                                        | -          |                                                                        |   |                                                                        | - |   | - |
| Total                                                      |   |                                                                                        | 11,470,368 |                                                                        |   | $                                                                           | 2.54 |   | 7,743,095 |

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ITEM 7

|   |   | 1. | A release of us from the repayment of the loan from Iddo Keinan, the son of Mr. Keinan and an employee of Swiftnet, dated December 10, 2009, pursuant to which Iddo Keinan extended to Swiftnet a loan of £860,044 ($1,344,073); |
|--------|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | 2. | A redemption of the credit facility which the Company had obtained from Bank Leumi (UK) Plc. for of £150,000 ($234,420), thereby releasing us from our obligation to Bank Leumi (UK) Plc.;                                       |
|   |   | 3. | An annual earn-out payment over the following years beginning on the consummation of the Transaction. The aggregate Earn-Out Payments shall be equal to but shall not exceed $1,858,325 in the aggregate; and               |
|   |   | 4. | Cancellation of intercompany balances between us and the UK Subsidiaries amounting to $1,009,037.                                                                                                                                     |

----

| Proceeds                                                       |   |   |       |
|----------------------------------------------------------------|--------|--------|------------|
| Release from the repayment of a loan                           |   | $      | 1,344,073  |   |
| Release from a repayment of credit line                        |   |   | 234,420    |   |
| Release from retirement and employment termination liabilities |   |   | 937,677    |   |
| Aggregate future Earn-Out receivables (*)                      |   |   | 1,444,494  |   |
| Transaction costs                                              |   |   | (55,495    | ) |
|                                                           |   |   |       |   |
| Net proceeds                                                   |   |   | 3,905,169  |   |
|                                                           |   |   |       |   |
| Net book value of the UK Subsidiaries:                         |   |   |       |   |
| Cash                                                           |   |   | 494,060    |   |
| Account receivables                                            |   |   | 718,214    |   |
| Other current assets                                           |   |   | 2,272,316  |   |
| Fixed assets, net                                              |   |   | 879,989    |   |
| Trade payable                                                  |   |   | (1,539,926 | ) |
| Other current liabilities                                      |   |   | (1,894,363 | ) |
| Other long-term liability                                      |   |   | (166,824   | ) |
| Goodwill and other intangible assets                           |   |   | 4,942,739  |   |
| Realization of cumulative translation adjustment               |   |   | 905,279    |   |
|                                                           |   |   |       |   |
| Net assets                                                     |   |   | 6,611,484  |   |
|                                                           |   |   |       |   |
| Loss before taxes                                              |   |   | (2,706,315 | ) |
|                                                           |   |   |       |   |
| Tax benefits                                                   |   |   | 442,032    |   |
|                                                           |   |   |       |   |
| Net loss on the sale of the UK Subsidiaries (**)               |   | $      | (2,264,283 | ) |
|                                                           |   |   |       |   |

----

|                                                                |   | Year ended   |       |
|---------------------------------------------------------------------|--------|--------------|------------|
|                                                                |   | December 31, |       |
|                                                                |   | 2010 (*)     |       |   | 2009 |   |
|                                                                |   |         |       |   |   |   |
| Revenues                                                            |   | $            | 7,125,187  |   |   | $ | 15,323,807 |   |
| Cost of revenues                                                    |   |         | 2,629,875  |   |   |   | 7,226,018 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Gross profit                                                        |   |         | 4,495,312  |   |   |   | 8,097,789 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Operating expenses:                                                 |   |         |       |   |   |   |   |   |
| Marketing and selling                                               |   |         | 2,661,304  |   |   |   | 4,635,012 |   |
| General and administrative                                          |   |         | 2,492,330  |   |   |   | 2,226,567 |   |
| Impairment of goodwill                                              |   |         | 800,000    |   |   |   | - |   |
| Total operating expenses                                            |   |         | 5,953,634  |   |   |   | 6,861,579 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Operating profit (loss)                                             |   |         | (1,458,322 | ) |   |   | 1,236,210 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Financing expenses, net                                             |   |         | (76,297    | ) |   |   | (82,310 | ) |
|                                                                |   |         |       |   |   |   |   |   |
| Income (loss) before taxes                                     |   |         | (1,534,619 | ) |   |   | 1,153,900 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Income tax benefit (expense)                                        |   |         | (4,662)    |   |   |   | 77,011 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Net income (loss) from discontinued operation in the United Kingdom |   | $            | (1,539,281 | ) |   | $ | 1,230,911 |   |

----

| Gross proceeds:                                                |   |   |       |
|----------------------------------------------------------------|--------|--------|------------|
| Cash (less Transaction costs)                                  |   | $      | 5,560,567  |   |
| Cash held in escrow                                            |   |   | 1,695,817  |   |
| Allocation of proceeds to Minority Partners                    |   |   | (2,308,285 | ) |
|                                                           |   |   |       |   |
| Net proceeds                                                   |   |   | 4,948,099  |   |
|                                                           |   |   |       |   |
| Net book value of Xfone 018:                                   |   |   |       |   |
| Cash                                                           |   |   | 433,314    |   |
| Account receivables                                            |   |   | 1,690,699  |   |
| Other current assets                                           |   |   | 206,735    |   |
| Fixed assets, net                                              |   |   | 1,446,789  |   |
| Other non-current assets                                       |   |   | 276,814    |   |
| Short-term bank credit and current maturities of notes payable |   |   | (466,864   | ) |
| Trade payable                                                  |   |   | (1,667,384 | ) |
| Other current liabilities                                      |   |   | (149,019   | ) |
| Notes payable, net of current maturities                       |   |   | (349,177   | ) |
| Other long-term liability                                      |   |   | (125,218   | ) |
| Minority interest                                              |   |   | (372,451   | ) |
| Realization of cumulative translation adjustment               |   |   | 100,172    |   |
|                                                           |   |   |       |   |
| Net assets                                                     |   |   | 1,024,410  |   |
|                                                           |   |   |       |   |
| Profit before capital gain taxes                               |   |   | 3,923,689  |   |
|                                                           |   |   |       |   |
| Tax expense                                                    |   |   | 2,538,179  |   |
|                                                           |   |   |       |   |
| Net profit on the sale of Xfone 018                            |   | $      | 1,385,510  |   |

----

|                                                        |   | Year ended   |      |
|-------------------------------------------------------------|--------|--------------|-----------|
|                                                        |   | December 31, |      |
|                                                        |   | 2010(*)      |      |   | 2009 |   |
|                                                        |   |         |      |   |   |   |
| Revenues                                                    |   | $            | 6,477,810 |   |   | $ | 8,296,047 |   |
| Cost of revenues                                            |   |         | 3,799,730 |   |   |   | 4,423,727 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Gross profit                                                |   |         | 2,678,080 |   |   |   | 3,872,320 |   |
|                                                        |   |         |      |   |   |   |   |   |
|                                                        |   |         |      |   |   |   |   |   |
| Operating expenses:                                         |   |         |      |   |   |   |   |   |
| Marketing and selling                                       |   |         | 610,465   |   |   |   | 1,289,040 |   |
| General and administrative                                  |   |         | 1,312,228 |   |   |   | 1,683,520 |   |
| Non-recurring loss                                          |   |         | -         |   |   |   | 506,176 |   |
| Total operating expenses                                    |   |         | 1,922,693 |   |   |   | 3,478,736 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Operating profit (loss)                                     |   |         | 755,387   |   |   |   | 393,584 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Financing expenses, net                                     |   |         | (129,508  | ) |   |   | (295,215 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Income (loss) before taxes                             |   |         | 625,879   |   |   |   | 98,369 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Income tax expense                                          |   |         | (184,633  | ) |   |   | (31,214 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Net income (loss)                                           |   |         | 441,246   |   |   |   | 67,155 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Income (loss) attributed to non-controlling interest        |   |         | (136,786  | ) |   |   | (20,870 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Net income (loss) from discontinued operation in the Israel |   | $            | 304,460   |   |   | $ | 46,285 |   |
|                                                        |   |         |      |   |   |   |   |   |

----

----

|                                                                          |   | Year EndedDecember 31, |   |
|-------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                          |   | 2010                   |   |   | 2009 |   |
| Revenues                                                                      |   |                   |   |   |   |   |   |   |
| Services on Fiber-To-The-Premise network                                      |   |                   | 17.1   | % |   |   | 13.2 | % |
| Leased local loop services and other                                          |   |                   | 82.9   | % |   |   | 86.8 | % |
| Total Revenues                                                                |   |                   | 100    | % |   |   | 100 | % |
|                                                                          |   |                   |   |   |   |   |   |   |
| Expenses:                                                                     |   |                   |   |   |   |   |   |   |
| Cost of services (excluding depreciation and amortization)                    |   |                   | 49.3   | % |   |   | 51.6 | % |
| Selling, general and administrative                                           |   |                   | 39.5   | % |   |   | 38.9 | % |
| Depreciation and amortization                                                 |   |                   | 7.6    | % |   |   | 6.2 | % |
| Non- recurring loss                                                           |   |                   | -      | % |   |   | 34.9 | % |
| Financing expenses, net                                                       |   |                   | 9.7    | % |   |   | 6.1 | % |
| Other expenses                                                                |   |                   | 1.2    | % |   |   | 0.8 | % |
| Total expenses                                                                |   |                   | 107.3  | % |   |   | 138.4 | % |
|                                                                          |   |                   |   |   |   |   |   |   |
| Loss from continued operations before taxes and non-controlling interest |   |                   | (7.3)  | % |   |   | (38.4) | % |
|                                                                          |   |                   |   |   |   |   |   |   |
| Loss from continued operations                                                |   |                   | (4.2)  | % |   |   | (38.2) | % |
|                                                                          |   |                   |   |   |   |   |   |   |
| Net loss attribuited to shareholders                                     |   |                   | (7.8)  | % |   |   | (36.1) | % |

----

----

|                                                           |   | Payments Due by Period |       |
|----------------------------------------------------------------|--------|------------------------|------------|
| Contractual Obligations                                        |   | Total                  |       |   | Less than1 Year |   |   | 1-3 Years |   |   | 4-5 Years |   |   | More than5 Years |   |
|                                                           |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Domestic credit facility                                       |   | $                      | 2,812,941  |   |   | $ | 2,812,941 |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |
| Domestic Note Payable                                          |   |                   | 56,542     |   |   |   | 42,026 |   |   |   | 14,516 |   |   |   | - |   |   |   | - |   |
| Other notes payable                                            |   |                   | 3,196,357  |   |   |   | - |   |   |   | 3,196,357 |   |   |   | - |   |   |   | - |   |
| Notes Payable from the United States Department of Agriculture |   |                   | 9,912,708  |   |   |   | 420,259 |   |   |   | 840,519 |   |   |   | 840,519 |   |   |   | 7,811,411 |   |
| Bonds                                                          |   |                   | 19,222,920 |   |   |   | 3,810,443 |   |   |   | 7,620,886 |   |   |   | 7,631,100 |   |   |   | 160,491 |   |
| Capital leases                                                 |   |                   | 1,434,671  |   |   |   | 829,044 |   |   |   | 555,978 |   |   |   | 49,649 |   |   |   | - |   |
| Operating leases                                               |   |                   | 4,730,274  |   |   |   | 2,157,564 |   |   |   | 2,332,684 |   |   |   | 240,026 |   |   |   | - |   |
|                                                           |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total contractual cash obligations                             |   | $                      | 41,366,413 |   |   | $ | 10,072,277 |   |   | $ | 14,560,940 |   |   | $ | 8,761,294 |   |   | $ | 7,971,902 |   |

----

|   |  (1) A senior promissory note in the aggregate principal amount of $3,500,000, maturing on March 22, 2012. Interest accrues at an annual rate of 10% and is payable quarterly. The note ranks pari passu in rights of liquidation with our Series A Bonds.                                                                                                                                                                  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |  (2) 2,173,913 shares of our common stock at a price of $1.15 per share for a total purchase price of $2,500,000.                                                                                                                                                                                                                                                                                                           |
|   |  (3) A warrant to purchase 950,000 shares of our Common Stock, which shall be exercisable at a price of $2.00 per share for a period of 5 years. The number of shares issuable upon exercise of the Warrant, and/or the applicable exercise price, may be proportionately adjusted in the event of a stock dividend, distribution, subdivision, combination, merger, consolidation, sale of assets, spin-off or similar transactions. |

----

----

----

| Xfone, Inc. and Subsidiaries      |
|-----------------------------------|
| CONSOLIDATED FINANCIAL STATEMENTS |
| As of December 31, 2010           |
| CONTENTS                          |

| Report of Independent Registered Public Accounting Firm                           | 33     |
|-----------------------------------------------------------------------------------|--------|
|                                                                              |   |
| Consolidated Balance Sheets                                                       | 34     |
|                                                                              |   |
| Consolidated Statements of Operations                                             | 36     |
|                                                                              |   |
| Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Loss | 37     |
|                                                                              |   |
| Consolidated Statements of Cash Flows                                             | 38     |
|                                                                              |   |
| Notes to Consolidated Financial Statements                                        | 40     |

----

ERE

----

| Xfone, Inc. and Subsidiaries                                    |   |
|-----------------------------------------------------------------|--------|
| CONSOLIDATED BALANCE SHEETS                                     |   |
|                                                            |   |
|                                                            |   | December 31, |   |
|                                                            |   | 2010 |   |   | 2009 |   |
|                                                            |   |   |   |   |   |   |
| CURRENT ASSETS:                                                 |   |   |   |   |   |   |
| Cash                                                            |   | $ | 1,217,427 |   |   | $ | 1,533,369 |   |
| Accounts receivable, net                                        |   |   | 3,096,242 |   |   |   | 2,855,136 |   |
| Prepaid expenses and other receivables                          |   |   | 3,077,060 |   |   |   | 2,423,402 |   |
| Deferred taxes                                                  |   |   | 627,044 |   |   |   | 569,152 |   |
| Inventory                                                       |   |   | 181,874 |   |   |   | 199,392 |   |
| Current assets of discontinued operations in the United Kingdom |   |   | - |   |   |   | 2,932,345 |   |
| Current assets of discontinued operations in Israel             |   |   | - |   |   |   | 2,164,287 |   |
|                                                            |   |   |   |   |   |   |   |   |
| Total current assets                                            |   |   | 8,199,647 |   |   |   | 12,677,083 |   |
|                                                            |   |   |   |   |   |   |   |   |
| BONDS ISSUANCE COSTS, NET                                       |   |   | 1,432,607 |   |   |   | 1,725,705 |   |
|                                                            |   |   |   |   |   |   |   |   |
| OTHER LONG-TERM ASSETS                                          |   |   | 3,147,373 |   |   |   | 929,417 |   |
|                                                            |   |   |   |   |   |   |   |   |
| RESTRICTED CASH                                                 |   |   | 1,112,912 |   |   |   | 933,659 |   |
|                                                            |   |   |   |   |   |   |   |   |
| FIXED ASSETS, NET                                               |   |   | 58,544,792 |   |   |   | 51,546,695 |   |
|                                                            |   |   |   |   |   |   |   |   |
| INTANGIBLE ASSETS, NET                                          |   |   | 1,206,871 |   |   |   | 1,932,771 |   |
|                                                            |   |   |   |   |   |   |   |   |
| ASSETS OF DISCONTINUED OPERATIONS IN THE UNITED KINGDOM         |   |   | - |   |   |   | 6,719,663 |   |
|                                                            |   |   |   |   |   |   |   |   |
| ASSETS OF DISCONTINUED OPERATIONS IN ISRAEL                     |   |   | - |   |   |   | 2,010,289 |   |
|                                                            |   |   |   |   |   |   |   |   |
| Total assets                                                    |   | $ | 73,644,202 |   |   | $ | 78,475,282 |   |
|                                                            |   |   |   |   |   |   |   |   |

----

| Xfone, Inc. and Subsidiaries |
|------------------------------|
| CONSOLIDATED BALANCE SHEETS  |

|                                                                                    | December 31, |   |
|-----------------------------------------------------------------------------------------|--------------|--------|
|                                                                                    | 2010         |   |   | 2009 |   |
|                                                                                    |         |   |   |   |   |
| CURRENT LIABILITIES:                                                                    |         |   |   |   |   |   |   |   |
| Short-term bank credit and current maturities of notes payable                          |         | $      | 3,281,420 |   |   | $ | 7,029,842 |   |
| Trade payables                                                                          |         |   | 6,465,065 |   |   |   | 7,120,474 |   |
| Other liabilities and accrued expenses                                                  |         |   | 5,111,129 |   |   |   | 3,922,741 |   |
| Current maturities of obligations under capital leases                                  |         |   | 829,045 |   |   |   | 253,634 |   |
| Current maturities of bonds                                                             |         |   | 3,933,014 |   |   |   | 3,637,146 |   |
| Current liabilities of discontinued operations in the United Kingdom                    |         |   | - |   |   |   | 4,131,849 |   |
| Current liabilities of discontinued operations in Israel                                |         |   | - |   |   |   | 2,906,259 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| Total current liabilities                                                               |         |   | 19,619,673 |   |   |   | 29,001,945 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| DEFERRED TAXES, NET                                                                     |         |   | 2,791,430 |   |   |   | 3,733,929 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| NOTES PAYABLE TO THE UNITED STATES DEPARTMENT OF AGRICULTURE, NET OF CURRENT MATURITIES |         |   | 9,492,448 |   |   |   | 5,311,032 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| NOTES PAYABLE, NET OF CURRENT MATURITIES                                                |         |   | 3,210,873 |   |   |   | 43,012 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| BONDS PAYABLES, NET OF CURRENT MATURITIES                                               |         |   | 15,289,906 |   |   |   | 17,510,812 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| OBLIGATIONS UNDER CAPITAL LEASES, NET OF CURRENT MATURITIES                             |         |   | 605,626 |   |   |   | 256,790 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| OTHER LONG-TERM LIABILITIES                                                             |         |   | 118,940 |   |   |   | 293,953 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| SEVERANCE PAY                                                                           |         |   | 9,620 |   |   |   | 50,268 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| LIABILITIES OF DISCONTINUED OPERATIONS IN THE UNITED KINGDOM                            |         |   | - |   |   |   | 172,809 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| LIABILITIES OF DISCONTINUED OPERATIONS IN ISRAEL                                        |         |   | - |   |   |   | 418,039 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| Total liabilities                                                                       |         |   | 51,138,516 |   |   |   | 56,792,589 |   |
|                                                                                    |         |   |   |   |   |   |   |   |
| COMMITMENTS AND CONTINGENT LIABILITIES                                                  |         |   |   |   |   |   |   |   |
|                                                                                    |         |   |   |   |   |   |   |   |

| SHAREHOLDERS' EQUITY:                                                                                                                                                                            |   |   |        |    |   |   |        |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|---------|--------|--------|-------------|--------|
| Common stock of $0.001 par value per share: 75,000,000 shares authorized at December 31, 2010; 21,119,488 and 18,376,075 issued and outstanding at December 31, 2010 and 2009, respectively |   |   | 21,119      |    |   |   | 18,376      |   |
| Additional paid-in capital                                                                                                                                                                       |   |   | 48,077,378  |    |   |   | 43,362,217  |   |
| Foreign currency translation adjustment                                                                                                                                                          |   |   | (1,910,706  | )  |   |   | (2,860,983  | )      |
| Retained earnings (deficit)                                                                                                                                                                      |   |   | (23,682,105 | )  |   |   | (19,072,582 | )      |
|                                                                                                                                                                                             |   |   |        |    |   |   |        |   |
| Total shareholders' equity                                                                                                                                                                       |   |   | 22,505,686  |    |   |   | 21,447,028  |   |
|                                                                                                                                                                                             |   |   |        |    |   |   |        |   |
| Non – Controlling interest                                                                                                                                                                 |   |   | -           |    |   |   | 235,665     |   |
|                                                                                                                                                                                             |   |   |        |    |   |   |        |   |
| Total Equity                                                                                                                                                                                     |   |   | 22,505,686  |    |   |   | 21,682,693  |   |
|                                                                                                                                                                                             |   |   |        |    |   |   |        |   |
| Total liabilities and shareholders' equity                                                                                                                                                       |   | $      | 73,644,202  |    |   | $      | 78,475,282  |   |
|                                                                                                                                                                                             |   |   |        |    |   |   |        |   |

