----

----

| 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 itscharter) |

| 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                    |

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

----

| ·   | update      Item 3 (Legal Proceedings); |
|--------------------|-----------------------------------------|

| ·   | revise      Item 8 (Financial Statements and Supplementary Data) to make certain      typographical and formatting corrections, and to enhance certain      disclosures required by U.S. GAAP to support certain figures appearing in      the financial statements; and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | update      Exhibit 21.1, List of Subsidiaries. |
|--------------------|-------------------------------------------------|

----

OCE

----

SUP

| Xfone,      Inc. and Subsidiaries      |
|----------------------------------------|
| CONSOLIDATED      FINANCIAL STATEMENTS |
| As      of December 31, 2008           |
| CONTENTS                               |

| Report      of Independent Registered Public Accounting Firm                                                                   | 5      |
|--------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                           |   |
| Report      of Independent Registered Public Accounting Firm to the Shareholders and      Board of Directors of Xfone 018 Ltd. | 6      |
|                                                                                                                           |   |
| Balance      Sheets                                                                                                            | 7      |
|                                                                                                                           |   |
| Statements      of Operations                                                                                                  | 9      |
|                                                                                                                           |   |
| Statements      of Changes in Shareholders' Equity                                                                             | 10     |
|                                                                                                                           |   |
| Statements      of Cash Flows                                                                                                  | 11     |
|                                                                                                                           |   |
| Notes      to Consolidated Financial Statements                                                                                | 14     |

----

----

|  |  |
|--|--|

|                                                | Yarel      + Partners      C.P.A      (Isr.) /s/ Yarel +      Partners |
|-----------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
| Tel-Aviv,      IsraelMarch  26,      2009 | An      Independent Member of BKRInternational                                                            |

----

| Xfone,      Inc. and Subsidiaries           |   |
|---------------------------------------------|--------|
| CONSOLIDATED      BALANCE SHEETS            |   |
|                                        |   |
|                                        |   | December      31, |   |
|                                        |   | 2008 |   |   | 2007 |   |
|                                        |   |   |   |   |   |   |
| CURRENT      ASSETS:                        |   |   |   |   |   |   |
|                                        |   |   |   |   |   |   |
| Cash                                        |   | $ | 3,078,474 |   |   | $ | 5,835,608 |   |
| Restricted      cash                        |   |   | - |   |   |   | 25,562,032 |   |
| Accounts      receivable, net               |   |   | 7,834,003 |   |   |   | 5,886,499 |   |
| Prepaid      expenses and other receivables |   |   | 4,291,637 |   |   |   | 3,554,431 |   |
| Deferred      taxes                         |   |   | 2,795,473 |   |   |   | 430,876 |   |
|                                        |   |   |   |   |   |   |   |   |
| Total      current assets                   |   |   | 17,999,587 |   |   |   | 41,269,446 |   |
|                                        |   |   |   |   |   |   |   |   |
| INVENTORY                                   |   |   | 302,547 |   |   |   | - |   |
|                                        |   |   |   |   |   |   |   |   |
| MINORITY      INTEREST                      |   |   | - |   |   |   | 7,190 |   |
|                                        |   |   |   |   |   |   |   |   |
| BONDS      ISSUANCE COSTS , NET             |   |   | 1,696,278 |   |   |   | 1,753,503 |   |
|                                        |   |   |   |   |   |   |   |   |
| DEFERRED      TAXES                         |   |   | 2,146,010 |   |   |   | 16,018 |   |
|                                        |   |   |   |   |   |   |   |   |
| OTHER      LONG TERM ASSETS                 |   |   | 474,408 |   |   |   | 306,540 |   |
|                                        |   |   |   |   |   |   |   |   |
| FIXED      ASSETS, NET                      |   |   | 50,020,597 |   |   |   | 5,747,758 |   |
|                                        |   |   |   |   |   |   |   |   |
| OTHER      ASSETS, NET                      |   |   | 3,051,839 |   |   |   | 1,076,784 |   |
|                                        |   |   |   |   |   |   |   |   |
| GOODWILL                                    |   |   | 27,413,481 |   |   |   | 16,872,088 |   |
|                                        |   |   |   |   |   |   |   |   |
| Total      assets                           |   | $ | 103,104,747 |   |   | $ | 67,049,327 |   |
|                                        |   |   |   |   |   |   |   |   |