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

----

| Xfone, Inc. and Subsidiaries          |
|---------------------------------------|
|                                  |   |   |   |   |   |   |   |
| CONSOLIDATED STATEMENTS OF OPERATIONS |

|                                                                                                                    |   | Years Ended  |       |
|-------------------------------------------------------------------------------------------------------------------------|--------|--------------|------------|
|                                                                                                                    |   | December 31, |       |
|                                                                                                                    |   | 2010         |       |   | 2009 |   |
| Revenues                                                                                                                |   |         |       |   |   |   |
| Services on Fiber-To-The-Premise network                                                                                |   | $            | 10,092,894 |   |   | $ | 8,082,963 |   |
| Leased local loop services and other                                                                                    |   |         | 48,850,815 |   |   |   | 53,327,066 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Total Revenues                                                                                                          |   |         | 58,943,709 |   |   |   | 61,410,029 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Expenses                                                                                                                |   |         |       |   |   |   |   |   |
| Cost of services (excluding depreciation and amortization shown below)                                                  |   |         | 29,079,801 |   |   |   | 31,683,049 |   |
| Selling, general and administrative                                                                                     |   |         | 23,282,049 |   |   |   | 23,881,291 |   |
| Depreciation and amortization                                                                                           |   |         | 4,453,871  |   |   |   | 3,776,759 |   |
| Non- recurring loss                                                                                                     |   |         | -          |   |   |   | 21,441,485 |   |
| Financing expenses, net                                                                                                 |   |         | 5,708,491  |   |   |   | 3,732,519 |   |
| Other expenses                                                                                                          |   |         | 730,093    |   |   |   | 475,531 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Total Expenses                                                                                                          |   |         | 63,254,305 |   |   |   | 84,990,634 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Loss from continued operations before taxes and non-controlling interest                                                |   |         | (4,310,596 | ) |   |   | (23,580,605 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Income tax benefit (expense)                                                                                            |   |         | 1,814,667  |   |   |   | 123,977 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Net loss from continued operations                                                                                      |   |         | (2,495,929 | ) |   |   | (23,456,628 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Income (loss) from discontinued operations in the United Kingdom and Israel, before taxes                               |   |         | (908,740   | ) |   |   | 1,252,269 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Capital loss from the disposal of the discontinued operations in the United kingdom and Israel, net of capital gain tax |   |         | (878,773   | ) |   |   | - |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Income tax expense on discontinued operations in the United Kingdom and Israel                                          |   |         | (189,295   | ) |   |   | 45,797 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Net loss                                                                                                                |   |         | (4,472,737 | ) |   |   | (22,158,562 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Less: Net loss attributed to non-controlling interest (related to discontinued operations)                              |   |         | (136,786   | ) |   |   | (20,870 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Net loss attributed to shareholders                                                                                     |   | $            | (4,609,523 | ) |   | $ | (22,179,432 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
|  Basic and diluted income (loss) per share:                                                                        |   |         |       |   |   |   |   |   |
| Loss from continued operations                                                                                          |   |         | (0.122     | ) |   |   | (1.276 | ) |
| Income (loss) from discontinued operations                                                                              |   |         | (0.103     | ) |   |   | 0.069 |   |
| Basic and diluted loss per share                                                                                        |   | $            | (0.225     | ) |   | $ | (1.207 | ) |
|                                                                                                                    |   |         |       |   |   |   |   |   |
| Basic and diluted weighted average number of shares outstanding:                                                        |   |         | 20,503,350 |   |   |   | 18,376,075 |   |
|                                                                                                                    |   |         |       |   |   |   |   |   |

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

----

| Xfone, Inc. and Subsidiaries                                                                                                     |
|---------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                  |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE LOSSFor the years ended December 31, 2010 and 2009  |

|                                                            |   | Number of Ordinary Shares |       |   | Common Stock |   |   | Additional Paid-in Capital |   |   | Accumulated Other Comprehensive Income |   |   | Retained Earnings (Deficit) |       |    | Non – Controlling Interest |   |        | Total Equity |   |
|-----------------------------------------------------------------|--------|---------------------------|------------|--------|--------------|--------|--------|----------------------------|--------|--------|----------------------------------------|--------|--------|-----------------------------|------------|---------|----------------------------------|--------|-------------|--------------|--------|
| Balance at January 1, 2009                                      |   |                      | 18,376,075 |   |         | $      | 18,376 |                       |   | $      | 42,772,998                             |   |   | $                           | (2,953,651 | )       |                             | $      | 3,106,850   |         |   | $ | 214,795 |   |   | $ | 43,159,368 |   |
| Equity-based compensation expenses resulting from ASC 718-10-35 |   |                      | -          |   |         |   | -      |                       |   |   | 589,219                                |   |   |                        | -          |    |                             |   | -           |         |   |   | - |   |   |   | 589,219 |   |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
| Currency translation                                            |   |                      | -          |   |         |   | -      |                       |   |   |                                   |   |   |                        | 92,668     |    |                             |   | -           |         |   |   | - |   |   |   | 92,668 |   |
| Net income (loss)                                               |   |                      | -          |   |         |   | -      |                       |   |   | -                                      |   |   |                        | -          |    |                             |   | (22,179,432 | )            |   |   | 20,870 |   |   |   | (22,158,562 | ) |
| Total comprehensive loss                                        |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   | (22,065,894 | ) |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
| Balance at December 31, 2009                                    |   |                      | 18,376,075 |   |         | $      | 18,376 |                       |   | $      | 43,362,217                             |   |   | $                           | (2,860,983 | )       |                             | $      | (19,072,582 | )            |   | $ | 235,665 |   |   | $ | 21,682,693 |   |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
| Balance at January 1, 2010                                      |   |                      | 18,376,075 |   |         | $      | 18,376 |                       |   | $      | 43,362,217                             |   |   | $                           | (2,860,983 | )       |                             | $      | (19,072,582 | )            |   | $ | 235,665 |   |   | $ | 21,682,693 |   |
| Equity-based compensation expenses resulting from ASC 718-10-35 |   |                      | -          |   |         |   | -      |                       |   |   | 693,391                                |   |   |                        | -          |    |                             |   | -           |         |   |   | - |   |   |   | 693,391 |   |
| Stocks issued during the period, net of Issuance expenses       |   |                      | 2,673,913  |   |         |   | 2,674  |                       |   |   | 3,946,086                              |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   | 3,948,760 |   |
| Exercise of options                                             |   |                      | 69,500     |   |         |   | 69     |                       |   |   | 75,684                                 |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   | 75,753 |   |
| Disposal of discontinued operations                             |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        | 1,005,451  |    |                             |   |        |         |   |   | (372,451 | )  |   |   | 633,000 |   |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
| Currency translation                                            |   |                      | -          |   |         |   | -      |                       |   |   |                                   |   |   |                        | (55,174    | )  |                             |   | -           |         |   |   | - |   |   |   | (55,174 | )  |
| Net income (loss)                                               |   |                      | -          |   |         |   | -      |                       |   |   | -                                      |   |   |                        | -          |    |                             |   | (4,609,523  | )            |   |   | 136,786 |   |   |   | (4,472,737 | ) |
| Total comprehensive loss                                        |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   | (4,527,911 | ) |
|                                                            |   |                      |       |   |         |   |   |                       |   |   |                                   |   |   |                        |       |    |                             |   |        |         |   |   |   |   |   |   |   |   |
| Balance at December 31, 2010                                    |   |                      | 21,119,488 |   |         | $      | 21,119 |                       |   | $      | 48,077,378                             |   |   | $                           | (1,910,706 | )       |                             | $      | (23,682,105 | )            |   | $ | - |   |   | $ | 22,505,686 |   |

----

| Xfone, Inc. and Subsidiaries                                                                                     |   |
|------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   |   |   |   |   |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                            |   |
|                                                                                                             |   |   |   |   |   |   |
|                                                                                                             |   | Years Ended |   |
|                                                                                                             |   | December 31, |   |
|                                                                                                             |   | 2010 |   |   | 2009 |   |
| Cash flow from operating activities:                                                                             |   |   |   |   |   |   |
| Net loss                                                                                                         |   | $ | (4,472,737 | ) |   | $ | (22,158,562 | ) |
| Adjustments required to reconcile net income to net cash provided by operating activities:                       |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                                    |   |   | 4,926,762 |   |   |   | 4,335,820 |   |
| Compensation  in connection with the issuance of warrants and options issued for professional services |   |   | 693,391 |   |   |   | 589,219 |   |
| Impairment of goodwill                                                                                           |   |   | 800,000 |   |   |   | 21,147,745 |   |
| Accrued interest and exchange rate on bonds                                                                      |   |   | 1,503,311 |   |   |   | 915,643 |   |
| Capital loss from disposal of discontinued operations                                                       |   |   | 878,773 |   |   |   | - |   |
| Loss(Gain) on the disposal of fixed assets                                                                  |   |   | 41,158 |   |   |   | (9,314 | ) |
| Decrease (increase) in bonds issuance cost, net                                                                  |   |   | 293,098 |   |   |   | (29,427 | ) |
| Decrease (increase) in account receivables                                                                       |   |   | (94,557 | ) |   |   | 2,839,440 |   |
| Increase (decrease) in bad debt provision                                                                        |   |   | 194,839 |   |   |   | (535,148 | ) |
| Decrease (increase) in inventories                                                                               |   |   | 17,518 |   |   |   | 103,155 |   |
| Decrease (increase) in long-term receivables                                                                     |   |   | 12,162 |   |   |   | (480,207 | ) |
| Decrease (increase) in prepaid expenses and other receivables                                                    |   |   | (1,094,157 | ) |   |   | 229,040 |   |
| Increase( decrease) in long-term liabilities                                                                     |   |   | (172,095 | ) |   |   | (237,427 | ) |
| Increase (decrease) in trade payables                                                                            |   |   | (121,017 | ) |   |   | 5,447 |   |
| Increase(decrease) in other liabilities and accrued expenses                                                     |   |   | 719,722 |   |   |   | (1,273,267 | ) |
| Increase (decrease) in severance pay                                                                             |   |   | 914,330 |   |   |   | 29,445 |   |
| Deferred tax provision                                                                                           |   |   | (2,089,326 | ) |   |   | (232,036 | ) |
|                                                                                                             |   |   |   |   |   |   |   |   |
| Net cash  provided by  operating activities                                                  |   |   | 2,951,175 |   |   |   | 5,239,566 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
| Cash flow from investing activities:                                                                             |   |   |   |   |   |   |   |   |
| Proceeds from disposal of discontinued operations, net                                                           |   |   | 2,524,217 |   |   |   | - |   |
| Purchase of equipment                                                                                            |   |   | (2,378,168 | ) |   |   | (3,341,598 | ) |
| Purchase of equipment for the projects under the United States Department of Agriculture                         |   |   | (6,995,699 | ) |   |   | (4,207,449 | ) |
| Proceeds from disposal of fixed assets                                                                           |   |   | - |   |   |   | 9,728 |   |
|                                                                                                             |   |   |   |   |   |   |   |   |
|  Net cash used in investing activities                                                                      |   |   | (6,849,650 | ) |   |   | (7,539,319 | ) |

----

| Xfone, Inc. and Subsidiaries                                                       |         |
|------------------------------------------------------------------------------------|--------------|
|                                                                               |         |   |   |   |
| STATEMENTS OF CASH FLOWS                                                           |         |
|                                                                               |         |   |   |   |
|                                                                               | Years Ended  |   |
|                                                                               | December 31, |   |
|                                                                               | 2010         |   | 2009 |   |
|                                                                               |         |   |   |   |
| Cash flow from financing activities:                                               |         |   |   |   |   |   |
| Repayment of long-term loans from banks and others                                 |         |   | (557,939 | ) |   |   | (1,714,333 | ) |
| Repayment of capital lease obligation                                              |         |   | (603,896 | ) |   |   | (265,782 | ) |
| Increase (decrease) in short-term bank credit, net                                 |         |   | (4,024,895 | ) |   |   | 2,605,691 |   |
| Proceeds from long-term loans from banks                                           |         |   | 406,835 |   |   |   | 566,878 |   |
| Proceeds from long-term loans from the United States Department of Agriculture     |         |   | 4,774,239 |   |   |   | 4,138,986 |   |
| Repayment of principal on bonds                                                    |         |   | (3,428,350 | ) |   |   | (3,321,939 | ) |
| Repayment of long term loans from United States Department of Agriculture          |         |   | (405,489 | ) |   |   | - |   |
| Proceeds from exercise of options                                                  |         |   | 75,753 |   |   |   | - |   |
| Proceeds from issuance of shares and detachable warrants, net of issuance expenses |         |   | 3,948,760 |   |   |   | - |   |
| Decrease (increase) in restricted cash                                             |         |   | (179,253 | ) |   |   | (891,787 | ) |
| Proceeds from long-term loans                                                      |         |   | 3,203,393 |   |   |   | - |   |
| Net cash provided by financing activities                                          |         |   | 3,209,158 |   |   |   | 1,117,714 |   |
|                                                                               |         |   |   |   |   |   |   |   |
| Effect of exchange rate changes on cash and cash equivalents                  |         |   | 21,010 |   |   |   | 31,171 |   |
| Net increase (decrease) in cash and cash equivalents                               |         |   | (668,307 | ) |   |   | (1,150,868 | ) |
|                                                                               |         |   |   |   |   |   |   |   |
| Cash and cash equivalents at the beginning of the year (*)                         |         |   | 1,885,734 |   |   |   | 3,036,602 |   |
| Cash and cash equivalents at the end of year                                       |         | $ | 1,217,427 |   |   | $ | 1,885,734 |   |
|                                                                               |         |   |   |   |   |   |   |   |

| Supplemental disclosure of cash flows activities:      |   |   |                  |   |
|--------------------------------------------------------|--------|--------|-----------------------|--------|
|                                                   |   |   |                  |   |   |   |
| Cash paid for:                                         |   |   |                  |   |   |   |
|                                                   |   |   |                  |   |   |   |
| Interest                                               |   | $      |   2,539,625 |   |   | $ | 2,509,218 |   |
|                                                   |   |   |                  |   |   |   |   |   |
| Taxes                                                  |   | $      | 407,180               |   |   | $ | 456,681 |   |
|                                                   |   |   |                  |   |   |   |   |   |
| Purchase of fixed assets by capital lease arrangements |   | $      | 1,434,671             |   |   | $ | 510,424 |   |

----

| Xfone, Inc. and Subsidiaries                                         |   |
|----------------------------------------------------------------------|--------|
|                                                                 |   |    |   |   |   |   |   |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2010 and 2009 |   |

|   | A. | Xfone, Inc. (the "Company" or "Xfone") was incorporated in the State of Nevada, U.S.A. in September 2000. The Company is a holding and managing company providing, through its subsidiaries, integrated communications services which include voice, video and data over its Fiber-To-The-Premise (“FTTP”) and other networks. The Company currently has operations in Texas, Mississippi and Louisiana. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | NTS Communications, Inc. ("NTS") and its seven wholly owned subsidiaries, NTS Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona, Inc., Communications Brokers Inc., NTS Telephone Company, LLC, NTS Management Company, LLC and PRIDE Network, Inc. |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ● | Xfone USA, Inc. and its two wholly owned subsidiaries, eXpeTel Communications, Inc. and Gulf Coast Utilities, Inc. (collectively, "Xfone USA").                                                                                                                                |

|   | B. | Disposition of UK Subsidiaries (Swiftnet, Auracall, Equitalk.co.uk and Story Telecom) |
|--------|----|---------------------------------------------------------------------------------------|

|   |   | 1. | A release of the Company from the repayment of the loan from Iddo Keinan, the son of Mr. Keinan and an employee of Swiftnet dated December 10, 2009, pursuant to which Iddo Keinan extended to Swiftnet a loan of £860,044 ($1,344,073); |
|--------|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | 2. | A redemption of the credit facility which the Company had obtained from Bank Leumi (UK) Plc. for of £150,000 ($234,420), thereby releasing the Company from its obligation to Bank Leumi (UK) Plc.;                                      |
|   |   | 3. | An annual earn-out payment over the following years beginning on the consummation of the Transaction. The aggregate Earn-Out Payments shall be equal to but shall not exceed $1,858,325 in the aggregate; and                       |
|   |   | 4. | Cancellation of intercompany balances between Xfone and the UK Subsidiaries amounting to $1,009,037.                                                                                                                                          |

----

| Proceeds                                                       |   |   |       |
|----------------------------------------------------------------|--------|--------|------------|
| Release from the repayment of a loan                           |   | $      | 1,344,073  |   |
| Release from a repayment of credit line                        |   |   | 234,420    |   |
| Release from retirement and employment termination liabilities |   |   | 937,677    |   |
| Aggregate future Earn-Out receivables (*)                      |   |   | 1,444,494  |   |
| Transaction costs                                              |   |   | (55,495    | ) |
|                                                           |   |   |       |   |
| Net proceeds                                                   |   |   | 3,905,169  |   |
|                                                           |   |   |       |   |
| Net book value of the UK Subsidiaries:                         |   |   |       |   |
| Cash                                                           |   |   | 494,060    |   |
| Account receivables                                            |   |   | 718,214    |   |
| Other current assets                                           |   |   | 2,272,316  |   |
| Fixed assets, net                                              |   |   | 879,989    |   |
| Trade payable                                                  |   |   | (1,539,926 | ) |
| Other current liabilities                                      |   |   | (1,894,363 | ) |
| Other long-term liability                                      |   |   | (166,824   | ) |
| Goodwill and other intangible assets                           |   |   | 4,942,739  |   |
| Realization of cumulative translation adjustment               |   |   | 905,279    |   |
|                                                           |   |   |       |   |
| Net assets                                                     |   |   | 6,611,484  |   |
|                                                           |   |   |       |   |
| Loss before taxes                                              |   |   | (2,706,315 | ) |
|                                                           |   |   |       |   |
| Tax benefit                                                    |   |   | 442,032    |   |
|                                                           |   |   |       |   |
| Net loss on the sale of the UK Subsidiaries (**)               |   | $      | (2,264,283 | ) |

----

|                                                                |   | Year ended   |       |
|---------------------------------------------------------------------|--------|--------------|------------|
|                                                                |   | December 31, |       |
|                                                                |   | 2010 (*)     |       |   | 2009 |   |
|                                                                |   |         |       |   |   |   |
| Revenues                                                            |   | $            | 7,125,187  |   |   | $ | 15,323,807 |   |
| Cost of revenues                                                    |   |         | 2,629,875  |   |   |   | 7,226,018 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Gross profit                                                        |   |         | 4,495,312  |   |   |   | 8,097,789 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Operating expenses:                                                 |   |         |       |   |   |   |   |   |
| Marketing and selling                                               |   |         | 2,661,304  |   |   |   | 4,635,012 |   |
| General and administrative                                          |   |         | 2,492,330  |   |   |   | 2,226,567 |   |
| Impairment of goodwill                                              |   |         | 800,000    |   |   |   | - |   |
| Total operating expenses                                            |   |         | 5,953,634  |   |   |   | 6,861,579 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Operating profit (loss)                                             |   |         | (1,458,322 | ) |   |   | 1,236,210 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Financing expenses, net                                             |   |         | (76,297    | ) |   |   | (82,310 | ) |
|                                                                |   |         |       |   |   |   |   |   |
| Income (loss) before taxes                                     |   |         | (1,534,619 | ) |   |   | 1,153,900 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Income tax benefit (expense)                                        |   |         | (4,662)    |   |   |   | 77,011 |   |
|                                                                |   |         |       |   |   |   |   |   |
| Net income (loss) from discontinued operation in the United Kingdom |   | $            | (1,539,281 | ) |   | $ | 1,230,911 |   |

|   | C. | Disposition of Israeli Subsidiary (Xfone 018) |
|--------|----|-----------------------------------------------|

----

| Gross proceeds:                                                |   |   |       |
|----------------------------------------------------------------|--------|--------|------------|
| Cash (less Transaction costs)                                  |   | $      | 5,560,567  |   |
| Cash held in escrow                                            |   |   | 1,695,817  |   |
| Allocation of proceeds to Minority Partners                    |   |   | (2,308,285 | ) |
|                                                           |   |   |       |   |
| Net proceeds                                                   |   |   | 4,948,099  |   |
|                                                           |   |   |       |   |
| Net book value of Xfone 018:                                   |   |   |       |   |
| Cash                                                           |   |   | 433,314    |   |
| Account receivables                                            |   |   | 1,690,699  |   |
| Other current assets                                           |   |   | 206,735    |   |
| Fixed assets, net                                              |   |   | 1,446,789  |   |
| Other non-current assets                                       |   |   | 276,814    |   |
| Short-term bank credit and current maturities of notes payable |   |   | (466,864   | ) |
| Trade payable                                                  |   |   | (1,667,384 | ) |
| Other current liabilities                                      |   |   | (149,019   | ) |
| Notes payable, net of current maturities                       |   |   | (349,177   | ) |
| Other long-term liability                                      |   |   | (125,218   | ) |
| Minority interest                                              |   |   | (372,451   | ) |
| Realization of cumulative translation adjustment               |   |   | 100,172    |   |
|                                                           |   |   |       |   |
| Net assets                                                     |   |   | 1,024,410  |   |
|                                                           |   |   |       |   |
| Profit before capital gain taxes                               |   |   | 3,923,689  |   |
|                                                           |   |   |       |   |
| Tax expense                                                    |   |   | 2,538,179  |   |
|                                                           |   |   |       |   |
| Net profit on the sale of Xfone 018                            |   | $      | 1,385,510  |   |

----

|                                                        |   | Year ended   |      |
|-------------------------------------------------------------|--------|--------------|-----------|
|                                                        |   | December 31, |      |
|                                                        |   | 2010(*)      |      |   | 2009 |   |
|                                                        |   |         |      |   |   |   |
| Revenues                                                    |   | $            | 6,477,810 |   |   | $ | 8,296,047 |   |
| Cost of revenues                                            |   |         | 3,799,730 |   |   |   | 4,423,727 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Gross profit                                                |   |         | 2,678,080 |   |   |   | 3,872,320 |   |
|                                                        |   |         |      |   |   |   |   |   |
|                                                        |   |         |      |   |   |   |   |   |
| Operating expenses:                                         |   |         |      |   |   |   |   |   |
| Marketing and selling                                       |   |         | 610,465   |   |   |   | 1,289,040 |   |
| General and administrative                                  |   |         | 1,312,228 |   |   |   | 1,683,520 |   |
| Non-recurring loss                                          |   |         | -         |   |   |   | 506,176 |   |
| Total operating expenses                                    |   |         | 1,922,693 |   |   |   | 3,478,736 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Operating profit (loss)                                     |   |         | 755,387   |   |   |   | 393,584 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Financing expenses, net                                     |   |         | (129,508  | ) |   |   | (295,215 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Income (loss) before taxes                             |   |         | 625,879   |   |   |   | 98,369 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Income tax expense                                          |   |         | (184,633  | ) |   |   | (31,214 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Net income (loss)                                           |   |         | 441,246   |   |   |   | 67,155 |   |
|                                                        |   |         |      |   |   |   |   |   |
| Income (loss) attributed to non-controlling interest        |   |         | (136,786  | ) |   |   | (20,870 | ) |
|                                                        |   |         |      |   |   |   |   |   |
| Net income (loss) from discontinued operation in the Israel |   | $            | 304,460   |   |   | $ | 46,285 |   |
|                                                        |   |         |      |   |   |   |   |   |