----

| Xfone,      Inc. and Subsidiaries            |
|----------------------------------------------|
| CONSOLIDATED      BALANCE SHEETS (CONTINUED) |

|                                                                | December      31, |   |
|---------------------------------------------------------------------|-------------------|--------|
|                                                                | 2008              |   |   | 2007 |   |
|                                                                |              |   |   |   |   |
|                                                                |              |   |   |   |   |
| CURRENT      LIABILITIES:                                           |              |   |   |   |   |   |
| Short-term      bank credit and current maturities of notes payable |              | $      | 5,295,014 |   |   | $ | 1,094,339 |   |
| Trade      payables                                                 |              |   | 9,689,330 |   |   |   | 8,287,420 |   |
| Other      liabilities and accrued expenses                         |              |   | 7,674,870 |   |   |   | 5,322,045 |   |
| Current      maturities of obligations under capital leases         |              |   | 288,688 |   |   |   | 89,654 |   |
| Current      maturities of bonds                                    |              |   | 3,492,127 |   |   |   | 3,268,476 |   |
|                                                                |              |   |   |   |   |   |   |   |
| Total      current liabilities                                      |              |   | 26,440,029 |   |   |   | 18,061,934 |   |
|                                                                |              |   |   |   |   |   |   |   |
| DEFERRED      TAXES                                                 |              |   | 8,362,920 |   |   |   | 1,103 |   |
|                                                                |              |   |   |   |   |   |   |   |
| NOTES      PAYABLE, NET OF CURRENT MATURITIES                       |              |   | 4,113,093 |   |   |   | 1,013,808 |   |
|                                                                |              |   |   |   |   |   |   |   |
| BONDS      PAYABLES , NET OF CURRENT MATURITIES                     |              |   | 20,062,127 |   |   |   | 22,083,892 |   |
|                                                                |              |   |   |   |   |   |   |   |
| OBLIGATIONS      UNDER CAPITAL LEASES , NET OF CURRENT MATURITIES   |              |   | 307,596 |   |   |   | 31,893 |   |
|                                                                |              |   |   |   |   |   |   |   |
| OTHER      LONG TERM LIABILITIES                                    |              |   | 537,252 |   |   |   | - |   |
|                                                                |              |   |   |   |   |   |   |   |
| SEVERANCE      PAY                                                  |              |   | 122,362 |   |   |   | 148,600 |   |
|                                                                |              |   |   |   |   |   |   |   |
| MINORITY      INTEREST                                              |              |   | 214,795 |   |   |   | -  |   |
|                                                                |              |   |   |   |   |   |   |   |
| Total      liabilities                                              |              |   | 60,160,174 |   |   |   | 41,341,230 |   |
|                                                                |              |   |   |   |   |   |   |   |
| COMMITMENTS      AND CONTINGENT LIABILITIES                         |              |   |   |   |   |   |   |   |
|                                                                |              |   |   |   |   |   |   |   |