----

|   | D. Liquidity: | As of December 31, 2010, the Company reported a working capital deficit of $11,420,026 compared to a deficit of $14,383,386 (excluding $1,941,476 related to the discontinued operations) on December 31, 2009. In order to overcome the deficit in the Company's working capital, the Company's management took the following actions: (i) as of December 31, 2010 the Company's current liabilities includes a short-term note payable of approximately $2,800,000 with the Company's commercial bank. The Company started discussions with a financial entity to replace the short-term note with a multi-annual credit line and believes that upon resolution of the discussions the Company will repay most of the amount after December 31, 2011; (ii) the Company is in early discussions with a financing entity to refinance its real estate asset in a form of a long-term mortgage. The Company believes that the asset can be refinanced for a value of between $2.5 million to $3 million; (iii) the Company has reorganized its sales and marketing department to reduce the payroll costs. The Company's management believes that these actions, together with the increase in the profitability as a result of the increase in revenues from its Fiber-To-The-Premise network will able the Company to pay its current obligations. |
|--------|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A. | Principles of Consolidation and Basis of Financial Statement Presentation |
|--------|----|---------------------------------------------------------------------------|

|   | B. | Foreign Currency Translation |
|--------|----|------------------------------|

|   | C. | Subsequent Events |
|--------|----|-------------------|

|   | D. | Cash and Cash Equivalents |
|--------|----|---------------------------|

|   | E. | Restricted Cash |
|--------|----|----------------------|

----

|   | F. | Accounts Receivable |
|--------|----|---------------------|

|   | G. | Inventories |
|--------|----|-------------|

|   | H. | Fixed Assets |
|--------|----|--------------|

|                           | Useful Life           |
|--------------------------------|-----------------------|
| Communication equipment        | 3-15 years            |
| Fiber network                  | 30 years              |
| Construction equipment         | 5 years               |
| Equipment held under lease     | 4-15  years |
| Office furniture and equipment | 5-15 years            |
| Development costs              | 3 years               |
| Computer equipment             | 5-7 years             |
| Motor vehicles                 | 4-5 years             |
| Building and plant             | 4-30 years            |

----

|   | I. | Other Intangible Assets |
|--------|----|-------------------------|

|   | J. | Long-Lived Assets |
|--------|----|-------------------|

|   | K. | Revenue Recognition |
|--------|----|---------------------|

|   | L. | Advertising expenses |
|--------|----|----------------------|

|   | M. | Use of Estimates |
|--------|----|------------------|

----

|   | N. | Earnings Per Share |
|--------|----|--------------------|

|   | O. | Income Taxes |
|--------|----|--------------|

|   | P. | Fair Value Measurements |
|--------|----|-------------------------|

| 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                                                        |

|   | Q. | Stock-Based Compensation |
|--------|----|--------------------------|

----

|   | R. | Derivative instruments |
|--------|----|------------------------|

|   | S. | Goodwill and Indefinite-Lived Purchased Intangible Assets |
|--------|----|-----------------------------------------------------------|

|   | T. | Reclassification |
|--------|----|------------------|

|   | U. | Recent Accounting Pronouncements |
|--------|----|----------------------------------|

| 1.   | Fair Value Measurements and Disclosures. In January 2010, the FASB issued “Fair Value Measurements and Disclosures—Improving Disclosures about Fair Value Measurements” (Accounting Standards Update (ASU) 2010-06), which requires new disclosures and explanations for transfers of financial assets and liabilities between certain levels in the fair value hierarchy. ASU 2010-06 also clarifies that fair value measurement disclosures are required for each class of financial asset and liability, which may be a subset of a caption in the consolidated balance sheets, and those disclosures should include a discussion of inputs and valuation techniques. For financial assets and liabilities subject to lowest-measurements, ASU 2010-06, further requires that the Company separately present purchases, sales, issuances, and settlements instead of netting these changes. With respect to matters other than lowest-level measurements, the Company adopted ASU 2010-06 beginning with the quarter ended March 31, 2010 with the remaining disclosure requirements becoming effective for fiscal years and interim periods beginning on or after December 15, 2010 (i.e., the quarter ending March 31, 2011, for the Company). Adoption of this standard did not have any material impact on the Company's financial statements.  |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.   | Intangibles-Goodwill and Other. In December 2010, the FASB issued “Intangibles- Goodwill and Other-When to perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts” (Accounting Standards Update (ASU) 2010-28), which requires the entity to assess whether it is more likely than not that a goodwill impairment exists for each reporting unit with a zero or negative carrying amount.  If it is more likely than not that a goodwill impairment exists, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any by evaluating the adverse qualitative factors. ASU 2010-28 became effective for a public entity for fiscal years, and interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. Adoption of this standard required recording a cumulative-effect adjustment to beginning retained earnings in the period of adoption. Accordingly, adoption of the new guidance has not impacted the Company’s financial statements.                                                                                                                                                                                                                                                  |

----

| 3.   | Business Combinations (Topic 805). In December 2010, the FASB issued “Business Combinations (Topic 805) - Disclosure of Supplementary Pro Forma Information for Business Combinations” (Accounting Standards Update (ASU) 2010-29). If a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. If comparative financial statements are not presented, the revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period (supplemental pro forma information). ASU 2010-29 also expands the supplemental pro forma disclosures to include the description of the nature and amount of any material, nonrecurring pro forma adjustments directly attributable to the business combination(s) included in the reported pro forma revenue and earnings. ASU 2010-29 is applied prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010; earlier application is permitted. The Company has not completed any business combinations since January 1, 2010.  Accordingly, adoption of the new guidance has not impacted the Company’s financial statements. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Subsequent Events (Topic 855). In February 2010, the FASB issued “Subsequent Events (Topic 855) - Amendments to Certain Recognition and Disclosure Requirements” (Accounting Standards Update (ASU) 2010-09), which requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued. An SEC filer is an entity that is required to file or furnish its financial statements with either the SEC or, with respect to an entity subject to Section 12(i) of the Securities Exchange Act of 1934, as amended, the appropriate agency under that Section. ASU 2010-09 also clarifies that Revised financial statements are considered reissued financial statements and financial statements are revised only for correction of an error or retrospective application of U.S. GAAP. ASU 2010-09 is effective for interim or annual financial periods ending after June 15, 2010 and is applied prospectively. Adoption of this amendment did not have an impact on the company’s consolidated financial statements. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|              |   | December 31, |      |
|-------------------|--------|--------------|-----------|
|              |   | 2010         |      |   | 2009 |   |
| Unbilled revenues |   | $            | 1,265,795 |   |   | $  | 769,705 |   |
| Prepaid expenses  |   |         | 601,328   |   |   |   | 681,961 |   |
| Other receivables |   |         | 1,209,937 |   |   |   | 971,736 |   |
|              |   | $            | 3,077,060 |   |   | $ | 2,423,402 |   |

|                           |   |         |        |   |   |   |
|--------------------------------|--------|--------------|-------------|--------|--------|--------|
|                           |   | December 31, |        |
|                           |   | 2010         |        |   | 2009   |   |
| Cost                           |   |         |        |   |   |   |
| Communication equipment        |   | $            | 69,397,623  |   |   | $      | 67,546,756 |   |
| Fiber network                  |   |         | 44,443,236  |   |   |   | 38,825,568 |   |
| Office furniture and equipment |   |         | 3,664,434   |   |   |   | 2,009,326 |   |
| Development costs              |   |         | 2,044,362   |   |   |   | 1,275,914 |   |
| Computer equipment             |   |         | 10,242,282  |   |   |   | 9,974,301 |   |
| Construction equipment         |   |         | 481,049     |   |   |   | 583,253 |   |
| Motor vehicles                 |   |         | 1,458,887   |   |   |   | 1,032,412 |   |
| Building and plant             |   |         | 10,478,823  |   |   |   | 10,441,678 |   |
|                           |   |         | 142,210,696 |   |   |   | 131,689,208 |   |
|                           |   |         |        |   |   |   |   |   |
| Accumulated Depreciation       |   |         |        |   |   |   |   |   |
| Communication equipment        |   |         | 56,859,826  |   |   |   |  56,992,241 |   |
| Fiber network                  |   |         | 9,843,897   |   |   |   | 8,632,614 |   |
| Office furniture and equipment |   |         | 3,327,691   |   |   |   | 1,723,547 |   |
| Development costs              |   |         | -           |   |   |   | - |   |
| Computer equipment             |   |         | 8,784,800   |   |   |   | 8,323,659 |   |
| Construction equipment         |   |         | 338,129     |   |   |   | 375,469 |   |
| Motor vehicles                 |   |         | 824,699     |   |   |   | 782,951 |   |
| Building                       |   |         | 3,686,862   |   |   |   | 3,312,032 |   |
|                           |   |         | 83,665,904  |   |   |   | 80,142,513 |   |
|                           |   |         |        |   |   |   |   |   |
|  Fixed assets, net        |   | $            | 58,544,792  |   |   | $      | 51,546,695 |   |

----

|                     |   | CustomerRelationships |      |   | License |   |    | Total  |   |
|--------------------------|--------|-----------------------|-----------|--------|---------|--------|---------|--------|--------|
| December 31, 2010   |   |                  |      |   |    |   |    |   |   |   |   |   |
| Cost                     |   | $                     | 3,130,800 |   |    | $      | 250,000 |   |   | $ | 3,380,800 |   |
| Accumulated amortization |   |                  | 2,173,929 |   |    |   | -       |   |   |   | 2,173,929 |   |
|                     |   |                  |      |   |    |   |    |   |   |
| Net                      |   | $                     | 956,871   |   |    | $      | 250,000 |   |   | $ | 1,206,871 |   |
|                     |   |                  |      |   |    |   |    |   |   |
| December 31, 2009   |   |                  |      |   |    |   |    |   |   |   |   |   |
| Cost                     |   | $                     | 3,130,800 |   |    | $      | 250,000 |   |   | $ | 3,380,800 |   |
| Accumulated amortization |   |                  | 1,448,029 |   |    |   | -       |   |   |   | 1,448,029 |   |
|                     |   |                  |      |   |    |   |    |   |   |
| Net                      |   | $                     | 1,682,771 |   |    | $      | 250,000 |   |   | $ | 1,932,771 |   |
|                     |   |                  |      |   |    |   |    |   |   |

|                 |   | 2011   |    |   | 2012   |   |    | 2013   |   |   | 2014   |   |   | 2015   |   |
|----------------------|--------|--------|---------|--------|--------|--------|---------|--------|--------|--------|--------|--------|--------|--------|--------|
| Amortization expense |   | $      | 696,387 |   |   | $      | 260,484 |   |   | $      | -      |   |   | $      | -      |   |   | $ | - |   |
|                 |   |   |    |   |   |   |    |   |   |   |   |   |   |   |   |

----

|                           |   | Fair value as of measurement date |   |   | Quoted prices in active markets foridentical assets |   |   | Significant other observable inputs |   |   | Significant unobservable inputs |   |   | Impairment charge |   |
|--------------------------------|--------|-----------------------------------|--------|--------|-----------------------------------------------------|--------|--------|-------------------------------------|--------|--------|---------------------------------|--------|--------|-------------------|--------|
|                           |   |                              |   |   | (Level 1)                                           |   |   | (Level 2)                           |   |   | (Level 3)                       |   |   |              |   |
| Goodwill related to US segment |   | $                                 | -      |   |                                                | $      | N/A    |                                |   | $      | N/A                             |   |   | $                 | -      |   |   | $ | 21,147,745 |   |

|                        | December 31, |      |
|-----------------------------|--------------|-----------|
|                        | 2010         |      | 2009 |   |
|                        |         |      |   |   |   |   |
| Payroll and payroll related | $            | 797,446   |   | $  | 760,852 |   |
| Accrued expense             |         | 2,249,114 |   |   | 2,022,239 |   |
| Deferred revenues           |         | 1,013,833 |   |   | 1,039,905 |   |
| Tax authorities             |         | 786,139   |   |   | - |   |
| Others                      |         | 264,597   |   |   | 99,745 |   |
|                        | $            | 5,111,129 |   | $ | 3,922,741 |   |
|                        |         |      |   |   |   |   |

----

|                          |   | December 31, |   |
|-------------------------------|--------|--------------|--------|
|                          |   | 2010         |   |   | 2009 |   |
|                          |   |         |   |   |   |   |   |   |
| Loan from various lenders (1) |   |  $      | -      |   |   |  $ | 541,707 |   |

| 1. | On December 1, 2009, the Company issued a series of promissory notes to various lenders who are either affiliates of the Company or people related to certain affiliates and/or business partners of the Company.  The notes bore interest of 10% and matured between three months and one year from issuance. The proceeds of the notes were utilized to repay obligations under the Company’s Series A Bonds. The promissory notes were paid in full during 2010. |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | December 31, |      |
|--------------------------------------------------------------|--------|--------------|-----------|
|                                                         |   | 2010         |      |   | 2009 |   |
|                                                         |   |         |      |   |   |   |   |   |
| Notes Payable to the United States Department of Agriculture |   |  $      | 9,912,707 |   |   |  $ | 5,574,100 |   |
|                                                         |   |         |      |   |   |   |   |   |
| Less current portion (see note 10)                           |   |         | 420,259   |   |   |   | 263,068 |   |
|                                                         |   |         |      |   |   |   |   |   |
| Long-term portion                                            |   |   $     | 9,492,448 |   |   |  $ | 5,311,032 |   |

| Year                |   |   |      |
|---------------------|--------|--------|-----------|
| 2011                |   | $      | 420,259   |   |
| 2012                |   |   | 554,959   |   |
| 2013                |   |   | 576,416   |   |
| 2014                |   |   | 598,476   |   |
| 2015                |   |   | 621,319   |   |
| 2016 and thereafter |   |   | 7,141,278 |   |
|                |   | $      | 9,912,707 |   |

----

|                                                                                            |                   |    | December 31, |   |
|-------------------------------------------------------------------------------------------------|------------------------|---------|--------------|--------|
|                                                                                            | Annual Interest Rate   |    | 2010         |   |   | 2009 |   |
| Credit line and loan from a commercial bank (1)                                                 | 2% above the WSJ Prime | $       | 2,843,084    |   | $ | 5,583,692 |   |
| Credit line from Bank Leumi (UK) Plc.                                                           | 1.51%                  |    | -            |   |   | 241,373 |   |
| Current maturity of notes payable from the united States Department of Agriculture (see note 9) | 3.79%-3.81%            |    | 420,259      |   |   | 263,068 |   |
| Long-term loan from Burlingame Equity Investors, LP ("Burlingame") (2)                          | 10.0%                  |    | 3,196,357    |   |   | - |   |
| Other notes payable                                                                             | 3.45% - 12.0%          |    | 32,593       |   |   | 114,485 |   |
|                                                                                            |                   |    | 6,492,293    |   |   | 7,072,854 |   |
|                                                                                            |                   |    |         |   |   |   |   |
| Less current portion                                                                            |                   |    | 3,281,420    |   |   | 7,029,842 |   |
|                                                                                            |                   |    |         |   |   |   |   |
| Long-term portion                                                                               |                   |  $ | 3,210,873    |   |  $ | 43,012 |   |

| 1. | On October 14, 2010, NTS replaced the revolving line of credit and the loan from commercial bank with a new loan in the amount of $2,983,531 with a maturity date of October 13, 2011. The new loan bears interest at a rate equivalent to 2% above the Wall Street Journal Prime rate, but not less than 6% per annum and is repayable in equal principal and interest monthly installments of $100,000 each. The new loan is secured by an assignment of all of NTS’ trade accounts receivable, equipment and inventory.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2. | On March 23, 2010, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing shareholder, Burlingame. As part of the Purchase Agreement, the Company issued a senior promissory note in the aggregate principal amount of $3,500,000, maturing on March 22, 2012. Interest accrues at an annual rate of 10% and is payable quarterly. The note is not secured and has equal liquidation rights with the Company's Series A Bonds issued in Israel on December 13, 2007. The Company evaluated the fair value of each of the three securities that were issued under the Purchase Agreement (i.e., the promissory note, 2,173,913 shares of the Company’s common stock, and a warrant to purchase 950,000 shares of the Company’s common stock) and recorded the promissory note at its fair value of $2,556,240. The difference between the fair value and the principal amount will be expense ratably over the life of the promissory note. The effective rate of the note is calculated at 27.5%. |

| Year   |   |   |      |
|--------|--------|--------|-----------|
| 2011   |   | $      | 3,281,420 |   |
| 2012   |   |   | 3,210,873 |   |
|   |   | $      | 6,492,293 |   |

|   | A. | Issuance of Bonds |
|--------|----|-------------------|

|                                             | December 31, |   |
|--------------------------------------------------|--------------|--------|
|                                             | 2010         |   |   | 2009 |   |
|                                             |         |   |   |   |   |
|                                             |         |   |   |   |   |   |   |   |
| Outstanding balance (in NIS)                     |         |   | 62,738,813 |   |   |   |   75,286,575 |   |
| Accrued Interest (in NIS)                        |         |   |      412,529 |   |   |   |         511,536 |   |
| Increase in debt due to CPI adjustments (in NIS) |         |   |    7,209,581 |   |   |   |       6,769,705 |   |
| Total outstanding debt                           |         |   |  70,360,923 |   |   |   |    82,567,816 |   |
|                                             |         |   |   |   |   |   |   |   |
| Exchange rate for year end                       |         |   | 3.55 |   |   |   | 3.78 |   |
|                                             |         |   |   |   |   |   |   |   |
| Total outstanding debt (USD)                     |         | $      | 19,825,563 |   |   | $ |    21,872,269 |   |
| Debt discount related to warrants                |         |   |   (602,643 | )  |   |   |        (724,311 | )  |
|                                             |         |   |   |   |   |   |   |   |
| Total outstanding debt                           |         |   | 19,222,920 |   |   |   |    21,147,958 |   |
|                                             |         |   |   |   |   |   |   |   |
| Less current portion                             |         |   |    3,933,014 |   |   |   |      3,637,146 |   |
|                                             |         |   |   |   |   |   |   |   |
| Long-term portion                                |         | $      | 15,289,906 |   |   | $ |    17,510,812 |   |
|                                             |         |   |   |   |   |   |   |   |

----

| Bonds Series A                           |   | $      | 24,588,726 |   |
|-----------------------------------------------|--------|--------|------------|--------|
| Stock Purchase Warrants  (1)   |   |   | 973,306    |   |
| Total                                         |   | $      | 25,562,032 |   |

| (1)   | Presented as part of Additional Paid-in Capital. |
|-----------------|--------------------------------------------------|

|   | B. | Aggregate maturities are as follows: |
|--------|----|--------------------------------------|

|             |   |   |       |   |
|------------------|--------|--------|------------|--------|
| 2011             |   | $      | 3,822,476  |   |
| 2012             |   |   | 3,822,476  |   |
| 2013             |   |   | 3,822,476  |   |
| 2014             |   |   | 3,822,477  |   |
| 2015             |   |   | 3,822,477  |   |
|             |   |   | 19,112,382 |   |
| Accrued interest |   |   | 110,538    |   |
|             |   |   |       |   |
|             |   | $      | 19,222,920 |   |

| 2011                                                        |   | $       | 829,044   |   |
|-------------------------------------------------------------|--------|---------|-----------|--------|
| 2012                                                        |   |    | 555,978   |   |
| 2013                                                        |   |    | 49,649    |   |
|                                                        |   |    |      |   |
| Total                                                       |   | $       | 1,434,671 |   |
|                                                        |   |    |      |   |
| Total minimum lease payments                                |   | $  | 1,542,867 |   |
| Less: amount representing interest at average rate of 7.54% |   |    | (108,196  | )      |
|                                                        |   |    |      |   |
|  Present value of net minimum lease payment            |   | $  | 1,434,671 |   |

----

|                    |   | December 31, |      |
|-------------------------|--------|--------------|-----------|
|                    |   | 2010         |      |   | 2009 |   |
|                    |   |         |      |   |   |   |
| Communication equipment |   |  $      | 508,781   |   |   |  $ | 458,306 |   |
| Construction equipment  |   |         | 289,603   |   |   |   | 52,118 |   |
| Telephone equipment     |   |         | 189,242   |   |   |   | - |   |
| Computer equipment      |   |         | 82,376    |   |   |   | - |   |
| Motor vehicles          |   |         | 364,669   |   |   |   | - |   |
|                    |   |  $      | 1,434,671 |   |   |  $ | 510,424 |   |

|                    |   | December 31, |      |
|-------------------------|--------|--------------|-----------|
|                    |   | 2010         |      |   | 2009 |   |
| Current:                |   |         |      |   |   |   |   |   |
| Federal                 |   | $            | -         |   |   | $ | - |   |
| State                   |   |         | (224,833  | )  |   |   | (219,025 | ) |
| Deferred:               |   |         |      |   |   |   |   |   |
| Federal                 |   |         | 1,979,505 |   |   |   | 306,897 |   |
| State                   |   |         | 59,995    |   |   |   | 36,105 |   |
|                    |   |         |      |   |   |   |   |   |
| Total benefit (expense) |   | $            | 1,814,667 |   |   | $ | 123,977 |   |