| SHAREHOLDERS'      EQUITY:                                                                                               |   |   |        |   |   |   |       |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|--------|--------|--------|------------|--------|
| Common      stock of $0.001 par value:                                                                                   |   |   |        |   |   |   |       |   |
| 75,000,000      shares authorized at December 31, 2008;                                                                  |   |   |        |   |   |   |       |   |
| 13,467,928      and 18,376,075 issued and outstanding at December 31, 2007 and      December 31, 2008, respectively |   |   | 18,376      |   |   |   | 13,468     |   |
| Additional      paid-in capital                                                                                          |   |   | 42,772,998  |   |   |   | 26,199,830 |   |
| Foreign      currency translation adjustment                                                                             |   |   | (2,953,651) |   |   |   | (1,564,814 | )      |
| Retained      earnings                                                                                                   |   |   | 3,106,850   |   |   |   | 1,059,613  |   |
|                                                                                                                     |   |   |        |   |   |   |       |   |
| Total      shareholders' equity                                                                                          |   |   | 42,944,573  |   |   |   | 25,708,097 |   |
|                                                                                                                     |   |   |        |   |   |   |       |   |
| Total      liabilities and shareholders' equity                                                                          |   | $      | 103,104,747 |   |   | $      | 67,049,327 |   |
|                                                                                                                     |   |   |        |   |   |   |       |   |

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

----

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

|                                                       |   | Years      Ended  |        |
|------------------------------------------------------------|--------|-------------------|-------------|
|                                                       |   | December      31, |        |
|                                                       |   | 2008              |        |   | 2007 |   |
|                                                       |   |              |        |   |   |   |
|                                                       |   |              |        |   |   |   |
| Revenues                                                   |   | $                 | 90,338,980  |   |   | $ | 44,723,934 |   |
| Cost      of revenues                                      |   |              | 47,132,313  |   |   |   | 19,626,322 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Gross      profit                                          |   |              | 43,206,667  |   |   |   | 25,097,612 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Operating      expenses:                              |   |              |        |   |   |   |   |   |
| Research      and development                              |   |              | 60,094      |   |   |   | 47,609 |   |
| Marketing      and selling                                 |   |              | 12,422,391  |   |   |   | 10,886,883 |   |
| General      and administrative                            |   |              | 25,720,376  |   |   |   | 12,335,759 |   |
| Non-      recurring loss                                   |   |              | 189,610     |   |   |   | 2,856,803 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Total      operating expenses                              |   |              | 38,392,471  |   |   |   | 26,127,054 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Operating      profit (loss)                               |   |              | 4,814,196   |   |   |   | (1,029,442 | ) |
| Financing      expenses, net                               |   |              | (2,862,132) |   |   |   | (515,562 | ) |
| Equity      in income of affiliated company                |   |              | -           |   |   |   | 132,867 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Income      (loss) before minority interest and taxes      |   |              | 1,952,064   |   |   |   | (1,412,137 | ) |
|                                                       |   |              |        |   |   |   |   |   |
| Minority      interest                                     |   |              | (221,985)   |   |   |   | (297,860 | ) |
|                                                       |   |              |        |   |   |   |   |   |
|                                                       |   |              |        |   |   |   |   |   |
| Income      (loss) before taxes                            |   |              | 1,730,079   |   |   |   | (1,709,997 | ) |
|                                                       |   |              |        |   |   |   |   |   |
| Income      tax benefit (expense)                          |   |              | 317,158     |   |   |   | 426,105 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Net      income (loss)                                     |   | $                 | 2,047,237   |   |   | $ | (1,283,892 | ) |
|                                                       |   |              |        |   |   |   |   |   |
|                                                       |   |              |        |   |   |   |   |   |
| Basic      net profit (loss) per share                     |   | $                 | 0.116       |   |   | $ | (0.109 | ) |
|                                                       |   |              |        |   |   |   |   |   |
| Diluted      net profit (loss) per share                   |   | $                 | 0.116       |   |   | $ | (0.109 | ) |
|                                                       |   |              |        |   |   |   |   |   |
| Weighted      average number of shares used for computing: |   |              |        |   |   |
| Basic      profit (loss) per share                         |   |              | 17,624,249  |   |   |   | 11,777,645 |   |
|                                                       |   |              |        |   |   |   |   |   |
| Diluted      profit (loss) per share                       |   |              | 17,624,249  |   |   |   | 11,777,645 |   |

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

----

| Xfone,      Inc. and Subsidiaries            |
|---------------------------------------------------|
|                                              |   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| STATEMENTS      OF CHANGES IN SHAREHOLDERS'EQUITY |

|                                                               |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |
|--------------------------------------------------------------------|--------|----------------------------------------|---------------|--------|-------------------|--------|---------------|---------------------------------|--------|--------|----------------------------------------------------------|--------|--------|-------------------------|---------------|--------|--------------------------------------|--------|
|                                                               |   | Number of   Ordinary  Shares |          |   | Common      Stock |   |          | Additional      paid in capital |   |   | Foreign      currency translation  adjustments |   |   | Retained  Earnings |          |   | Total Shareholders' Equity |   |
| Balance      at January 1, 2007                                    |   |                                   | 11,153,817    |   |              | $      | 11,154        |                            |   | $      | 18,498,300                                               |   |   | $                       | (1,380,701    | )      |                                 | $      | 2,343,505 |   |   | $ | 19,472,258 |   |
| Equity-based      compensation expenses resulting from SFAS 123(R) |   |                                   | -             |   |              |   | -             |                            |   |   | 216,238                                                  |   |   |                    | -             |   |                                 |   |  - |   |   |   | 216,238 |   |
| Stock      issued during the period, net of issuance expenses :    |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| For      services                                                  |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| For      cash                                                      |   |                                   | 2,294,828     |   |              |   | 2,295         |                            |   |   | 6,489,955                                                |   |   |                    | -             |   |                                 |   | - |   |   |   | 6,492,250 |   |
| For      acquisitions                                              |   |                                   | 20,026        |   |              |   | 20            |                            |   |   | (20                                                      | )      |   |                    | -             |   |                                 |   | - |   |   |   | - |   |
| Exercise      of options                                           |   |                                   | 6,300         |   |              |   | 6             |                            |   |   | 22,044                                                   |   |   |                    | -        |   |                                 |   | -  |   |   |   | 22,050 |   |
| Shares      cancelled                                              |   |                                   | (7,043)  |   |              |   | (7)      |                            |   |   |  7                                                  |   |   |                    | -        |   |                                 |   | -  |   |   |   | -  |   |
| Fair      value of warrants granted to bonds holders               |   |                                   |          |   |              |   |          |                            |   |   | 973,306                                                  |   |   |                    |          |   |                                 |   |   |   |   |   | 973,306 |   |
| Currency      translation                                          |   |                                   | -             |   |              |   | -             |                            |   |   | -                                                        |   |   |                    | (184,113      | )      |                                 |   | - |   |   |   | (184,113 | ) |
| Net      loss                                                      |   |                                   | -   |   |              |   | -   |                            |   |   | -                                              |   |   |                    | -   |   |                                 |   | (1,283,892 | ) |   |   | (1,283,892 | ) |
|                                                               |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| Balance      at December 31, 2007                                  |   |                                   | 13,467,928    |   |              | $      | 13,468        |                            |   | $      | 26, 199,830                                              |   |   | $                       | (1,564,814    | )      |                                 | $      | 1,059,613 |   |   | $ | 25,708,097 |   |
|                                                               |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| Balance      at January 1, 2008                                    |   |                                   | 13,467,928    |   |              |   | 13,468        |                            |   |   | 26, 199,830                                              |   |   |                    | (1,564,814)   |   |                                 |   | 1,059,613 |   |   |   | 25,708,097 |   |
| Issuance      of stock options                                     |   |                                   |  -       |   |              |   |  -       |                            |   |   | 1, 412,507                                               |   |   |                    |  -       |   |                                 |   |  - |   |   |   | 1,412,507 |   |
| Equity-based      compensation expenses resulting from SFAS 123(R) |   |                                   |  -       |   |              |   |  -       |                            |   |   | 655,165                                                  |   |   |                    |  -       |   |                                 |   |  - |   |   |   | 655,165 |   |
| Stock      issued during the period, net of                        |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
|   of        issuance expenses :                |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| For      cash                                                      |   |                                   | 2,600,000     |   |              |   | 2,600         |                            |   |   | 8,029,901                                                |   |   |                    |  -       |   |                                 |   |  - |   |   |   | 8,032,501 |   |
| For      acquisitions                                              |   |                                   | 2,366,892     |   |              |   | 2,367         |                            |   |   | 6,461,169                                                |   |   |                    |  -       |   |                                 |   |  - |   |   |   | 6,463,536 |   |
| Exercise      of options                                           |   |                                   | 4,105         |   |              |   | 4             |                            |   |   | 14,363                                                   |   |   |                    |  -       |   |                                 |   |  - |   |   |   | 14,367 |   |
| Shares      cancelled                                              |   |                                   | (62,850)      |   |              |   | (63)          |                            |   |   | 63                                                       |   |   |                    |  -       |   |                                 |   |  - |   |   |   | - |   |
| Currency      translation                                          |   |                                   |  -       |   |              |   |  -       |                            |   |   |  -                                                  |   |   |                    | (1,388,837)   |   |                                 |   |  - |   |   |   | (1,388,837) |   |
| Net      income                                                    |   |                                   |  -       |   |              |   |  -       |                            |   |   |  -                                                  |   |   |                    |  -       |   |                                 |   | 2,047,237 |   |   |   | 2,047,237 |   |
|                                                               |   |                                   |          |   |              |   |          |                            |   |   |                                                     |   |   |                    |          |   |                                 |   |   |   |   |   |   |   |
| Balance      at December 31, 2008                                  |   |                                   | 18,376,075    |   |              | $      | 18,376        |                            |   | $      | 42,772,998                                               |   |   | $                       | (2,953,651)   |   |                                 | $      | 3,106,850 |   |   | $ | 42,944,573 |   |