----

|                                                                              |   |         |                                                                                        |   |
|-----------------------------------------------------------------------------------|--------|--------------|---------------------------------------------------------------------------------------------|--------|
|                                                                              |   | December 31, |
|                                                                              |   | 2010         |                                                                                        | 2009   |
| Deferred Tax Liabilities:                                                         |   |         |                                                                                        |   |   |   |
| Accelerated tax depreciation of fixed assets                                      |   | $            | 8,055,999                                                                                   |   | $ | 7,954,705 |
|                                                                              |   |         |                                                                                        |   |   |   |
| Deferred Tax Assets:                                                              |   |         |                                                                                        |   |   |   |
| Carry forward losses                                                              |   |         | 4,133,590                                                                                   |   |   | 3,860,264 |
| Allowance for bad debts                                                           |   |         |               135,685 |   |   | 115,565 |
| Evaluation of bonds payable to the Israeli Consumer Price Index and exchange rate |   |         | 1,309,703                                                                                   |   |   | 625,231 |
| Accrued vacation and severance pay                                                |   |         |               153,509 |   |   | 188,868 |
| Expenses related to warrants and non qualified stock options                      |   |         | 159,126                                                                                     |   |   | -  |
|                                                                              |   |         |                                                                                        |   |   |   |
| Net deferred taxes liabilities                                                    |   | $            | 2,164,386                                                                                   |   | $ | 3,164,777 |

----

|                                                                                                |   |         |       |   |   |   |
|-----------------------------------------------------------------------------------------------------|--------|--------------|------------|--------|--------|--------|
|                                                                                                |   | December 31, |       |
|                                                                                                |   | 2010         |       |   | 2009   |   |
|                                                                                                |   |         |       |   |   |   |
| Income tax expense (benefit) computed at statutory rate                                             |   | $            | (1,465,603 | )      |   | $      | (8,017,406 | ) |
|                                                                                                |   |         |       |   |   |   |   |   |
| Goodwill impairment                                                                                 |   |         | -          |   |   |   | 7,190,233 |   |
| State income taxes, net of Federal benefit                                                          |   |         | 104,975    |   |   |   | 218,352 |   |
| Difference between income reported for tax purposes and income for financial reporting purposes     |   |         | 109,205    |   |   |   | - |   |
| Adjustment to deferred tax items                                                                    |   |         | (217,769   | )      |   |   | - |   |
| Difference in the effective tax rate that was used to calculate deferred tax assets and liabilities |   |         | (156,680   | )      |   |   | - |   |
| Other                                                                                               |   |         | (188,795   | )      |   |   | 484,844 |   |
|                                                                                                |   |         |       |   |   |   |   |   |
| Expense (benefit) for income taxes                                                                  |   | $            | (1,814,667 | )      |   | $      | (123,977 | ) |

| 1. | The Company leases its facilities in the USA under operating lease agreement, which will expire in 2011 and thereafter. The minimum lease payments under non-cancelable operating leases are as follows: |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year ended December 31, |   |    |
|-------------------------|--------|---------|
|                    |   |    |   |
| 2011                    |   |  $ | 2,157,564 |   |
| 2012                    |   |    | 1,658,711 |   |
| 2013                    |   |    | 673,973 |   |
| 2014                    |   |    | 240,026 |   |
|                    |   | $       | 4,730,274 |   |

----

| 1.   | On October 14, 2010, NTS replaced the revolving line of credit and the loans with a new loan in the amount of $2,983,531 with a maturity date of October 13, 2011. The new loan bears interest at a rate equivalent to 2% above  the Wall Street Journal Prime rate, but not less than 6% per annum and is repayable in equal principal and interest monthly installments of $100,000 each. The new loan is secured by an assignment of all of NTS’ trade accounts receivable, equipment and inventory.  |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A.     | The holders of the Company's share of common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. The common stock has no pre-emptive or conversion rights or other subscription rights. There are no sinking fund provisions applicable to the common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | B.     | On February 15, 2010, the Company granted the following options to officers and employees under the Company’s 2007 Stock Incentive Plan: (1) The Company's President, Chief Executive Officer and director was granted options to purchase 1,500,000 shares of common stock, fully vested, exercisable at $1.10 per share and expiring five years from the date of grant. Based on the assumptions below, the Company estimated the fair value of the options at $294,386.(2) The Company's Chief Financial Officer was granted options to purchase 400,000 shares of common stock, exercisable at $1.10 per share and expiring seven years from the grant date. The options will vest as to 25% of the underlying shares 12 months from the date of grant. The remaining 75% of the options shall vest in equal quarterly installments after 15 months from the date of grant. In the event of a change of control of the Company, any unvested and outstanding portion of the options shall immediately and fully vest. Based on the assumptions below, the Company estimated the fair value of the options at $107,050.(3) An aggregate of 1,372,500 options to purchase shares of common stock were granted to other employees of the Company and its subsidiaries.  Each such option is exercisable at $1.10 per share and expires seven years from the date of grant.  Of these options, 85,000 options are fully vested on the date of grant, and the remaining 1,287,500 options will vest as to 25% of the underlying shares 12 months from the date of grant, with the remaining 75% vesting in equal quarterly installments after 15 months from the date of grant. Additionally, 125,000 of the options will immediately and fully vest in the event of a change in control of the Company. Based on the assumption below, the Company estimated the fair value of the options at $367,311. On March 22, 2010, 69,500 of these options were exercised.                                                                                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | C.     | Securities Purchase Agreement with Burlingame                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | On March 23, 2010, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with an existing shareholder, Burlingame Equity Investors, LP (“Burlingame”), for the issuance of the following securities of the Company ("Components") for an aggregate purchase price of $6,000,000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |   | (1) A senior promissory note in the aggregate principal amount of $3,500,000, maturing on March 22, 2012.  Interest accrues at an annual rate of 10% and is payable quarterly. The note is not secured and has equal liquidation rights with the Company's Series A Bonds issued in Israel on December 13, 2007. The note is included in the Company's long-term Notes Payables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   | (2) 2,173,913 shares of the Company’s common stock at a price of $1.15 per share for a total purchase price of $2,500,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |   | (3) A warrant to purchase 950,000 shares of the Company’s Common Stock, which shall be exercisable at a price of $2.00 per share for a period of 5 years. The number of shares issuable upon exercise of the Warrant, and/or the applicable exercise price, may be proportionately adjusted in the event of a stock dividend, distribution, subdivision, combination, merger, consolidation, sale of assets, spin-off or similar transactions. The fair value of the warrants is $691,863 using the Black-Scholes pricing model. The assumptions used in the valuation model are: volatility of 48.4%; risk-free interest 2.44%; dividend yield 0%; and expected life of 5 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |   | The Company allocated the total aggregate purchase price of $6,000,000 to the three Components above based on their relative fair value. After such allocation, the senior promissory note was recorded at $2,556,240; the shares were recorded at $2,918,920; and the warrants at $524,840                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | D.     | Subscription Agreement with certain investors affiliated with Gagnon Securities LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | On March 23, 2010, the Company entered into a Subscription Agreement with certain investors affiliated with Gagnon Securities LLC, an existing shareholder (collectively, “Gagnon”), for the issuance of 500,000 Common Stock at a purchase price of $1.15 per share for an aggregate purchase price of $575,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | E.     | On September 20, 2010, the Company granted the following options to directors and employees under the Company’s 2007 Stock Incentive Plan:(1) An aggregate of 360,000 options to purchase shares of common stock were granted to four directors of the Company. The options vest in equal monthly installments of 10,000 during a period of nine months from date of grant. The options are exercisable at $1.22 per share and expire five years from the date of grant. Based on the assumptions below, the Company estimated the fair value of the options at $164,121.(2) An aggregate of 135,000 options to purchase shares of common stock were granted to employees of the Company and its subsidiaries.  Each option is exercisable at $1.22 per share and expires seven years from the date of grant.  The options will vest as to 25% of the underlying shares on the 12 month anniversary from the date of grant, with the remaining 75% of the options vesting in equal quarterly installments after 15 months from the date of grant. Based on the assumption below, the Company estimated the fair value of the options at $73,978.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | F.     | The Company entered into an Agreement and Release with John Burton effective as of October 31, 2010 (the “Release”). Mr. Burton was employed by the Company's former wholly owned UK subsidiary Swiftnet Limited (“Swiftnet”) as General Manager pursuant to a Service Agreement dated July 3, 2006 (the “Service Agreement”) which was amended on January 15, 2009. The Release acknowledged that in consideration of the termination of the Service Agreement on July 31, 2010, in connection with the purchase of Swiftnet by AMIT K LTD, a company which is wholly owned and controlled by Abraham Keinan (a significant shareholder of the Company and our former Chairman of the Board and director), the Company agreed to extend the expiration date of Mr. Burton’s options, under the Company's 2004 Stock Option Plan, to purchase 300,000 shares of the Company's common stock (the “Options”) to October 31, 2013 and amend the exercise price of 40,000 of the Options to $1.50 per share. In return, Mr. Burton agreed to forever release and discharge the Company and its respective affiliates, shareholders, directors, officers, employees, agents and attorneys from any and all claims, demands, losses, damages, actions, causes of action, suits, debts, promises, liabilities, obligations, liens, costs, expenses, attorney’s fees, indemnities, subrogations or duties, of any nature, character or description whatsoever which Mr. Burton may have arising from or relating to, directly or indirectly, Mr. Burton’s employment and discontinuation of employment with Swiftnet (including the Service Agreement) and/or the Options. The foregoing release includes, but is not limited to, claims at law or equity or sounding in contract (express or implied) or torts arising under federal, state or local laws or the common law prohibiting any form of discrimination, and does not include third party claims made against Mr. Burton as a result of him being a Director of one or more of the Company's subsidiaries. Based on the assumptions below, the Company estimated the fair value of the Options under the new terms at $57,871, which was recorded as an expense under loss from discontinued operations in the United Kingdom. |

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|                                                           |   | Number of warrants |       |   | Weighted average exercise price |   |
|----------------------------------------------------------------|--------|--------------------|------------|--------|---------------------------------|--------|
|                                                           |   |               |       |   |                            |   |   |   |
|                                                           |   |               |       |   |                            |   |   |   |
| Warrants outstanding at December 31, 2008                 |   |               | 7,497,888  |   |                            | $      | 3.68 |   |
| Granted                                                        |   |               | -          |   |                            | $      | - |   |
| Cancelled or expired                                           |   |               | (1,136,737 | )      |                            | $      | 5.50 |   |
|                                                           |   |               |       |   |                            |   |   |   |
| Warrants outstanding at December 31, 2009                 |   |               | 6,361,151  |   |                            | $      | 3.36 |   |
| Granted                                                        |   |               | 950,000    |   |                            | $      | 2.00 |   |
| Cancelled or expired                                           |   |               | (1,517,783 | )      |                            | $      | 3.80 |   |
| Warrants outstanding and exercisable at December 31, 2010 |   |               | 5,793,368  |   |                            | $      | 3.10 |   |

|            | Warrants vested and exercisable |
|-----------------|---------------------------------|
| Range price ($) | Number of warrants              | Weighted average remaining contractual life (years) | Weighted average exercise price |
| $2.00           | 950,000                         | 4.35 | $2.00 |
| $2.86-$3.10     | 1,920,336                       | 1.49 | $3.05 |
| $3.25-$3.63     | 2,815,392                       | 1.36 | $3.45 |
| $4.00-$5.50     | 107,640                         | 0.71 | $4.42 |

|                    |   | Year ended December 31, |   |
|-------------------------|--------|-------------------------|--------|
|                    |   | 2010                    |   |
|                    |   |                    |   |
| Volatility              |   |                    | 49.0   | % |
| Risk-free interest rate |   |                    | 2.4    | % |
| Dividend yield          |   |                    | 0      | % |
| Forfeiture rate         |   |                    | 20     | % |
| Expected life (years)   |   |                    | 5.8    |   |
|                    |   |                    |   |   |

----

|                                                   |   | Number of options |       |    | Weighted average exercise price |   |   | Aggregate Intrinsic value |   |
|--------------------------------------------------------|--------|-------------------|------------|---------|---------------------------------|--------|--------|---------------------------|--------|
|                                                   |   |              |       |    |                            |   |   |                      |   |
| Options outstanding at December 31, 2008               |   |              | 6,366,000  |    |                            | $      | 3.55   |                      |   |   | - |   |
| Granted                                                |   |              | -          |    |                            |   | -      |                      |   |   |   |   |
| Exercised                                              |   |              | -          |    |                            |   | -      |                      |   |   |   |   |
| Cancelled or expired                                   |   |              | (320,000   | )       |                            | $      | 3.50   |                      |   |   | - |   |
|                                                   |   |              |       |    |                            |   |   |                      |   |   |   |   |
| Options outstanding at December 31, 2009               |   |              | 6,046,000  |    |                            | $      | 3.55   |                      |   |   | - |   |
| Granted                                                |   |              | 3,767,500  |    |                            | $      | 1.12   |                      |   |   |   |   |
| Exercised                                              |   |              | (69,500    | )  |                            | $      | 1.10   |                      |   |   |   |   |
| Cancelled or expired                                   |   |              | (4,067,000 | )       |                            | $      | 3.53   |                      |   |   |   |   |
| Options outstanding at December 31, 2010               |   |              | 5,677,000  |    |                            | $      | 1.96   |                      |   | $ | 113,528 |   |
|                                                   |   |              |       |    |                            |   |   |                      |   |   |   |   |
| Options vested and exercisable as of December 31, 2009 |   |              | 4,838,750  |    |                            | $      | 3.34   |                      |   |   |   |   |
|                                                   |   |              |       |    |                            |   |   |                      |   |   |   |   |
| Options vested and exercisable as of December 31, 2010 |   |              | 3,534,500  |    |                            | $      | 2.40   |                      |   |   |   |   |
|                                                   |   |              |       |    |                            |   |   |                      |   |   |   |   |
| Weighted average fair value of options granted in 2009 |   |              |       |    |                            |   | N/A    |                      |   |   |   |   |
|                                                   |   |              |       |    |                            |   |   |                      |   |   |   |   |
| Weighted average fair value of options granted in 2010 |   |              |       |    |                            |   | 0.27   |                      |   |   |   |   |

----

|            | Options vested and exercisable |
|-----------------|--------------------------------|
| Range price ($) | Number of options              | Weighted average remaining contractual life (years) | Weighted average exercise price |
| $1.10-$1.50     | 1,670,500                      | 4.15 | $1.12 |
| $2.79           | 950,000                        | 2.16 | $2.79 |
| $3.146-$5.00    | 914,000                        | 3.66 | $4.35 |

|            | Options expected to vest |
|-----------------|--------------------------|
| Range price ($) | Number of options        | Weighted average remaining contractual life (years) | Weighted average exercise price |
| $1.10-$1.50     | 1,614,000                | 6.00 | $1.12 |
| $3.146-$5.00    | 100,000                  | 5.25 | $3.15 |

|                                  |   | Year Ended December 31, 2010 |       |
|---------------------------------------|--------|------------------------------|------------|
|                                  |   | Net loss                     |       | Weighted Average Shares |   | Per shareamounts |   |
|                                  |   |                         |       |   |   |   |   |   |   |
| Basic EPS:                            |   |                         |       |   |   |   |   |   |   |
| Net loss from continued operations    |   | $                            | (2,495,929 | ) | 20,503,350 |   | $ | (0.122 | ) |
|                                  |   |                         |       |   |   |   |   |   |   |
| Loss from discontinued operations     |   |                         | (2,113,594 | ) | - |   |   | (0.103 | ) |
|                                  |   |                         |       |   |   |   |   |   |   |
| Effect of dilutive securities:        |   |                         |       |   |   |   |   |   |   |
| Options and warrants (*)              |   |                         | -          |   | - |   |   | - |   |
| Diluted EPS:                          |   |                         |       |   |   |   |   |   |   |
| Net loss attributable to shareholders |   | $                            | (4,609,523 | ) | 20,503,350 |   | $ | (0.225 | ) |

|                                  |   | Year Ended December 31 , 2009 |        |
|---------------------------------------|--------|-------------------------------|-------------|
|                                  |   | Net loss                      |        | Weighted Average Shares |   | Per shareamounts |   |
| Basic EPS:                            |   |                          |        |   |   |   |   |   |   |
| Net loss attributable to shareholders |   | $                             | (23,456,628 | )  | 18,376,075 |   | $ | (1.276 | )  |
|                                  |   |                          |        |   |   |   |   |   |   |
| Income from discontinued operations   |   |                          | 1,277,196   |   | - |   |   | 0.069 |   |
|                                  |   |                          |        |   |   |   |   |   |   |
| Effect of dilutive securities:        |   |                          |        |   |   |   |   |   |   |
| Options and warrants (*)         |   |                          | -           |   | - |   |   | - |   |
| Diluted EPS:                          |   |                          |        |   |   |   |   |   |   |
| Net loss attributable to shareholders |   | $                             | (22,179,432 | )  | 18,376,075 |   | $ | (1.207 |  ) |

----

|                                 |   | Years ended        |    |
|--------------------------------------|--------|--------------------|---------|
|                                 |   | December  31, |    |
|                                 |   | 2010               |    |   | 2009 |   |
|                                 |   |               |    |   |   |   |   |   |
| Abraham Keinan                       |   |               |    |   |   |   |   |   |
| Fees                                 |   | $             | 211,465 |   |   | $ | 301,204 |   |
| Accrued expenses                     |   |               | -       |   |   |   | 79,388 |   |
|                                 |   |               |    |   |   |   |   |   |
| Guy Nissenson                        |   |               |    |   |   |   |   |   |
|  Fees                           |   |               | 430,749 |   |   |   | 301,204 |   |
| Accrued expenses                     |   |               | -       |   |   |   | 78,971 |   |
|                                 |   |               |    |   |   |   |   |   |
| Dionysos Investments (1999) Limited: |   |               |    |   |   |   |   |   |
| Fees                                 |   |               | 147,616 |   |   |   | 150,602 |   |
| Accrued Expenses                     |   |               | -       |   |   |   | 18,951 |   |

----

|   | 1. | FCC Enforcement Bureau (EB-06-IH-0904) |
|--------|----|----------------------------------------|

|   | 2. | Eliezer Tzur et al. vs. 012 Telecom Ltd. Et al. |
|--------|----|-------------------------------------------------|

----

----

----

| Name of Director:                                      |   | Director Since:   |   |  Will next stand for re-election at the Annual Meeting of Stockholders in: |
|--------------------------------------------------------|--------|-------------------|--------|---------------------------------------------------------------------------------|
| Itzhak Almog, Chairman of the Board                    |   | May 18, 2006      |   | 2011                                                                            |
| Guy Nissenson, President and Chief Executive Officer   |   | Inception         |   | 2011                                                                            |
| Niv Krikov, Treasurer and Chief Financial Officer |   | December 27, 2010 |   | 2011                                                                            |
| Shemer S. Schwarz                                      |   | December 19, 2002 |   | 2011                                                                            |
| Israel Singer                                          |   | December 28, 2006 |   | 2011                                                                            |
| Arie Rosenfeld                                         |   | January 16, 2009  |   | 2011                                                                            |
| Timothy M. Farrar                                      |   | December 27, 2010 |   | 2011                                                                            |

----

| Name              |   | Age |   | Director / Officer                                                                                                                                                                                             |
|-------------------|--------|-----|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Itzhak Almog      |   | 72  |   | Director since May 18, 2006,  an independent director and Chairman of our Board of Directors since September 19, 2010 and Chairman of the Audit Committee and the Nominating Committee of the Board. |
| Guy Nissenson     |   | 36  |   | Director, President and Chief Executive Officer since our inception.                                                                                                                                           |
| Niv Krikov        |   | 40  |   | Director since December 27, 2010, Treasurer and Chief Financial Officer since August 13, 2007, and Principal Accounting Officer since May 9, 2007.                                                             |
| Shemer S. Schwarz |   | 36  |   | Director, since December 19, 2002, an independent director and a member of our Audit Committee and our Compensation Committee.                                                                                 |
| Israel Singer     |   | 62  |   | Director since December 28, 2006, an independent director and the Chairman of the Compensation Committee and a member of the Audit Committee.                                                                  |
| Arie Rosenfeld    |   | 67  |   | Director since January 16, 2009 an independent director and a member of our Nominating Committee.                                                                                                              |
| Timothy M. Farrar |   | 42  |   | Director since December 27, 2010 and an independent director.                                                                                                                                                  |