| Equity-based      compensation expenses resulting from SFAS123(R) |
|-------------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                                                                          |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                       |   |   |   |   |   |   |
| STATEMENTS      OF CASH FLOWS                                                                                              |   |
|                                                                                                                       |   |   |   |   |   |   |
|                                                                                                                       |   | Years      Ended |   |
|                                                                                                                       |   | December      31 , |   |
|                                                                                                                       |   | 2008 |   |   | 2007 |   |
| Cash      flow from operating activities:                                                                                  |   |   |   |   |   |   |
| Net      income (loss)                                                                                                     |   | $ | 2,047,237 |   |   | $ | (1,283,892 | ) |
| Adjustments      required to reconcile net income to net cash provided by (used in)      operating activities:             |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                                                         |   |   | 3,979,915 |   |   |   | 1,211,798 |   |
| Compensation  in      connection with the issuance of warrants and options issued for      professional services |   |   | 655,165 |   |   |   | 216,238 |   |
| Minority      interest                                                                                                     |   |   | 221,985 |   |   |   | 297,860 |   |
| Accrued      interest and exchange rate on bonds                                                                           |   |   | (2,843,410 | ) |   |   | - |   |
| Changes      in earnings of equity investments                                                                             |   |   | - |   |   |   | (132,868 | ) |
| Decrease      (increase) in account receivables                                                                            |   |   | 530,744 |   |   |   | 2,154,876 |   |
| Increase      (decrease) in bad debt provision                                                                             |   |   | 241,277 |   |   |   | 641,477 |   |
| Decrease      (increase) in inventories                                                                                    |   |   | 58,833 |   |   |   | - |   |
| Decrease      (increase) in long term receivables                                                                          |   |   | 54,091 |   |   |   | 373,258 |   |
| Decrease      (increase) in bonds issuance expenses, net                                                                   |   |   | 330,924 |   |   |   | - |   |
| Decrease      ( increase) in prepaid expenses and other receivables                                                        |   |   | 1,015,215 |   |   |   | (1,333,883 | ) |
| Increase      in deferred taxes                                                                                            |   |   | (2,364,597 | ) |   |   | (369,665 | ) |
| Increase      (decrease) in trade payables                                                                                 |   |   | 2,420,775 |   |   |   | 663,601 |   |
| Decrease in      accrual for non-recurring loss                                                                       |   |   | (3,689,394 | ) |   |   | - |   |
| Increase      (decrease) in other liabilities and accrued expenses                                                         |   |   | (1,159,826 | ) |   |   | 2,523,797 |   |
| Increase      (decrease) in severance pay                                                                                  |   |   | (27,973 | ) |   |   | 57,160 |   |
| Decrease      in deferred taxes                                                                                            |   |   | 1,929,295 |   |   |   | (180,026 | ) |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Net      cash provided by (used in) operating activities                                                                   |   |   | 3,400,256 |   |   |   | 4,839,731 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flow from investing activities:                                                                                  |   |   |   |   |   |   |   |   |
| Investment      in short- term deposit                                                                                     |   |   | - |   |   |   | (24,998,173 | ) |
| Proceeds      from short term deposit                                                                                      |   |   | 27,467,049 |   |   |   | - |   |
| Purchase      of other assets                                                                                              |   |   |   |   |   |   | - |   |
| Purchase      of equipment                                                                                                 |   |   | (8,446,396 | ) |   |   | (1,322,908 | ) |
| Non      recurring acquisition expenses                                                                                    |   |   | (189,610 | ) |   |   | - |   |
| Change      in prepaid acquisition costs                                                                                   |   |   | - |   |   |   | (479,502 | ) |
| Change      in long- term receivables                                                                                      |   |   | 493,752 |   |   |   | - |   |
| Acquisition      of Auracall                                                                                               |   |   |   |   |   |   | (612,607 | ) |
| Acquisition      of minority interest in Story Telecom, Inc.                                                               |   |   | (690,207 | ) |   |   | - |   |
| Acquisition      of NTS Communications, Inc. including acquisition    costs                                                |   |   | (38,640,829 | ) |   |   | - |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |
|  Net cash (used in) investing      activities                                                                         |   |   | (20,006,241 | ) |   |   | (27,413,190 | ) |