----

----

----

----

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ITEM 11

| Name and Principal Position                                                           | Year   | Salary($) |   |   | Bonus($) |   |   | Stock Awards($) |   |   | Option Awards($) |   | Non-Equity Incentive Plan Compensation($) |   |    | Non-qualified Deferred Compensation Earnings($) |   | All Other Compensation($) |   | Total($) |
|---------------------------------------------------------------------------------------|--------|-----------|--------|--------|----------|--------|--------|-----------------|--------|--------|------------------|--------|-------------------------------------------|--------|---------|-------------------------------------------------|--------|---------------------------|--------|----------|
| Abraham Keinan,Former Chairman of the Board and Director                              | 2010   | 42,193    | (1)    |   | -        |   |   | -               |   |   | -                |   | 169,272                                   | (2)    |    | -                                               |   | 12,171                    | (3)    | 223,636  |
|                                                                                  | 2009   | 75,300    | (1)    |   | -        |   |   | -               |   |   | -                |   | 301,204                                   | (2)    |    | -                                               |   | 20,865                    | (3)    | 397,369  |
|                                                                                  |   |      |   |   |     |   |   |            |   |   |             |   |                                      |   |    |                                            |   |                      |   |     |   |   |   |   |
| Guy Nissenson,President, CEO, and Director                                            | 2010   | 100,789   | (4)    |   |     | -      |   |            |   | -      |             |   | 294,386                                   | (5)    | 329,961 | (6)                                             |   | -                         |   | 9,449    | (7) | 734,585 |
|                                                                                  | 2009   | 75,300    | (4)    |   |     | -      |   |            |   | -      |             |   |                                      | -      |    | 301,204                                         | (6)    |                      |   | -        |   | 37,305 | (7) | 413,809 |
|                                                                                  |   |      |   |   |     |   |   |            |   |   |             |   |                                      |   |    |                                            |   |                      |   |     |   |   |   |   |
| Niv Krikov,Treasurer, CFO, Principal Accounting  Officer and Director  | 2010   | 209,193   | (8)    |   |     | -      |   |            |   | -      |             |   | 107,049                                   | (9)    | -       |                                            |   | -                         |   | -        |   | 316,242 |
|                                                                                  | 2009   | 195,507   | (8)    |   |     | -      |   |            |   | -      |             |   |                                      | -      |    | -                                               |   |                      |   | -        |   | - |   | 195,507 |

----

|   | (1) | Salary paid to Mr. Keinan by our former U.K. based wholly owned subsidiary, Swiftnet Limited (“Swiftnet”), in connection with his employment as Chairman of the Board of Swiftnet. The amounts shown in the table above for 2009 and 2010 were paid in British Pound Sterling (£48,000 in 2009 and £28,000 in 2010) and have been translated into U.S. dollars using the average rate of exchange of the U.S. dollar during 2009 and 2010, respectively. On July 29, 2010, we completed the sale of Swiftnet (and our other UK subsidiaries) to AMIT K LTD., a company registered in England & Wales which is wholly owned and controlled by Mr. Keinan. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | On March 28, 2007, we entered into a consulting agreement with Mr. Keinan, effective as of January 1, 2007 (the “Keinan Consulting Agreement”). The Keinan Consulting Agreement provided that Mr. Keinan shall render us advisory, consulting and other services in relation to our business and operations (excluding our business and operations in the UK). In consideration of the performance of the services pursuant to the Keinan Consulting Agreement, we agreed to pay Mr. Keinan a monthly fee of £10,000 ($15,470) which was increased by the Board of Directors, following the recommendation of the Audit Committee and the Compensation Committee, to £16,000 ($24,752) effective as of June 1, 2008. The amount shown reflects the eligibility of Mr. Keinan pursuant to the Keinan Consulting Agreement. As of December 31, 2009 there was an outstanding balance of $79,388 which was paid during March 2010. The Keinan Consulting Agreement was terminated on July 29, 2010, upon the consummation of the disposition of our UK Subsidiaries. Effective September 19, 2010, Mr. Keinan was replaced as Chairman of our Board by Mr. Itzhak Almog. Mr. Keinan resigned from our Board effective March 1, 2011. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Under the Keinan Consulting Agreement, we acknowledged that in order to render the services pursuant to the Keinan Consulting Agreement, Mr. Keinan may be required to travel frequently around the world. Therefore, in order to enable Mr. Keinan to have a normal family life we agreed to bear certain expenses which are related to Mr. Keinan's spouse. The amounts shown for 2009 and 2010 reflect payments for a leased car for Mr. Keinan’s use in 2009 and 2010.  |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Salary paid to Mr. Nissenson by our former UK based wholly owned subsidiary, Swiftnet, in connection with his employment as Director of Business Development. The amounts shown in the table above for 2009 and 2010 were paid in British Pound Sterling (£48,000 in 2009 and £12,000 in 2010) and have been translated into U.S. dollars using the average rate of exchange of the U.S. dollar during 2009 and 2010, respectively. Mr. Nissenson's employment with Swiftnet was terminated by mutual agreement, effective April 1, 2010. On June 30, 2010, we and Mr. Nissenson entered into a new employment agreement (the “Employment Agreement”), pursuant to which Mr. Nissenson is employed by us as our President and CEO, effective as of April 1, 2010.  Pursuant to the Employment Agreement, Mr. Nissenson will be paid an annual gross salary of $78,000, payable in equal monthly payments of $6,500 each.   |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | On February 15, 2010, Mr. Nissenson was granted under and subject to our 2007 Stock Incentive Plan options to purchase 1,500,000 shares of our common stock, fully vested, exercisable at $1.10 per share and expiring five years from the date of grant. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | On March 28, 2007, we entered into a consulting agreement with Mr. Nissenson, effective as of January 1, 2007 (the “Nissenson Consulting Agreement”). In consideration of the performance of the services pursuant to the Nissenson Consulting Agreement, we agreed to pay Mr. Nissenson a monthly fee of £10,000 ($15,470) which was increased to £16,000 ($24,752) effective as of June 1, 2008, and further increased in accordance with the First Amendment to the Nissenson Consulting Agreement described below. Mr. Nissenson invoices us at the end of each calendar month, and we make the monthly payments immediately upon receipt of such invoices. The amount shown reflects the eligibility of Mr. Nissenson pursuant to the Nissenson Consulting Agreement. As of December 31, 2009 there was an outstanding balance of $78,971 which was paid during January 2010. On June 30, 2010, we and Mr. Nissenson entered into a First Amendment to the Nissenson Consulting Agreement, effective as of April 1, 2010 (the “First Amendment”). The First Amendment amends certain terms of the Nissenson Consulting Agreement, including, but not limited to, the monthly fee payable to Mr. Nissenson, which has been amended to $28,500 per month. The Nissenson Consulting Agreement and the First Amendment are more fully described in Section C under Item 13 below. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Under the Nissenson Consulting Agreement (as amended by the First Amendment), we acknowledge that in order to render the services pursuant to the Nissenson Consulting Agreement, Mr. Nissenson may be required to travel frequently around the world. Therefore, in order to enable Mr. Nissenson to have a normal family life we agreed to bear certain expenses which are related to Mr. Nissenson's spouse and children. The amounts shown in the table above reflect airfare expenses incurred by us for the travels of Mr. Nissenson’s wife and/ child during 2009 and 2010. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | From August 13, 2007 to August 13, 2009, Mr. Krikov was entitled to a monthly gross salary of NIS 33,000 (approximately $8,841). On July 1, 2009, NTS Communications entered into an employment agreement (the “NTS Employment Agreement”) with Mr. Krikov. Mr. Krikov’s employment with NTS commenced on August 17, 2009, and unless extended by the parties shall terminate on July 31, 2011. Under the terms of the NTS Employment Agreement, Mr. Krikov will be paid an annual salary of $90,800. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | On February 15, 2010, Niv Krikov was granted under and subject to our 2007 Stock Incentive Plan options to purchase 400,000 shares of our common stock, exercisable at $1.10 per share and expiring seven years from the grant date. The options vested as to 25% of the underlying shares 12 months from the date of grant. The remaining 75% of the options shall vest in equal quarterly installments after 15 months from the date of grant. In the event of a change of control of the Company, any unvested and outstanding portion of the options shall immediately and fully vest. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|               |   | Option Awards                                                     | Stock Awards |
|--------------------|--------|-------------------------------------------------------------------|--------------|
| Name               |   | Number of Securities Underlying Unexercised Options(#)Exercisable |         |   | Number of Securities Underlying Unexercised Options(#) Unexercisable |   |   | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options(#) |   |   | Option Exercise Price($) |   | Option Expiration Date |   | Number of Shares or Units of Stock that Have Not Vested(#) |   |   | Market Value of Shares or Units of Stock that Have Not Vested($) |   |   | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested(#) |   |   | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested($) |   |
| Abraham Keinan (1) |   |                                                              | –      |   |   |   | – |   |   |   | – |   |   |   | – |   | – |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Guy Nissenson      |   |                                                              | 1,500,000    | (2) |   |   | – |   |   |   | – |   |   |   | 1.10 |   | February 15, 2015 |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |
| Niv Krikov         |   |                                                              | –      |   |   |   400,000(3) |   |   |   | – |   |   |   | 1.10 |   | February 15, 2017 |   |   | – |   |   |   | – |   |   |   | – |   |   |   | – |   |

|   | (1) | Mr. Keinan held 1,500,000 options which were granted to him under and subject to our 2004 Stock Option Plan. These options were granted on November 24, 2004, vested in full on November 24, 2005, and expired on November 24, 2010. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | On February 15, 2010, Mr. Nissenson was granted under and subject to our 2007 Stock Incentive Plan options to purchase 1,500,000 shares of our common stock, fully vested, exercisable at $1.10 per share and expiring five years from the date of grant. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | On February 15, 2010, Mr. Krikov was granted under and subject to our 2007 Stock Incentive Plan options to purchase 400,000 shares of our common stock, exercisable at $1.10 per share and expiring seven years from the grant date. The options vested as to 25% of the underlying shares 12 months from the date of grant. The remaining 75% of the options shall vest in equal quarterly installments after 15 months from the date of grant. In the event of a change of control of the Company, any unvested and outstanding portion of the options shall immediately and fully vest. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  Employment Year during which such termination occurs: |   | Mr. Worthington |    |   | Mr. Hoover |   | Ms. Baldwin |
|-------------------------------------------------------------|--------|-----------------|---------|--------|------------|--------|-------------|
| Year 1                                                      |   | $               | 487,680 |   |       | $      | 487,680     |   | $ | 773,000 |
| Year 2                                                      |   | $               | 390,144 |   |       | $      | 390,144     |   | $ | 618,400 |
| Year 3                                                      |   | $               | 292,608 |   |       | $      | 292,608     |   | $ | 463,800 |
| Year 4                                                      |   | $               | 195,072 |   |       | $      | 195,072     |   | $ | 309,200 |
| Year 5                                                      |   | $               | 97,536  |   |       | $      | 97,536      |   | $ | 154,600 |

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| Name                     |   | Fees Earned or Paid in Cash($) |   |   | Stock Awards($) |   |   | Options Awards($) |   |   | Non-Equity Incentive Plan Compensation($) |   |   | Nonqualified Deferred Compensation Earnings($) |   |   | All Other Compensation($) |   | Total($) |
|--------------------------|--------|--------------------------------|--------|--------|-----------------|--------|--------|-------------------|--------|--------|-------------------------------------------|--------|--------|------------------------------------------------|--------|--------|---------------------------|--------|----------|
| Itzhak Almog (1)         |   |                           | 4,350  |   |            |   | -      |              |   |   | 41,030                                    |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 45,380 |
| Guy Nissenson (2)        |   |                           | -      |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | - |
| Niv Krikov (3)           |   |                           | -      |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | - |
| Abraham Keinan (2)       |   |                           | -      |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | - |
| Shemer S. Schwarz (4)    |   |                           | 4,000  |   |            |   | -      |              |   |   | 41,030                                    |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 45,030 |
| Israel Singer (5)        |   |                           | 4,050  |   |            |   | -      |              |   |   | 41,030                                    |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 45,080 |
|  Arie Rosenfeld (6) |   |                           | 3,500  |   |            |   | -      |              |   |   | 41,030                                    |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 44,530 |
| Timothy M. Farrar (3)    |   |                           | -      |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | - |
| Eyal J. Harish (7)       |   |                           | 700    |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 700 |
| Aviu Ben-Horrin (8)      |   |                           | 500    |   |            |   | -      |              |   |   | -                                         |   |   |                                           | -      |   |                      |   | -        |   |   |   | - |   | 500 |

----

|   | (1) | As of December 31, 2010, Mr. Almog held 25,000 options, fully vested at an exercise price of $3.50 and with expiration date of October 30, 2012; and 90,000 options of which 30,000 vested and 10,000 shall vest each month until all options are vested on June 20, 2011, at an exercise price of $1.22 and with expiration date of September 20, 2015. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | (2) | We do not compensate directors who are also employed by the Company (or its subsidiaries) for their services on the Board. Accordingly, Messrs Keinan and Nissenson did not receive any compensation for their services on our Board during the fiscal year ended December 31, 2010.                                                                     |

|   | (3) | Messrs Krikov and Farrar were elected to our Board on December 27, 2010. Mr. Krikov is employed by our subsidiary, NTS Communications. |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | As of December 31, 2010, Mr. Schwarz held 90,000 options of which 30,000 vested and 10,000 shall vest each month until all options are vested on June 20, 2011, at an exercise price of $1.22 and with expiration date of September 20, 2015. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | As of December 31, 2010, Mr. Singer held 20,000 options, fully vested at an exercise price of $3.50, and with expiration date of June 5, 2013; and 90,000 options of which 30,000 vested and 10,000 shall vest each month until all options are vested on June 20, 2011, at an exercise price of $1.22 and with expiration date of September 20, 2015. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (6) | As of December 31, 2010, Mr. Rosenfeld held 90,000 options of which 30,000 vested and 10,000 shall vest each month until all options are vested on June 20, 2011, at an exercise price of $1.22 and with expiration date of September 20, 2015. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Mr. Harish is a former director who resigned from our Board effective July 29, 2010. Mr. Harish held 75,000 options which expired on October 29, 2010. |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Mr. Ben-Horrin is a former director who resigned from our Board effective July 29, 2010. Mr.  Ben-Horrin held 25,000 options which expired on October 29, 2010. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Name, Title & Address of Beneficial Owner                                                                                                |   | Amount of Beneficial Ownership(Common Stock) |                                    | Nature of Ownership |            | Percent of Class |   |
|----------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|-----------------------------------------|---------------------|-----------------|------------------|--------|
| Itzhak Almog (1)Chairman of the Board7/A Moledet St.Hod HasharonIsrael                                                                       |   |                                         |    103,000               |                | Direct          |             |   |    0.49 |    % |
| Guy Nissenson (2)(3)President, Chief Executive Officer, and Director,3A Finchley ParkLondon N12 9JSUnited Kingdom                       |   |                                         |      5,713,350 |                | Direct/Indirect |             |   |     25.26 |     % |
| Niv Krikov (4)Treasurer, Chief Financial Officer, Principal Accounting Officer and Director7908 Vicksburg Ave.Lubbock, TX 79424United States |   |                                         |      100,000   |                | Direct          |             |   |      0.47 |  % |

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| Shemer S. Schwarz (5)Director5 Israel Galili St.Tel-Aviv Israel                                                                                                                       |   |   |    78,900                |   | Direct             |   |   |    0.37              |    %             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------------------------------------|--------|--------------------|--------|--------|-------------------------------------|---------------------------------|
| Israel Singer (6)Director63 Ben Eliezer St.Ramat GanIsrael                                                                                                                                 |   |   |    90,000                |   |   Direct |   |   |    0.42              |    %             |
| Arie Rosenfeld (7)Director9, Clos de Wagram1180 BrusselsBelgium                                                                                                                            |   |   |     70,000          |   | Direct             |   |   |     0.33        |     %       |
| Timothy M. FarrarDirector572 South Oak Park Way,Redwood City, CA 94062United States                                                                                                        |   |   | 0                                       |   | N/A                |   |   | -                                   |                            |
| Directors and Executive Officers as a group(7 persons)                                                                                                                                     |   |   |  6,155,250                         |   | Direct             |   |   |  26.71                         |  %                         |
| Abraham Keinan (3)(8)Former Director4 Wycombe GardensLondon NW11 8ALUnited Kingdom                                                                                                    |   |   |     2,452,100       |   | Direct/Indirect    |   |   |     11.61       |     %       |
| Richard L. Scott (9)1400 Gulf Shore Boulevard, North - Suite 148, Naples, FL 34102United States                                                                                            |   |   |   3,305,983                   |   | Indirect           |   |   |   15.08                   |   %                   |
| Gagnon Securities LLC (10)(11)1370 Ave. of the Americas, Suite 2400New York, NY 10019United States                                                                                    |   |   |   642,595                     |   | Indirect           |   |   |   3.03                    |   %                   |
| Neil Gagnon (10)(11)1370 Ave. of the Americas, Suite 2400New York, NY 10019United States                                                                                              |   |   |   2,887,330                   |   | Direct/Indirect    |   |   |   13.4                    |   %                   |
| Mr. Blair E. Sanfordand Burlingame Asset Management, LLC (12)1 Market StreetSpear Street Tower, Suite 3750San Francisco, CA 94105United States                                             |   |   |    4,210,718             |   | Indirect           |   |   |      19.08 |      % |
| Windcrest Microcap Partners, LP,Windcrest Microcap GP, LLC,Windcrest Microcap Investments LLC andJames H. Gellert  (13)750 3rd Avenue, 33rd FloorNew York, NY 10017United States |   |   |      1,150,874 |   | Indirect           |   |   |      5.45  |      % |

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|                   |   | Fiscal Year |    |
|------------------------|--------|-------------|---------|
|                   |   | 2010        |    |   | 2009 |   |
|                   |
| Audit Fees (1)         |   | $           | 129,000 |   |   | $ | 196,905 |   |
| Audit-Related Fees (2) |   |        | 7,000   |   |   |   | 3,750 |   |
| Tax Fees (3)           |   |        | 26,000  |   |   |   | 16,640 |   |
| All Other (4)          |   |        | 10,041  |   |   |   | 7,555 |   |
| Total                  |   | $           | 172,041 |   |   | $ | 224,850 |   |

|   | (1)      Audit Fees Aggregate fees for professional services rendered in connection with the audit of our consolidated financial statements for fiscal years 2010 and 2009 and the quarterly reviews of our financial statements included in our Forms 10-Q. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (2)      Audit-related Fees Aggregate fees for professional services rendered in connection with the review of our other filings with the SEC (i.e. Forms 8-K, S-8, S-3). |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (3)      Tax Fees Aggregate fees for professional consulting services rendered in connection with our state and federal taxes. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

|   | (4)      All Other Reimbursement for expenses in connection with professional services rendered to us. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

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| Exhibit Number | Description                                                                                                                                                                                                                                                                                                                           |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.             | Agreement and plan of reorganization dated September 20, 2000, between the Company and Swiftnet Limited. (1)                                                                                                                                                                                                                          |
| 3.1            | Articles of Incorporation of the Company.(1)                                                                                                                                                                                                                                                                                          |
| 3.1.1          | Certificate of Amendment to the Articles of Incorporation of the Company, dated January 18, 2007. (56)                                                                                                                                                                                                                                |
| 3.3            | Memorandum of Association of Swiftnet Limited. (1)                                                                                                                                                                                                                                                                                    |
| 3.4            | Articles of Association of Swiftnet Limited. (1)                                                                                                                                                                                                                                                                                      |
| 3.6            | Bylaws of Xfone USA, Inc. (7)                                                                                                                                                                                                                                                                                                         |
| 3.12           | Reamended and Restated Bylaws of Xfone, Inc. dated November 18, 2010 (68)                                                                                                                                                                                                                                                             |
| 4.             | Specimen Stock Certificate.(1)                                                                                                                                                                                                                                                                                                        |
| 10.1           | Agreement dated May 11, 2000, between Swiftnet Limited and Guy Nissenson.(1)                                                                                                                                                                                                                                                          |
| 10.2           | Employment Agreement dated January 1, 2000 with Bosmat Houston. (1)                                                                                                                                                                                                                                                                   |
| 10.3           | Loan Agreement dated August 5, 2000, with Swiftnet Limited, Guy Nissenson, and Nissim Levy.(1)                                                                                                                                                                                                                                        |
| 10.4           | Promissory Note dated September 29, 2000, between the Company and Abraham Keinan.(1)                                                                                                                                                                                                                                                  |
| 10.5           | Stock Purchase Agreement dated June 19, 2000, between Swiftnet Limited, Abraham Keinan, and Campbeltown Business Ltd. (1)                                                                                                                                                                                                             |
| 10.6           | Consulting Agreement dated May 11, 2000 between Swiftnet Limited and Campbeltown Business Ltd.(1)                                                                                                                                                                                                                                     |
| 10.7           | Agreement dated July 30, 2001, with Campbeltown Business Ltd.(1)                                                                                                                                                                                                                                                                      |
| 10.8           | Contract dated June 20, 1998, with WorldCom International Ltd.(1)                                                                                                                                                                                                                                                                     |
| 10.9           | Contract dated April 11, 2000, with VoiceNet Inc.(1)                                                                                                                                                                                                                                                                                  |
| 10.10          | Contract dated April 25, 2000, with InTouchUK.com Ltd.(1)                                                                                                                                                                                                                                                                             |
| 10.11          | Letter of Understanding dated July 30, 2001, from Campbeltown Business Ltd. to the Company.(2)                                                                                                                                                                                                                                        |
| 10.12          | Agreement dated April 6, 2000, between Adar International, Inc./Mr. Sidney J. Golub and Swiftnet Limited. (2)                                                                                                                                                                                                                         |
| 10.13          | Lease Agreement dated December 4, 1991, between Elmtree Investments Ltd. and Swiftnet Limited.(2)                                                                                                                                                                                                                                     |
| 10.14          | Lease Agreement dated October 8, 2001, between Postwick Property Holdings Limited and Swiftnet Limited. (2)                                                                                                                                                                                                                           |
| 10.15          | Agreement dated September 30, 2002, between the Company, Swiftnet Limited., and Nir Davison.(5)                                                                                                                                                                                                                                       |
| 10.16          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Platinum Partners Value Arbitrage Fund LP, Countrywide Partners LLC and WEC Partners LLC. (6)                                                                                    |
| 10.17          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Simon Langbart, Robert Langbart, Arik Ecker, Zwi Ecker, Michael Derman, Errol Derman, Yuval Haim Sobel, Zvi Sobel, Tenram Investment Ltd., Michael Zinn, Michael Weiss. (6) |
| 10.18          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Southridge Partners LP and Southshore Capital Fund Ltd. (6)                                                                                                                      |
| 10.19          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Crestview Capital Master LLC. (6)                                                                                                                                                |
| 10.20          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Adam Breslawsky, Oded Levy, Michael Epstein, Steven Frank, Joshua Lobel, Joshua Kazan and The Oberon Group LLC. (6)                                                              |
| 10.21          | Newco (Auracall Limited) Formation Agreement.(6)                                                                                                                                                                                                                                                                                      |
| 10.22          | Agreement with ITXC Corporation.(6)                                                                                                                                                                                                                                                                                                   |
| 10.23          | Agreement with Teleglobe International.(6)                                                                                                                                                                                                                                                                                            |
| 10.23.1        | Amendment to Agreement with Teleglobe International.(6)                                                                                                                                                                                                                                                                               |
| 10.24          | Agreement with British Telecommunications.(6)                                                                                                                                                                                                                                                                                         |

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| 10.25       | Agreement with Easyair Limited (OpenAir).(6)                                                                                                                                                                                                                                            |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.26       | Agreement with Worldnet.(6)                                                                                                                                                                                                                                                             |
| 10.27       | Agreement with Portfolio PR.(6)                                                                                                                                                                                                                                                         |
|  10.28 | Agreement with Stern and Company.(6)                                                                                                                                                                                                                                                    |
| 10.29       | Letter to the Company dated December 31, 2003, from Abraham Keinan.(6)                                                                                                                                                                                                                  |
| 10.30       | Agreement between Swiftnet Limited and Dan Kirschner.(8)                                                                                                                                                                                                                                |
| 10.31       | Agreement and Plan of Merger.(7)                                                                                                                                                                                                                                                        |
| 10.32       | Escrow Agreement.(7)                                                                                                                                                                                                                                                                    |
| 10.33       | Release Agreement.(7)                                                                                                                                                                                                                                                                   |
| 10.34       | Employment Agreement date March 10, 2005, between Xfone USA, Inc. and Wade Spooner.(7)                                                                                                                                                                                                  |
| 10.34.1     | Separation Agreement and Release, dated August 15, 2008, between Xfone USA, Inc. and Wade Spooner. (56)                                                                                                                                                                                 |
| 10.35       | Employment Agreement date March 10, 2005, between Xfone USA, Inc. and Ted Parsons.(7)                                                                                                                                                                                                   |
| 10.35.1     | Separation Agreement and Release, dated August 15, 2008, between Xfone USA, Inc. and Ted Parsons. (56)                                                                                                                                                                                  |
| 10.36       | First Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.).(11)                                                                                                                                                                                                      |
| 10.37       | Finders Agreement with The Oberon Group, LLC.(11)                                                                                                                                                                                                                                       |
| 10.38       | Agreement with The Oberon Group, LLC.(11)                                                                                                                                                                                                                                               |
| 10.39       | Management Agreement between WS Telecom, Inc. and Xfone USA, Inc.(8)                                                                                                                                                                                                                    |
| 10.40       | Engagement Letter to Tommy R. Ferguson, Confidentiality Agreement, and Executive Inventions Agreement dated August 19, 2004. (11)                                                                                                                                                       |
| 10.41       | Voting Agreement dated September 28, 2004.(11)                                                                                                                                                                                                                                          |
| 10.42       | Novation Agreement executed September 27, 2004.(11)                                                                                                                                                                                                                                     |
| 10.43       | Novation Agreement executed September 28, 2004.(11)                                                                                                                                                                                                                                     |
| 10.44       | Investment Agreement dated August 26, 2004, with Ilan Shoshani.(12)                                                                                                                                                                                                                     |
| 10.44.1     | Addendum and Clarification to the Investment Agreement with Ilan Shoshani dated September 13, 2004. (12)                                                                                                                                                                                |
| 10.45       | Agreement dated November 16, 2004, with Elite Financial Communications Group.(13)                                                                                                                                                                                                       |
| 10.46       | Financial Services and Business Development Consulting Agreement dated November 18, 2004, with Dionysos Investments (1999) Ltd. (13)                                                                                                                                                    |
| 10.47       | Agreement and Plan of Merger to acquire I-55 Internet Services, Inc. dated August 18, 2005.(14)                                                                                                                                                                                         |
| 10.48       | Agreement and Plan of Merger to acquire I-55 Telecommunications, LLC dated August 26, 2005.(15)                                                                                                                                                                                         |
| 10.49       | Securities Purchase Agreement, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                   |
| 10.50       | Secured Convertible Term Note, dated September 27, 2005, by the Company in favor of Laurus Master Fund, Ltd.; Adjustment Provision Waiver Agreement, dated September 27, 2005, by and between the Company and Laurus Fund, Ltd. (16)                                                    |
| 10.51       | Common Stock Purchase Warrant, dated September 27, 2005, by the Company in favor of Laurus Master Fund, Ltd. (16)                                                                                                                                                                       |
| 10.52       | Registration Rights Agreement, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                   |
| 10.53       | Master Security Agreement, dated September 27, 2005, by and between the Company, Xfone USA, Inc., eXpeTel Communications, Inc., Gulf Coast Utilities, Inc., and Laurus Master Fund, Ltd. (16)                                                                                           |
| 10.54       | Stock Pledge Agreement, dated September 27, 2005, by and between the Company, Xfone USA, Inc., and Laurus Master Fund, Ltd. (16)                                                                                                                                                        |
| 10.55       | Subsidiary Guarantee dated September 27, 2005, by Xfone USA, Inc., eXpeTel Communications, Inc. and Gulf Coast Utilities, Inc. in favor of Laurus Master Fund, Ltd. (16)                                                                                                                |
| 10.56       | Funds Escrow Agreement, dated September 27, 2005, by and between the Company, Laurus Master Fund, Ltd. and Loeb & Loeb LLP; Disbursement Letter, dated September 27, 2005. (16)                                                                                                     |
| 10.57       | Incremental Funding Side Letter, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                 |
| 10.58       | Securities Purchase Agreement dated September 28, 2005, by and between the Company and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |

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| 10.59       | Registration Rights Agreement, dated September 28, 2005, by and between the Company and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.60       | Common Stock Purchase Warrant, dated September 28, 2005, by the Company in favor of the Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |
| 10.61       | Escrow Agreement, dated September 28, 2005, by and between the Company, the Purchasers and Feldman Weinstein LLP. (16)                                                                                                                                                                   |
|  10.62 | Management Agreement dated October 11, 2005.(17)                                                                                                                                                                                                                                         |
| 10.63       | First Amendment to Agreement and Plan of Merger (to acquire I-55 Internet Services, Inc.), dated October 10, 2005. (17)                                                                                                                                                                  |
| 10.64       | Letter Agreement with MCG Capital Corporation dated October 10, 2005.(17)                                                                                                                                                                                                                |
| 10.65       | Securities Purchase Agreement, dated November 23, 2005, between the Company and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                                 |
| 10.66       | Registration Rights Agreement, dated November 23, 2005, between the Company and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                                 |
| 10.67       | Common Stock Purchase Warrant, dated November 23, 2005, by the Company in favor of Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                              |
| 10.68       | Escrow Agreement, dated November 23, 2005, between the Company, the Escrow Agent, and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                           |
| 10.69       | Management Agreement with I-55 Telecommunications, LLC dated October 12, 2005.(19)                                                                                                                                                                                                       |
| 10.70       | Agreement - General Terms and Conditions with EBI Comm, Inc., dated January 1, 2006.(21)                                                                                                                                                                                                 |
| 10.71       | Asset Purchase Agreement with Canufly.net, Inc., dated January 10, 2006.(21)                                                                                                                                                                                                             |
| 10.72       | Stock Purchase Agreement dated May 10, 2006, by and among the Company, Story Telecom, Inc., Story Telecom Limited, Story Telecom (Ireland) Limited, Nir Davison, and Trecastle Holdings Limited. (23)                                                                                    |
| 10.73       | Agreement dated May 25, 2006, by and among the Company and the shareholders of Equitalk.co.uk Limited. (24)                                                                                                                                                                              |
| 10.74       | Securities Purchase Agreement, dated June 19, 2006, by and between the Company and the Purchasers. (25)                                                                                                                                                                                  |
| 10.75       | Registration Rights Agreement, dated June 19, 2006, by and between the Company and the Purchasers. (25)                                                                                                                                                                                  |
| 10.76       | Common Stock Purchase Warrant, dated June 19, 2006, by the Company in favor of the Purchasers.(25)                                                                                                                                                                                       |
| 10.77       | Escrow Agreement, dated June 19, 2006, by and between the Company, the Escrow Agent, and the Purchasers. (25)                                                                                                                                                                            |
| 10.78       | Form of Indemnification Agreement between the Company and its Directors and Officers.(27)                                                                                                                                                                                                |
| 10.79       | Agreement to Purchase Promissory Note dated October 31, 2005, with Randall Wade James Tricou.(27)                                                                                                                                                                                        |
| 10.80       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Tricou Construction. (27)                                                                                                                                                                               |
| 10.81       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon Aire Estates. (27)                                                                                                                                                                                  |
| 10.82       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon Aire Utility. (27)                                                                                                                                                                                  |
| 10.83       | Agreement to Purchase Promissory Note dated February 3, 2006, with Danny Acosta.(27)                                                                                                                                                                                                     |
| 10.84       | Letter Agreement dated November 15, 2005, with Oberon Securities, LLC.(27)                                                                                                                                                                                                               |
| 10.85       | Letter Agreement dated June 15, 2006, with Oberon Securities, LLC.(27)                                                                                                                                                                                                                   |
| 10.86       | Second Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.), dated June 28, 2006. (27)                                                                                                                                                                                |
| 10.87       | General Contract for Services dated January 1, 2005, by and between the Company and Swiftnet Limited. (27)                                                                                                                                                                               |
| 10.88       | Service Agreement dated December 6, 2005, by and between the Company and Elite Financial Communications Group, LLC. (27)                                                                                                                                                                 |
| 10.89       | Agreement for Market Making in Securities dated July 31, 2006, by and between the Company and Excellence Nessuah Stock Exchange Services Ltd. (27)                                                                                                                                       |
| 10.90       | Shareholders Loan Agreement, dated September 27, 2006, by and between Auracall Limited, Swiftnet Limited, and Dan Kirschner. (28)                                                                                                                                                        |
| 10.91       | Service Agreement, dated November 7, 2006, by and between the Company and Institutional Marketing Services, Inc. (28)                                                                                                                                                                    |
| 10.92       | Consultancy Agreement, dated November 20, 2006, by and between the Company and Crestview Capital Partners, LLP. (29)                                                                                                                                                                     |
| 10.93       | Agreement dated December 24, 2006, by and between the Company, Halman-Aldubi Provident Funds Ltd., and Halman-Aldubi Pension Funds Ltd. [translation from Hebrew]. (31)                                                                                                                  |
| 10.94       | First Amendment to Financial Services and Business Development Consulting Agreement dated February 8, 2007, by and between the Company and Dionysos Investments (1999) Ltd. (33)                                                                                                         |
| 10.95       | Agreement dated February 8, 2007, by and between the Company, Swiftnet Limited, Campbeltown Business, Ltd., and Mr. Abraham Keinan. (33)                                                                                                                                                 |

----

| 10.96    | First Amendment to General Contract for Services, dated March 14, 2007, by and between the Company and Swiftnet Limited. (34)                                                                                                                            |
|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.97    | Employment Agreement, dated March 28, 2007, between Swiftnet Limited and Abraham Keinan.(34)                                                                                                                                                             |
| 10.98    | Consulting Agreement, dated March 28, 2007, between the Company and Abraham Keinan. (34)                                                                                                                                                            |
| 10.99    | Employment Agreement, dated March 28, 2007, between Swiftnet Limited and Guy Nissenson.(34)                                                                                                                                                              |
| 10.100   | Consulting Agreement, dated March 28, 2007, between the Company and Guy Nissenson.(34)                                                                                                                                                                   |
| 10.101   | Settlement Agreement and Release dated May 31, 2007, by and among Embarq Logistics, Inc, Xfone USA, Inc. and the Company. (35)                                                                                                                           |
| 10.102   | Promissory Note dated May 31, 2007, by Xfone USA, Inc.(35)                                                                                                                                                                                               |
| 10.103   | Parent Guarantee dated as of May 31, 2007 by the Company in favor of Embarq Logistics, Inc.(35)                                                                                                                                                          |
| 10.104   | Share Purchase Agreement dated August 15, 2007, by and between Dan Kirschner, as Seller, Swiftnet Limited, as Buyer, and Xfone, Inc. (36)                                                                                                                |
| 10.105   | Inter-Company Loan Agreement dated August 15, 2007, by and between Auracall Limited, as Lender, and Swiftnet Limited, as Borrower. (36)                                                                                                                  |
| 10.106   | Stock Purchase Agreement dated August [20], 2007, by and among the Company, NTS Communications, Inc., and the Shareholders of NTS Communications, Inc. (37)                                                                                              |
| 10.107   | Letter of Joint Venture dated June 15, 2007, by and among the Company and NTS Holdings, Inc.(37)                                                                                                                                                         |
| 10.107.1 | Form of Free Cash Flow Participation Agreement to be Entered into between the Company and NTS Holdings, Inc. Upon Consummation of the Acquisition. (37)                                                                                                  |
| 10.107.2 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Barbara Baldwin upon Consummation of the Acquisition. (37)                                                                                                          |
| 10.107.3 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Jerry Hoover upon Consummation of the Acquisition. (37)                                                                                                             |
| 10.107.4 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Brad Worthington upon Consummation of the Acquisition. (37)                                                                                                         |
| 10.108   | Employment Contract signed on August 26, 2007, by and between the Company’s Israeli based Subsidiary Xfone 018 ltd. and Roni Haliva. (38)                                                                                                          |
| 10.109   | Subscription Agreement for the Purchase of Shares of Common Stock of the Company Dated October 23, 2007. (39)                                                                                                                                            |
| 10.110   | Subscription Agreement for the Purchase of Shares of Common Stock of the Company Dated November 1, 2007. (41)                                                                                                                                            |
| 10.111   | Form of Subscription Agreement for the Purchase of Units Consisting of Two Shares of Common Stock and One Common Stock Purchase Warrant. (42)                                                                                                            |
| 10.112   | Form of Common Stock Purchase Warrant.(42)                                                                                                                                                                                                               |
| 10.113   | First Amendment to Stock Purchase Agreement.(43)                                                                                                                                                                                                         |
| 10.114.1 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Barbara Baldwin. (44)                                                                                                                                 |
| 10.114.2 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Jerry Hoover. (44)                                                                                                                                    |
| 10.114.3 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Brad Worthington .(44)                                                                                                                                |
| 10.115   | Free cash flow participation agreement dated as of February 26, 2008, by and among Xfone, Inc. and NTS Holdings, Inc. (44)                                                                                                                               |
| 10.116   | Escrow agreement dated as of February 26, 2008, by and among Xfone, Inc., Chris Chelette, Robert Healea and Kevin Buxkemper the NTS shareholders representatives, and Trustmark National Bank, as Escrow Agent. (44)                                     |
| 10.117   | Release, effective as of February 26, 2008, entered into by each of Barbara Baldwin, Jerry Hoover and Brad Worthington (44)                                                                                                                         |
| 10.118   | Noncompetition, nondisclosure and nonsolicitation agreement dated as of February 26, 2008, by and among Xfone, Inc., Telephone Electronics Corporation, Joseph D. Fail, Chris Chelette, Robert Healea, Joey Garner, and Walter Frank. (44)               |
| 10.119   | Second amendment to stock purchase agreement entered into by each of February 26, 2008 by and among Xfone, Inc., NTS Communications, Inc. and Chris Chelette, Robert Healea and Kevin Buxkemper, as the NTS shareholders representatives. (44) |
| 10.120   | Modification of Financial Consulting Agreement between Xfone, Inc. and Oberon Securities, LLC in connection with NTS Communications Transaction. (45)                                                                                                    |
| 10.121   | Fees Due to Oberon Securities, LLC from Xfone, Inc. in connection with services provided in conjunction with the acquisition of NTS Communications, Inc. (45)                                                                                            |
| 10.122   | Agreement of Principles dated March 17, 2008 by and between Xfone 018 Ltd. and Tiv Taam Holdings 1 Ltd. [Free Translation from Hebrew]. (46)                                                                                                             |
| 10.123   | Compromise Agreement dated March 25, 2008, between Xfone, Inc., Story Telecom, Inc., Story Telecom Limited, Trecastle Holdings Limited and Nir Davison. (47)                                                                                             |
| 10.124   | Securities Purchase Agreement dated March 25, 2008, between Xfone, Inc., Trecastle Holdings Limited and Nir Davison. (47)                                                                                                                                |
| 10.125   | Third Amendment to Stock Purchase Agreement entered into as of April 25, 2008 by and among Chris Chelette, Robert Healea and Kevin Buxkemper, as Sellers’ Representative, NTS Communications, Inc. and Xfone, Inc. (48)                            |
| 10.126   | Irrevocable Option Agreement dated as of July 1, 2008 by and between Abraham Keinan and Guy Nissenson (49)                                                                                                                                     |

----

| 10.127       | Indenture, entered into on December 13, 2007, as amended and restated on October 27, 2008, between Xfone, Inc. and Ziv Haft Trusts Company Ltd. (free translation from Hebrew). (51)                                           |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.128       | Form of warrant (free translation from Hebrew). (51)                                                                                                                                                                           |
| 10.129       | Underwriting Agreement between Xfone, Inc., Excellence Nessuah Underwriting (1993) Ltd. and The First International & Co. - Underwriting and Investments Ltd., dated November 2, 2008 (free translation from Hebrew). (52) |
| 10.130       | Market Making Agreement dated December 24, 2008, by and between Xfone, Inc. and Harel Finance Trade & Securities Ltd. [Free translation from Hebrew] (54)                                                             |
| 10.131       | Second Amendment to Financial Services and Business Development Consulting Agreement dated January 15, 2009, by and between Xfone, Inc. and Dionysos Investments (1999) Ltd. (55)                                              |
| 10.132       | Employment Agreement between NTS Communications, Inc. and Niv Krikov dated July 1, 2009. (59)                                                                                                                                  |
| 10.133       | Agreement dated November 20, 2009 between Xfone, Inc., David Sela and Blokshtil Ltd. (English translation). (60)                                                                                                               |
| 10.134       | Loan Agreement dated as of December 10, 2009, between Swiftnet Limited, Iddo Keinan, Xfone, Inc., Auracall Limited, Equitalk.co.uk Limited and Story Telecom Limited. (61)                                                     |
|  10.135 | General Release and Settlement Agreement dated December 28, 2009 between Xfone, Inc., and the selling shareholders of NTS Communications, Inc. (62)                                                                            |
| 10.136       | Agreement dated January 29, 2010 by and between Xfone, Inc., Abraham Keinan, and AMIT K Limited. (63)                                                                                                                          |
| 10.137       | Agreement dated January 29, 2010 by and between Xfone, Inc. and Abraham Keinan. (63)                                                                                                                                           |
| 10.138       | Agreement dated January 29, 2010 by and between Abraham Keinan, Guy Nissenson and Campbeltown Business Ltd. (63)                                                                                                               |
| 10.139       | Securities Purchase Agreement dated effective as of March 23, 2010.  (64)                                                                                                                                            |
| 10.140       | Form of Subscription Agreement dated as of March 23, 2010. (64)                                                                                                                                                                |
| 10.141       | Contract dated May 14, 2010 by and between Xfone, Inc., Newcall Ltd., Margo Pharma, Ltd., and Marathon Telecom Ltd. [English translation] (65)                                                                                 |
| 10.142       | Employment Agreement entered into on June 30, 2010 between Xfone, Inc. and Guy Nissenson [Free translation from Hebrew] (66)                                                                                                   |
| 10.143       | First Amendment to Consulting Agreement dated June 30, 2010 between Xfone, Inc. and Guy Nissenson (66)                                                                                                                         |
| 10.144       | Severance Agreement entered into on September 20, 2010 between Xfone, Inc. and Guy Nissenson. (67)                                                                                                                             |
| 10.145       | Third Amendment to Financial Services and Business Development Consulting Agreement dated December 27, 2010, by and between Xfone, Inc. and Dionysos Investments (1999) Ltd. (69)                                              |   |
| 16.2         | Letter dated June 1, 2009 from Stark Winter Schenkein & Co., LLP to the Securities and Exchange Commission. (58)                                                                                                           |   |
| 21.1         | List of Subsidiaries (As of March, 17, 2011). *                                                                                                                                                                                |   |
| 23.1         | Consent of Baker Tilly Virchow Krause, LLP dated March 16, 2011. *                                                                                                                                                             |   |
| 31.1         | Certification pursuant to section 302 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                                    |   |
| 31.2         | Certification pursuant to section 302 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                                    |   |
| 32.1         | Certification of Officer pursuant to section 906 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                         |   |
| 32.2         | Certification of Officer pursuant to section 906 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                         |   |

|   |  (1)  | Denotes previously filed exhibits: filed on August 10, 2001 with Xfone, Inc.’s SB-2 Registration Statement.                         |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |  (2)  | Denotes previously filed exhibits: filed on October 16, 2001 with Xfone, Inc.’s SB-2/Amendment 1 Registration Statement.            |
|   |  (5)  | Denotes previously filed exhibit: filed on March 3, 2003 with Xfone, Inc.’s SB-2/Post Effective Amendment 2 Registration Statement. |
|   |  (6)  | Denotes previously filed exhibit: filed on April 15, 2004 with Xfone’s, Inc. SB-2 Amendment 1 Registration Statement.               |
|   |  (7)  | Denotes previously filed exhibit: filed on June 1, 2004 with Xfone, Inc.’s Form 8-K.                                                |
|   |  (8)  | Denotes previously filed exhibit: filed on June 7, 2004 with Xfone, Inc.’s SB-2/Amendment 2 Registration Statement.                 |
|   |  (9)  | Denotes previously filed exhibit: filed on August 11, 2004 with Xfone’s, Inc. SB-2 Amendment 3 Registration Statement.              |
|   |  (10) | Denotes previously filed exhibit: filed on September 13, 2004 with Xfone’s, Inc. SB-2 Amendment 4 Registration Statement.           |
|   |  (11) | Denotes previously filed exhibits: filed on October 4, 2004 with Xfone, Inc.’s Form 8-K                                             |
|   |  (12) | Denotes previously filed exhibits: filed on November 29, 2004 with Xfone, Inc.’s Form 8-K.                                          |
|   |  (13) | Denotes previously filed exhibits: filed on March 31, 2005 with Xfone, Inc.’s Form 10-KSB.                                          |
|   |  (14) | Denotes previously filed exhibit: filed on August 22, 2005 with Xfone, Inc.’s Form 8-K.                                             |
|   |  (15) | Denotes previously filed exhibit: filed on August 31, 2005 with Xfone, Inc.’s Form 8-K.                                             |
|   |  (16) | Denotes previously filed exhibits: filed on October 3, 2005 with Xfone, Inc.’s Form 8-K.                                            |
|   |  (17) | Denotes previously filed exhibits: filed on October 11, 2005 with Xfone, Inc.’s Form 8-K/A #1.                                      |