----

| Xfone,      Inc. and Subsidiaries                                                                |               |
|--------------------------------------------------------------------------------------------------|--------------------|
|                                                                                             |               |   |   |   |
| STATEMENTS      OF CASH FLOWS (Continued)                                                        |               |
|                                                                                             |               |   |   |   |
|                                                                                             | Years      Ended   |   |
|                                                                                             | December      31 , |   |
|                                                                                             | 2008               |   | 2007 |   |
|                                                                                             |               |   |   |   |
| Cash      flow from financing activities:                                                        |               |   |   |   |   |   |
| Repayment      of long term loans from banks and others                                          |               |   | (2,044,053 | ) |   |   | (274,796 | ) |
| Increase      in capital lease obligation                                                        |               |   | 203,490 |   |   |   | (105,968 | ) |
| Increase      (decrease) in short-term bank credit, net                                          |               |   | 4,069,338 |   |   |   | (1,821,597 | ) |
| Proceeds      from long term loans from banks                                                    |               |   | 3,143,525 |   |   |   | 199,437 |   |
| Repayment      of bonds                                                                          |               |   | (3,318,309 | ) |   |   | - |   |
| Repayment      of convertible notes                                                              |               |   | (914,942 | ) |   |   | (776,283) |   |
| Issuance      of bonds, net of issuance expenses                                                 |               |   | - |   |   |   | 22,821,827 |   |
| Proceeds      from exercise of options                                                           |               |   | 14,368 |   |   |   | 22,050 |   |
| Proceeds      from issuance of shares and detachable warrants, net of issuance      expenses     |               |   | 14,496,038 |   |   |   | 7,465,555 |   |
| Net      cash provided by (used in) financing activities                                         |               |   | 15,649,455 |   |   |   | 27,530,225 |   |
|                                                                                             |               |   |   |   |   |   |   |   |
| Effect      of exchange rate changes on cash and cash equivalents                           |               |   | (1,800,604 | ) |   |   | (339,550 | ) |
| Net      increase (decrease) in cash and cash equivalents                                   |               |   | (2,757,134 | ) |   |   | 4,617,216 |   |
|                                                                                             |               |   |   |   |   |   |   |   |
| Cash      and cash equivalents at the beginning of year                                          |               |   | 5,835,608 |   |   |   | 1,218,392 |   |
| Cash      and cash equivalents at the end of year                                                |               | $ | 3,078,474 |   |   | $ | 5,835,608 |   |
|                                                                                             |               |   |   |   |   |   |   |   |
| The      accompanying notes are an integral part of these consolidated financial      statements |