----

|                |  (18) | Denotes previously filed exhibits: filed on November 29, 2005 with Xfone, Inc.’s Form 8-K.                      |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------|
|                |  (19) | Denotes previously filed exhibit: filed on January 23, 2006 with Xfone, Inc.’s Form 8-K/A #3.                   |
|                |  (21) | Denotes previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s Form 8-K.                        |
|                |  (23) | Denotes previously filed exhibit: filed on May 16, 2006 with Xfone, Inc.’s Form 8-K.                            |
|                |  (24) | Denotes previously filed exhibit: filed on May 30, 2006 with Xfone, Inc.’s Form 8-K.                            |
|      |  (25) | Denotes previously filed exhibits: filed on June 20, 2006 with Xfone, Inc.’s Form 8-K.                          |
|                |  (27) | Denotes previously filed exhibits: filed on July 31, 2006 with Xfone, Inc.’s Form 8-K.                          |
|                |  (28) | Denotes previously filed exhibits: filed on November 14, 2006 with Xfone, Inc.’s Form 10-QSB.                   |
|                |  (29) | Denotes previously filed exhibit: filed on November 22, 2006 with Xfone, Inc.’s Form 8-K.                       |
|                |  (31) | Denotes previously filed exhibit: filed on December 28, 2006 with Xfone, Inc.’s Form 8-K.                       |
|                |  (33) | Denotes previously filed exhibits: filed on February 8, 2007 with Xfone, Inc.’s Form 8-K.                       |
|                |  (34) | Denotes previously filed exhibits: filed on March 30, 2007 with Xfone, Inc.’s Form 10-KSB.                      |
|                |  (35) | Denotes previously filed exhibits: filed on May 31, 2007 with Xfone, Inc.’s Form 8-K.                           |
|                |  (36) | Denotes previously filed exhibits: filed on August 15, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (37) | Denotes previously filed exhibits: filed on August 22, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (38) | Denotes previously filed exhibit: filed on August 27, 2007 with Xfone, Inc.’s Form 8-K.                         |
|                |  (39) | Denotes previously filed exhibit: filed on October 23, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (41) | Denotes previously filed exhibit: filed on November 5, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (42) | Denotes previously filed exhibits: filed on December 14, 2007 with Xfone, Inc.’s Form 8-K.                      |
|                |  (43) | Denotes previously filed exhibit: filed on February 14, 2008 with Xfone, Inc.’s Form 8-K.                       |
|                |  (44) | Denotes previously filed exhibits: filed on February 26, 2008 with Xfone, Inc.’s Form 8-K.                      |
|                |  (45) | Denotes previously filed exhibits: filed on March 6, 2008 with Xfone, Inc.’s Form 8-K.                          |
|                |  (46) | Denotes previously filed exhibit: filed on March 17, 2008 with Xfone, Inc.’s Form 8-K.                          |
|                |  (47) | Denotes previously filed exhibits: filed on March 25 with Xfone, Inc.’s Form 8-K.                               |
|                |  (48) | Denotes previously filed exhibit: filed on  May 1, 2008 with Xfone, Inc.‘s Form 8-K.                  |
|                |  (49) | Denotes previously filed exhibit: filed on  July 1, 2008 with Xfone, Inc.‘s Form 8-K.                 |
|                |  (51) | Denotes previously filed exhibit: filed on October 28, 2008 with Xfone, Inc.‘s Form 8-K.                   |
|                |  (52) | Denotes previously filed exhibit: filed on November 4, 2008 with Xfone, Inc.‘s Form 8-K.                   |
|           |  (54) | Denotes previously filed exhibit: filed on December 24, 2008 with Xfone, Inc.‘s Form 8-K.                  |
|                |  (55) | Denotes previously filed exhibit: filed on January 16, 2009 with Xfone, Inc.‘s Form 8-K.                   |
|                |  (56) | Denotes previously filed exhibit: filed on April 1, 2009 with Xfone, Inc.‘s Form 10-K.                     |
|                |  (57) | Denotes previously filed exhibit: filed on April 30, 2009 with Xfone, Inc.‘s Form 10-K/A.                  |
|                |  (58) | Denotes previously filed exhibit: filed on June 3, 2009 with Xfone, Inc.‘s Form 8-K/A.                     |
|                |  (59) | Denotes previously filed exhibit: filed on July 1, 2009 with Xfone, Inc.‘s Form 8-K.                       |
|                | (60)       | Denotes previously filed exhibit: filed on  November 30, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (61)       | Denotes previously filed exhibit: filed on  December 11, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (62)       | Denotes previously filed exhibit: filed on  December 29, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (63)       | Denotes previously filed exhibits: filed on  January 29, 2010  with Xfone, Inc.‘s Form 8-K. |
|                | (64)       | Denotes previously filed exhibits: filed on  March 23, 2010  with Xfone, Inc.‘s Form 8-K.   |
|                | (65)       | Denotes previously filed exhibits: filed on June 1, 2010 with Xfone, Inc.’s Form 8-K.                           |
|                | (66)       | Denotes previously filed exhibits: filed on June 30, 2010 with Xfone, Inc.’s Form 8-K.                          |
|                | (67)       | Denotes previously filed exhibits: filed on September 20, 2010 with Xfone, Inc.’s Form 8-K.                     |
|                | (68)       | Denotes previously filed exhibit: filed on November 18, 2010 with Xfone, Inc.’s Form 8-K                        |
|                | (69)       | Denotes previously filed exhibit: filed on December 28, 2010 with Xfone, Inc.’s Form 8-K                        |

----

|                      | XFONE, INC. |                                                         |
|---------------------------|-------------|--------------------------------------------------------------|
|                      |        |                                                         |   |
| Date: March 18, 2011 | By:         | /s/ Guy Nissenson                                       |   |
|                      |        | Guy NissensonPresident, Chief Executive Officer and Director |   |
|                      |        |                                                         |   |
|                      |        |                                                         |   |

| Signature               | Title                                                                                           | Date                |
|-------------------------|-------------------------------------------------------------------------------------------------|---------------------|
|                    |                                                                                            |                |
|  /s/ Itzhak Almog  | Chairman of the Board, Chairman of the Audit Committee and Chairman of the Nominating Committee | March 18, 2011      |
| Itzhak Almog            |                                                                                            |                |
|                    |                                                                                            |                |
| /s/ Guy Nissenson       | President, Chief Executive Officer and Director                                                 | March 18, 2011 |
| Guy Nissenson           |                                                                                            |                |
|                    |                                                                                            |                |
|  /s/ Niv Krikov    | Treasurer, Chief Financial Officer, Principal Accounting Officer and Director                   | March 18, 2011 |
| Niv Krikov              |                                                                                            |                |
|                    |                                                                                            |                |
|  /s/ Israel Singer | Director, Chairman of the Compensation Committee and a member of the Audit Committee            | March 18, 2011 |
| Israel Singer           |                                                                                            |                |

----

| Exhibit Number | Description                                                                                                                                                                                                                                                                                                                           |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.             | Agreement and plan of reorganization dated September 20, 2000, between the Company and Swiftnet Limited. (1)                                                                                                                                                                                                                          |
| 3.1            | Articles of Incorporation of the Company.(1)                                                                                                                                                                                                                                                                                          |
| 3.1.1          | Certificate of Amendment to the Articles of Incorporation of the Company, dated January 18, 2007. (56)                                                                                                                                                                                                                                |
| 3.3            | Memorandum of Association of Swiftnet Limited. (1)                                                                                                                                                                                                                                                                                    |
| 3.4            | Articles of Association of Swiftnet Limited. (1)                                                                                                                                                                                                                                                                                      |
| 3.6            | Bylaws of Xfone USA, Inc. (7)                                                                                                                                                                                                                                                                                                         |
| 3.12           | Reamended and Restated Bylaws of Xfone, Inc. dated November 18, 2010 (68)                                                                                                                                                                                                                                                             |
| 4.             | Specimen Stock Certificate.(1)                                                                                                                                                                                                                                                                                                        |
| 10.1           | Agreement dated May 11, 2000, between Swiftnet Limited and Guy Nissenson.(1)                                                                                                                                                                                                                                                          |
| 10.2           | Employment Agreement dated January 1, 2000 with Bosmat Houston. (1)                                                                                                                                                                                                                                                                   |
| 10.3           | Loan Agreement dated August 5, 2000, with Swiftnet Limited, Guy Nissenson, and Nissim Levy.(1)                                                                                                                                                                                                                                        |
| 10.4           | Promissory Note dated September 29, 2000, between the Company and Abraham Keinan.(1)                                                                                                                                                                                                                                                  |
| 10.5           | Stock Purchase Agreement dated June 19, 2000, between Swiftnet Limited, Abraham Keinan, and Campbeltown Business Ltd. (1)                                                                                                                                                                                                             |
| 10.6           | Consulting Agreement dated May 11, 2000 between Swiftnet Limited and Campbeltown Business Ltd.(1)                                                                                                                                                                                                                                     |
| 10.7           | Agreement dated July 30, 2001, with Campbeltown Business Ltd.(1)                                                                                                                                                                                                                                                                      |
| 10.8           | Contract dated June 20, 1998, with WorldCom International Ltd.(1)                                                                                                                                                                                                                                                                     |
| 10.9           | Contract dated April 11, 2000, with VoiceNet Inc.(1)                                                                                                                                                                                                                                                                                  |
| 10.10          | Contract dated April 25, 2000, with InTouchUK.com Ltd.(1)                                                                                                                                                                                                                                                                             |
| 10.11          | Letter of Understanding dated July 30, 2001, from Campbeltown Business Ltd. to the Company.(2)                                                                                                                                                                                                                                        |
| 10.12          | Agreement dated April 6, 2000, between Adar International, Inc./Mr. Sidney J. Golub and Swiftnet Limited. (2)                                                                                                                                                                                                                         |
| 10.13          | Lease Agreement dated December 4, 1991, between Elmtree Investments Ltd. and Swiftnet Limited.(2)                                                                                                                                                                                                                                     |
| 10.14          | Lease Agreement dated October 8, 2001, between Postwick Property Holdings Limited and Swiftnet Limited. (2)                                                                                                                                                                                                                           |
| 10.15          | Agreement dated September 30, 2002, between the Company, Swiftnet Limited., and Nir Davison.(5)                                                                                                                                                                                                                                       |
| 10.16          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Platinum Partners Value Arbitrage Fund LP, Countrywide Partners LLC and WEC Partners LLC. (6)                                                                                    |
| 10.17          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Simon Langbart, Robert Langbart, Arik Ecker, Zwi Ecker, Michael Derman, Errol Derman, Yuval Haim Sobel, Zvi Sobel, Tenram Investment Ltd., Michael Zinn, Michael Weiss. (6) |
| 10.18          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Southridge Partners LP and Southshore Capital Fund Ltd. (6)                                                                                                                      |
| 10.19          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Crestview Capital Master LLC. (6)                                                                                                                                                |
| 10.20          | As to Form: Shares and Warrant Purchase Agreement, Irrevocable Proxy, Warrant A, Warrant B and Registration Rights Agreement of Selling Shareholders Adam Breslawsky, Oded Levy, Michael Epstein, Steven Frank, Joshua Lobel, Joshua Kazan and The Oberon Group LLC. (6)                                                              |
| 10.21          | Newco (Auracall Limited) Formation Agreement.(6)                                                                                                                                                                                                                                                                                      |
| 10.22          | Agreement with ITXC Corporation.(6)                                                                                                                                                                                                                                                                                                   |
| 10.23          | Agreement with Teleglobe International.(6)                                                                                                                                                                                                                                                                                            |
| 10.23.1        | Amendment to Agreement with Teleglobe International.(6)                                                                                                                                                                                                                                                                               |
| 10.24          | Agreement with British Telecommunications.(6)                                                                                                                                                                                                                                                                                         |

----

| 10.25       | Agreement with Easyair Limited (OpenAir).(6)                                                                                                                                                                                                                                            |
|-------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.26       | Agreement with Worldnet.(6)                                                                                                                                                                                                                                                             |
| 10.27       | Agreement with Portfolio PR.(6)                                                                                                                                                                                                                                                         |
|  10.28 | Agreement with Stern and Company.(6)                                                                                                                                                                                                                                                    |
| 10.29       | Letter to the Company dated December 31, 2003, from Abraham Keinan.(6)                                                                                                                                                                                                                  |
| 10.30       | Agreement between Swiftnet Limited and Dan Kirschner.(8)                                                                                                                                                                                                                                |
| 10.31       | Agreement and Plan of Merger.(7)                                                                                                                                                                                                                                                        |
| 10.32       | Escrow Agreement.(7)                                                                                                                                                                                                                                                                    |
| 10.33       | Release Agreement.(7)                                                                                                                                                                                                                                                                   |
| 10.34       | Employment Agreement date March 10, 2005, between Xfone USA, Inc. and Wade Spooner.(7)                                                                                                                                                                                                  |
| 10.34.1     | Separation Agreement and Release, dated August 15, 2008, between Xfone USA, Inc. and Wade Spooner. (56)                                                                                                                                                                                 |
| 10.35       | Employment Agreement date March 10, 2005, between Xfone USA, Inc. and Ted Parsons.(7)                                                                                                                                                                                                   |
| 10.35.1     | Separation Agreement and Release, dated August 15, 2008, between Xfone USA, Inc. and Ted Parsons. (56)                                                                                                                                                                                  |
| 10.36       | First Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.).(11)                                                                                                                                                                                                      |
| 10.37       | Finders Agreement with The Oberon Group, LLC.(11)                                                                                                                                                                                                                                       |
| 10.38       | Agreement with The Oberon Group, LLC.(11)                                                                                                                                                                                                                                               |
| 10.39       | Management Agreement between WS Telecom, Inc. and Xfone USA, Inc.(8)                                                                                                                                                                                                                    |
| 10.40       | Engagement Letter to Tommy R. Ferguson, Confidentiality Agreement, and Executive Inventions Agreement dated August 19, 2004. (11)                                                                                                                                                       |
| 10.41       | Voting Agreement dated September 28, 2004.(11)                                                                                                                                                                                                                                          |
| 10.42       | Novation Agreement executed September 27, 2004.(11)                                                                                                                                                                                                                                     |
| 10.43       | Novation Agreement executed September 28, 2004.(11)                                                                                                                                                                                                                                     |
| 10.44       | Investment Agreement dated August 26, 2004, with Ilan Shoshani.(12)                                                                                                                                                                                                                     |
| 10.44.1     | Addendum and Clarification to the Investment Agreement with Ilan Shoshani dated September 13, 2004. (12)                                                                                                                                                                                |
| 10.45       | Agreement dated November 16, 2004, with Elite Financial Communications Group.(13)                                                                                                                                                                                                       |
| 10.46       | Financial Services and Business Development Consulting Agreement dated November 18, 2004, with Dionysos Investments (1999) Ltd. (13)                                                                                                                                                    |
| 10.47       | Agreement and Plan of Merger to acquire I-55 Internet Services, Inc. dated August 18, 2005.(14)                                                                                                                                                                                         |
| 10.48       | Agreement and Plan of Merger to acquire I-55 Telecommunications, LLC dated August 26, 2005.(15)                                                                                                                                                                                         |
| 10.49       | Securities Purchase Agreement, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                   |
| 10.50       | Secured Convertible Term Note, dated September 27, 2005, by the Company in favor of Laurus Master Fund, Ltd.; Adjustment Provision Waiver Agreement, dated September 27, 2005, by and between the Company and Laurus Fund, Ltd. (16)                                                    |
| 10.51       | Common Stock Purchase Warrant, dated September 27, 2005, by the Company in favor of Laurus Master Fund, Ltd. (16)                                                                                                                                                                       |
| 10.52       | Registration Rights Agreement, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                   |
| 10.53       | Master Security Agreement, dated September 27, 2005, by and between the Company, Xfone USA, Inc., eXpeTel Communications, Inc., Gulf Coast Utilities, Inc., and Laurus Master Fund, Ltd. (16)                                                                                           |
| 10.54       | Stock Pledge Agreement, dated September 27, 2005, by and between the Company, Xfone USA, Inc., and Laurus Master Fund, Ltd. (16)                                                                                                                                                        |
| 10.55       | Subsidiary Guarantee dated September 27, 2005, by Xfone USA, Inc., eXpeTel Communications, Inc. and Gulf Coast Utilities, Inc. in favor of Laurus Master Fund, Ltd. (16)                                                                                                                |
| 10.56       | Funds Escrow Agreement, dated September 27, 2005, by and between the Company, Laurus Master Fund, Ltd. and Loeb & Loeb LLP; Disbursement Letter, dated September 27, 2005. (16)                                                                                                     |
| 10.57       | Incremental Funding Side Letter, dated September 27, 2005, by and between the Company and Laurus Master Fund, Ltd. (16)                                                                                                                                                                 |
| 10.58       | Securities Purchase Agreement dated September 28, 2005, by and between the Company and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |

----

| 10.59       | Registration Rights Agreement, dated September 28, 2005, by and between the Company and Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |
|-------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.60       | Common Stock Purchase Warrant, dated September 28, 2005, by the Company in favor of the Crestview Capital Mater, LLC, Burlingame Equity Investors, LP, Burlingame Equity Investors II, LP, Burlingame Equity Investors (Offshore), Ltd., and Mercantile Discount - Provident Funds. (16) |
| 10.61       | Escrow Agreement, dated September 28, 2005, by and between the Company, the Purchasers and Feldman Weinstein LLP. (16)                                                                                                                                                                   |
|  10.62 | Management Agreement dated October 11, 2005.(17)                                                                                                                                                                                                                                         |
| 10.63       | First Amendment to Agreement and Plan of Merger (to acquire I-55 Internet Services, Inc.), dated October 10, 2005. (17)                                                                                                                                                                  |
| 10.64       | Letter Agreement with MCG Capital Corporation dated October 10, 2005.(17)                                                                                                                                                                                                                |
| 10.65       | Securities Purchase Agreement, dated November 23, 2005, between the Company and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                                 |
| 10.66       | Registration Rights Agreement, dated November 23, 2005, between the Company and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                                 |
| 10.67       | Common Stock Purchase Warrant, dated November 23, 2005, by the Company in favor of Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                              |
| 10.68       | Escrow Agreement, dated November 23, 2005, between the Company, the Escrow Agent, and Mercantile Discount - Provident Funds, Hadar Insurance Company Ltd., The Israeli Phoenix Assurance Company Ltd. and Gaon Gemel Ltd. (18)                                                           |
| 10.69       | Management Agreement with I-55 Telecommunications, LLC dated October 12, 2005.(19)                                                                                                                                                                                                       |
| 10.70       | Agreement - General Terms and Conditions with EBI Comm, Inc., dated January 1, 2006.(21)                                                                                                                                                                                                 |
| 10.71       | Asset Purchase Agreement with Canufly.net, Inc., dated January 10, 2006.(21)                                                                                                                                                                                                             |
| 10.72       | Stock Purchase Agreement dated May 10, 2006, by and among the Company, Story Telecom, Inc., Story Telecom Limited, Story Telecom (Ireland) Limited, Nir Davison, and Trecastle Holdings Limited. (23)                                                                                    |
| 10.73       | Agreement dated May 25, 2006, by and among the Company and the shareholders of Equitalk.co.uk Limited. (24)                                                                                                                                                                              |
| 10.74       | Securities Purchase Agreement, dated June 19, 2006, by and between the Company and the Purchasers. (25)                                                                                                                                                                                  |
| 10.75       | Registration Rights Agreement, dated June 19, 2006, by and between the Company and the Purchasers. (25)                                                                                                                                                                                  |
| 10.76       | Common Stock Purchase Warrant, dated June 19, 2006, by the Company in favor of the Purchasers.(25)                                                                                                                                                                                       |
| 10.77       | Escrow Agreement, dated June 19, 2006, by and between the Company, the Escrow Agent, and the Purchasers. (25)                                                                                                                                                                            |
| 10.78       | Form of Indemnification Agreement between the Company and its Directors and Officers.(27)                                                                                                                                                                                                |
| 10.79       | Agreement to Purchase Promissory Note dated October 31, 2005, with Randall Wade James Tricou.(27)                                                                                                                                                                                        |
| 10.80       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Tricou Construction. (27)                                                                                                                                                                               |
| 10.81       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon Aire Estates. (27)                                                                                                                                                                                  |
| 10.82       | Agreement to Purchase Promissory Note dated October 31, 2005, with Rene Tricou - Bon Aire Utility. (27)                                                                                                                                                                                  |
| 10.83       | Agreement to Purchase Promissory Note dated February 3, 2006, with Danny Acosta.(27)                                                                                                                                                                                                     |
| 10.84       | Letter Agreement dated November 15, 2005, with Oberon Securities, LLC.(27)                                                                                                                                                                                                               |
| 10.85       | Letter Agreement dated June 15, 2006, with Oberon Securities, LLC.(27)                                                                                                                                                                                                                   |
| 10.86       | Second Amendment to Agreement and Plan of Merger (to acquire WS Telecom, Inc.), dated June 28, 2006. (27)                                                                                                                                                                                |
| 10.87       | General Contract for Services dated January 1, 2005, by and between the Company and Swiftnet Limited. (27)                                                                                                                                                                               |
| 10.88       | Service Agreement dated December 6, 2005, by and between the Company and Elite Financial Communications Group, LLC. (27)                                                                                                                                                                 |
| 10.89       | Agreement for Market Making in Securities dated July 31, 2006, by and between the Company and Excellence Nessuah Stock Exchange Services Ltd. (27)                                                                                                                                       |
| 10.90       | Shareholders Loan Agreement, dated September 27, 2006, by and between Auracall Limited, Swiftnet Limited, and Dan Kirschner. (28)                                                                                                                                                        |
| 10.91       | Service Agreement, dated November 7, 2006, by and between the Company and Institutional Marketing Services, Inc. (28)                                                                                                                                                                    |
| 10.92       | Consultancy Agreement, dated November 20, 2006, by and between the Company and Crestview Capital Partners, LLP. (29)                                                                                                                                                                     |
| 10.93       | Agreement dated December 24, 2006, by and between the Company, Halman-Aldubi Provident Funds Ltd., and Halman-Aldubi Pension Funds Ltd. [translation from Hebrew]. (31)                                                                                                                  |
| 10.94       | First Amendment to Financial Services and Business Development Consulting Agreement dated February 8, 2007, by and between the Company and Dionysos Investments (1999) Ltd. (33)                                                                                                         |
| 10.95       | Agreement dated February 8, 2007, by and between the Company, Swiftnet Limited, Campbeltown Business, Ltd., and Mr. Abraham Keinan. (33)                                                                                                                                                 |

----

| 10.96    | First Amendment to General Contract for Services, dated March 14, 2007, by and between the Company and Swiftnet Limited. (34)                                                                                                                            |
|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.97    | Employment Agreement, dated March 28, 2007, between Swiftnet Limited and Abraham Keinan.(34)                                                                                                                                                             |
| 10.98    | Consulting Agreement, dated March 28, 2007, between the Company and Abraham Keinan. (34)                                                                                                                                                            |
| 10.99    | Employment Agreement, dated March 28, 2007, between Swiftnet Limited and Guy Nissenson.(34)                                                                                                                                                              |
| 10.100   | Consulting Agreement, dated March 28, 2007, between the Company and Guy Nissenson.(34)                                                                                                                                                                   |
| 10.101   | Settlement Agreement and Release dated May 31, 2007, by and among Embarq Logistics, Inc, Xfone USA, Inc. and the Company. (35)                                                                                                                           |
| 10.102   | Promissory Note dated May 31, 2007, by Xfone USA, Inc.(35)                                                                                                                                                                                               |
| 10.103   | Parent Guarantee dated as of May 31, 2007 by the Company in favor of Embarq Logistics, Inc.(35)                                                                                                                                                          |
| 10.104   | Share Purchase Agreement dated August 15, 2007, by and between Dan Kirschner, as Seller, Swiftnet Limited, as Buyer, and Xfone, Inc. (36)                                                                                                                |
| 10.105   | Inter-Company Loan Agreement dated August 15, 2007, by and between Auracall Limited, as Lender, and Swiftnet Limited, as Borrower. (36)                                                                                                                  |
| 10.106   | Stock Purchase Agreement dated August [20], 2007, by and among the Company, NTS Communications, Inc., and the Shareholders of NTS Communications, Inc. (37)                                                                                              |
| 10.107   | Letter of Joint Venture dated June 15, 2007, by and among the Company and NTS Holdings, Inc.(37)                                                                                                                                                         |
| 10.107.1 | Form of Free Cash Flow Participation Agreement to be Entered into between the Company and NTS Holdings, Inc. Upon Consummation of the Acquisition. (37)                                                                                                  |
| 10.107.2 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Barbara Baldwin upon Consummation of the Acquisition. (37)                                                                                                          |
| 10.107.3 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Jerry Hoover upon Consummation of the Acquisition. (37)                                                                                                             |
| 10.107.4 | Form of Employment Agreement to be entered into between NTS Communications, Inc. and Brad Worthington upon Consummation of the Acquisition. (37)                                                                                                         |
| 10.108   | Employment Contract signed on August 26, 2007, by and between the Company’s Israeli based Subsidiary Xfone 018 ltd. and Roni Haliva. (38)                                                                                                          |
| 10.109   | Subscription Agreement for the Purchase of Shares of Common Stock of the Company Dated October 23, 2007. (39)                                                                                                                                            |
| 10.110   | Subscription Agreement for the Purchase of Shares of Common Stock of the Company Dated November 1, 2007. (41)                                                                                                                                            |
| 10.111   | Form of Subscription Agreement for the Purchase of Units Consisting of Two Shares of Common Stock and One Common Stock Purchase Warrant. (42)                                                                                                            |
| 10.112   | Form of Common Stock Purchase Warrant.(42)                                                                                                                                                                                                               |
| 10.113   | First Amendment to Stock Purchase Agreement.(43)                                                                                                                                                                                                         |
| 10.114.1 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Barbara Baldwin. (44)                                                                                                                                 |
| 10.114.2 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Jerry Hoover. (44)                                                                                                                                    |
| 10.114.3 | Employment agreement dated as of February 26, 2008, by and among NTS Communications, Inc. and Brad Worthington .(44)                                                                                                                                |
| 10.115   | Free cash flow participation agreement dated as of February 26, 2008, by and among Xfone, Inc. and NTS Holdings, Inc. (44)                                                                                                                               |
| 10.116   | Escrow agreement dated as of February 26, 2008, by and among Xfone, Inc., Chris Chelette, Robert Healea and Kevin Buxkemper the NTS shareholders representatives, and Trustmark National Bank, as Escrow Agent. (44)                                     |
| 10.117   | Release, effective as of February 26, 2008, entered into by each of Barbara Baldwin, Jerry Hoover and Brad Worthington (44)                                                                                                                         |
| 10.118   | Noncompetition, nondisclosure and nonsolicitation agreement dated as of February 26, 2008, by and among Xfone, Inc., Telephone Electronics Corporation, Joseph D. Fail, Chris Chelette, Robert Healea, Joey Garner, and Walter Frank. (44)               |
| 10.119   | Second amendment to stock purchase agreement entered into by each of February 26, 2008 by and among Xfone, Inc., NTS Communications, Inc. and Chris Chelette, Robert Healea and Kevin Buxkemper, as the NTS shareholders representatives. (44) |
| 10.120   | Modification of Financial Consulting Agreement between Xfone, Inc. and Oberon Securities, LLC in connection with NTS Communications Transaction. (45)                                                                                                    |
| 10.121   | Fees Due to Oberon Securities, LLC from Xfone, Inc. in connection with services provided in conjunction with the acquisition of NTS Communications, Inc. (45)                                                                                            |
| 10.122   | Agreement of Principles dated March 17, 2008 by and between Xfone 018 Ltd. and Tiv Taam Holdings 1 Ltd. [Free Translation from Hebrew]. (46)                                                                                                             |
| 10.123   | Compromise Agreement dated March 25, 2008, between Xfone, Inc., Story Telecom, Inc., Story Telecom Limited, Trecastle Holdings Limited and Nir Davison. (47)                                                                                             |
| 10.124   | Securities Purchase Agreement dated March 25, 2008, between Xfone, Inc., Trecastle Holdings Limited and Nir Davison. (47)                                                                                                                                |
| 10.125   | Third Amendment to Stock Purchase Agreement entered into as of April 25, 2008 by and among Chris Chelette, Robert Healea and Kevin Buxkemper, as Sellers’ Representative, NTS Communications, Inc. and Xfone, Inc. (48)                            |
| 10.126   | Irrevocable Option Agreement dated as of July 1, 2008 by and between Abraham Keinan and Guy Nissenson (49)                                                                                                                                     |

----

| 10.127       | Indenture, entered into on December 13, 2007, as amended and restated on October 27, 2008, between Xfone, Inc. and Ziv Haft Trusts Company Ltd. (free translation from Hebrew). (51)                                           |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.128       | Form of warrant (free translation from Hebrew). (51)                                                                                                                                                                           |
| 10.129       | Underwriting Agreement between Xfone, Inc., Excellence Nessuah Underwriting (1993) Ltd. and The First International & Co. - Underwriting and Investments Ltd., dated November 2, 2008 (free translation from Hebrew). (52) |
| 10.130       | Market Making Agreement dated December 24, 2008, by and between Xfone, Inc. and Harel Finance Trade & Securities Ltd. [Free translation from Hebrew] (54)                                                             |
| 10.131       | Second Amendment to Financial Services and Business Development Consulting Agreement dated January 15, 2009, by and between Xfone, Inc. and Dionysos Investments (1999) Ltd. (55)                                              |
| 10.132       | Employment Agreement between NTS Communications, Inc. and Niv Krikov dated July 1, 2009. (59)                                                                                                                                  |
| 10.133       | Agreement dated November 20, 2009 between Xfone, Inc., David Sela and Blokshtil Ltd. (English translation). (60)                                                                                                               |
| 10.134       | Loan Agreement dated as of December 10, 2009, between Swiftnet Limited, Iddo Keinan, Xfone, Inc., Auracall Limited, Equitalk.co.uk Limited and Story Telecom Limited. (61)                                                     |
|  10.135 | General Release and Settlement Agreement dated December 28, 2009 between Xfone, Inc., and the selling shareholders of NTS Communications, Inc. (62)                                                                            |
| 10.136       | Agreement dated January 29, 2010 by and between Xfone, Inc., Abraham Keinan, and AMIT K Limited. (63)                                                                                                                          |
| 10.137       | Agreement dated January 29, 2010 by and between Xfone, Inc. and Abraham Keinan. (63)                                                                                                                                           |
| 10.138       | Agreement dated January 29, 2010 by and between Abraham Keinan, Guy Nissenson and Campbeltown Business Ltd. (63)                                                                                                               |
| 10.139       | Securities Purchase Agreement dated effective as of March 23, 2010.  (64)                                                                                                                                            |
| 10.140       | Form of Subscription Agreement dated as of March 23, 2010. (64)                                                                                                                                                                |
| 10.141       | Contract dated May 14, 2010 by and between Xfone, Inc., Newcall Ltd., Margo Pharma, Ltd., and Marathon Telecom Ltd. [English translation] (65)                                                                                 |
| 10.142       | Employment Agreement entered into on June 30, 2010 between Xfone, Inc. and Guy Nissenson [Free translation from Hebrew] (66)                                                                                                   |
| 10.143       | First Amendment to Consulting Agreement dated June 30, 2010 between Xfone, Inc. and Guy Nissenson (66)                                                                                                                         |
| 10.144       | Severance Agreement entered into on September 20, 2010 between Xfone, Inc. and Guy Nissenson. (67)                                                                                                                             |
| 10.145       | Third Amendment to Financial Services and Business Development Consulting Agreement dated December 27, 2010, by and between Xfone, Inc. and Dionysos Investments (1999) Ltd. (69)                                              |   |
| 16.2         | Letter dated June 1, 2009 from Stark Winter Schenkein & Co., LLP to the Securities and Exchange Commission. (58)                                                                                                           |   |
| 21.1         | List of Subsidiaries (As of March, 17, 2011). *                                                                                                                                                                                |   |
| 23.1         | Consent of Baker Tilly Virchow Krause, LLP dated March 16, 2011. *                                                                                                                                                             |   |
| 31.1         | Certification pursuant to section 302 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                                    |   |
| 31.2         | Certification pursuant to section 302 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                                    |   |
| 32.1         | Certification of Officer pursuant to section 906 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                         |   |
| 32.2         | Certification of Officer pursuant to section 906 of the Sarbanes - Oxley Act of 2002.*                                                                                                                                         |   |

|   |  (1)  | Denotes previously filed exhibits: filed on August 10, 2001 with Xfone, Inc.’s SB-2 Registration Statement.                         |
|--------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   |  (2)  | Denotes previously filed exhibits: filed on October 16, 2001 with Xfone, Inc.’s SB-2/Amendment 1 Registration Statement.            |
|   |  (5)  | Denotes previously filed exhibit: filed on March 3, 2003 with Xfone, Inc.’s SB-2/Post Effective Amendment 2 Registration Statement. |
|   |  (6)  | Denotes previously filed exhibit: filed on April 15, 2004 with Xfone’s, Inc. SB-2 Amendment 1 Registration Statement.               |
|   |  (7)  | Denotes previously filed exhibit: filed on June 1, 2004 with Xfone, Inc.’s Form 8-K.                                                |
|   |  (8)  | Denotes previously filed exhibit: filed on June 7, 2004 with Xfone, Inc.’s SB-2/Amendment 2 Registration Statement.                 |
|   |  (9)  | Denotes previously filed exhibit: filed on August 11, 2004 with Xfone’s, Inc. SB-2 Amendment 3 Registration Statement.              |
|   |  (10) | Denotes previously filed exhibit: filed on September 13, 2004 with Xfone’s, Inc. SB-2 Amendment 4 Registration Statement.           |
|   |  (11) | Denotes previously filed exhibits: filed on October 4, 2004 with Xfone, Inc.’s Form 8-K                                             |
|   |  (12) | Denotes previously filed exhibits: filed on November 29, 2004 with Xfone, Inc.’s Form 8-K.                                          |
|   |  (13) | Denotes previously filed exhibits: filed on March 31, 2005 with Xfone, Inc.’s Form 10-KSB.                                          |
|   |  (14) | Denotes previously filed exhibit: filed on August 22, 2005 with Xfone, Inc.’s Form 8-K.                                             |
|   |  (15) | Denotes previously filed exhibit: filed on August 31, 2005 with Xfone, Inc.’s Form 8-K.                                             |
|   |  (16) | Denotes previously filed exhibits: filed on October 3, 2005 with Xfone, Inc.’s Form 8-K.                                            |
|   |  (17) | Denotes previously filed exhibits: filed on October 11, 2005 with Xfone, Inc.’s Form 8-K/A #1.                                      |

----

|                |  (18) | Denotes previously filed exhibits: filed on November 29, 2005 with Xfone, Inc.’s Form 8-K.                      |
|---------------------|------------|-----------------------------------------------------------------------------------------------------------------------|
|                |  (19) | Denotes previously filed exhibit: filed on January 23, 2006 with Xfone, Inc.’s Form 8-K/A #3.                   |
|                |  (21) | Denotes previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s Form 8-K.                        |
|                |  (23) | Denotes previously filed exhibit: filed on May 16, 2006 with Xfone, Inc.’s Form 8-K.                            |
|                |  (24) | Denotes previously filed exhibit: filed on May 30, 2006 with Xfone, Inc.’s Form 8-K.                            |
|      |  (25) | Denotes previously filed exhibits: filed on June 20, 2006 with Xfone, Inc.’s Form 8-K.                          |
|                |  (27) | Denotes previously filed exhibits: filed on July 31, 2006 with Xfone, Inc.’s Form 8-K.                          |
|                |  (28) | Denotes previously filed exhibits: filed on November 14, 2006 with Xfone, Inc.’s Form 10-QSB.                   |
|                |  (29) | Denotes previously filed exhibit: filed on November 22, 2006 with Xfone, Inc.’s Form 8-K.                       |
|                |  (31) | Denotes previously filed exhibit: filed on December 28, 2006 with Xfone, Inc.’s Form 8-K.                       |
|                |  (33) | Denotes previously filed exhibits: filed on February 8, 2007 with Xfone, Inc.’s Form 8-K.                       |
|                |  (34) | Denotes previously filed exhibits: filed on March 30, 2007 with Xfone, Inc.’s Form 10-KSB.                      |
|                |  (35) | Denotes previously filed exhibits: filed on May 31, 2007 with Xfone, Inc.’s Form 8-K.                           |
|                |  (36) | Denotes previously filed exhibits: filed on August 15, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (37) | Denotes previously filed exhibits: filed on August 22, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (38) | Denotes previously filed exhibit: filed on August 27, 2007 with Xfone, Inc.’s Form 8-K.                         |
|                |  (39) | Denotes previously filed exhibit: filed on October 23, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (41) | Denotes previously filed exhibit: filed on November 5, 2007 with Xfone, Inc.’s Form 8-K.                        |
|                |  (42) | Denotes previously filed exhibits: filed on December 14, 2007 with Xfone, Inc.’s Form 8-K.                      |
|                |  (43) | Denotes previously filed exhibit: filed on February 14, 2008 with Xfone, Inc.’s Form 8-K.                       |
|                |  (44) | Denotes previously filed exhibits: filed on February 26, 2008 with Xfone, Inc.’s Form 8-K.                      |
|                |  (45) | Denotes previously filed exhibits: filed on March 6, 2008 with Xfone, Inc.’s Form 8-K.                          |
|                |  (46) | Denotes previously filed exhibit: filed on March 17, 2008 with Xfone, Inc.’s Form 8-K.                          |
|                |  (47) | Denotes previously filed exhibits: filed on March 25 with Xfone, Inc.’s Form 8-K.                               |
|                |  (48) | Denotes previously filed exhibit: filed on  May 1, 2008 with Xfone, Inc.‘s Form 8-K.                  |
|                |  (49) | Denotes previously filed exhibit: filed on  July 1, 2008 with Xfone, Inc.‘s Form 8-K.                 |
|                |  (51) | Denotes previously filed exhibit: filed on October 28, 2008 with Xfone, Inc.‘s Form 8-K.                   |
|                |  (52) | Denotes previously filed exhibit: filed on November 4, 2008 with Xfone, Inc.‘s Form 8-K.                   |
|           |  (54) | Denotes previously filed exhibit: filed on December 24, 2008 with Xfone, Inc.‘s Form 8-K.                  |
|                |  (55) | Denotes previously filed exhibit: filed on January 16, 2009 with Xfone, Inc.‘s Form 8-K.                   |
|                |  (56) | Denotes previously filed exhibit: filed on April 1, 2009 with Xfone, Inc.‘s Form 10-K.                     |
|                |  (57) | Denotes previously filed exhibit: filed on April 30, 2009 with Xfone, Inc.‘s Form 10-K/A.                  |
|                |  (58) | Denotes previously filed exhibit: filed on June 3, 2009 with Xfone, Inc.‘s Form 8-K/A.                     |
|                |  (59) | Denotes previously filed exhibit: filed on July 1, 2009 with Xfone, Inc.‘s Form 8-K.                       |
|                | (60)       | Denotes previously filed exhibit: filed on  November 30, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (61)       | Denotes previously filed exhibit: filed on  December 11, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (62)       | Denotes previously filed exhibit: filed on  December 29, 2009 with Xfone, Inc.‘s Form 8-K.            |
|                | (63)       | Denotes previously filed exhibits: filed on  January 29, 2010  with Xfone, Inc.‘s Form 8-K. |
|                | (64)       | Denotes previously filed exhibits: filed on  March 23, 2010  with Xfone, Inc.‘s Form 8-K.   |
|                | (65)       | Denotes previously filed exhibits: filed on June 1, 2010 with Xfone, Inc.’s Form 8-K.                           |
|                | (66)       | Denotes previously filed exhibits: filed on June 30, 2010 with Xfone, Inc.’s Form 8-K.                          |
|                | (67)       | Denotes previously filed exhibits: filed on September 20, 2010 with Xfone, Inc.’s Form 8-K.                     |
|                | (68)       | Denotes previously filed exhibit: filed on November 18, 2010 with Xfone, Inc.’s Form 8-K                        |
|                | (69)       | Denotes previously filed exhibit: filed on December 28, 2010 with Xfone, Inc.’s Form 8-K                        |

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