----

| Supplemental      disclosure of cash flows activities:                                            |   |   |      |   |
|---------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|
|                                                                                              |   |   |      |   |   |   |
| Cash      paid for:                                                                               |   |   |      |   |   |   |
|                                                                                              |   |   |      |   |   |   |
| Interest                                                                                          |   | $      | 3,065,042 |   |   | $ | 129,308 |   |
|                                                                                              |   |   |      |   |   |   |   |   |
| Tax es                                                                                            |   | $      | 2,262     |   |   | $ | 986 |   |
|                                                                                              |   |   |      |   |   |   |   |   |
| Non-cash transactions:                                                                            |   |   |      |   |   |   |
|                                                                                              |   |   |      |   |   |   |
| Purchase      of fixed assets                                                                     |   | $      | -         |   |   | $ | 830,000 |   |
|                                                                                              |   |   |      |   |   |   |   |   |
| Acquisition      of assets and liabilities of Cybergate, Inc.                                     |   | $      | 500,000   |   |   | $ | - |   |
|                                                                                              |   |   |      |   |   |   |   |   |
|  Purchase      of fixed assets via capital lease                                             |   | $      | -         |   |   | $ | 26,510  |   |
|                                                                                              |   |   |      |   |   |   |   |   |
| Capitalization      of finance expenses related with acquisition costs of NTS      Communications |   | $      | 955,016   |   |   | $ | 213,179 |   |
|                                                                                              |   |   |      |   |   |   |   |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | A. | Xfone,      Inc. ("Xfone" or "the Company") was incorporated in Nevada, U.S.A. in      September 2000 and is a provider of voice, video and data      telecommunications services, including: local, long distance and      international telephony services; video; prepaid and postpaid calling      cards; cellular services; Internet services; messaging services (Email/Fax      Broadcast, Email2Fax and Cyber-Number); and reselling opportunities, with      operations in the United States, United Kingdom and Israel. Xfone serves      customers worldwide. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | NTS      Communications, Inc. and its six wholly owned subsidiaries, NTS      Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona,      Inc., Communications Brokers Inc., and NTS Telephone Company, LLC and NTS      Management Company, LLC (collectively "NTS") - wholly owned U.S.      subsidiary. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Xfone      USA, Inc. and its two wholly owned subsidiaries, eXpeTel Communications,      Inc. and Gulf Coast Utilities, Inc. (collectively, "Xfone USA") -      wholly owned U.S. subsidiary. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Swiftnet      Limited ("Swiftnet") - wholly owned U.K.  subsidiary. |
|--------|---------|---------------------------------------------------------------------|

|   | ● | Equitalk.co.uk      Limited ("Equitalk") - wholly owned U.K.  subsidiary. |
|--------|---------|---------------------------------------------------------------------------|

|   | ● | Auracall      Limited ("Auracall") - wholly owned U.K.  subsidiary. |
|--------|---------|---------------------------------------------------------------------|

|   | ● | Xfone      USA, Inc. and its two wholly owned subsidiaries, eXpeTel Communications,      Inc. and Gulf Coast Utilities, Inc. - wholly owned U.S.      subsidiary. |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Story      Telecom, Inc. and its wholly owned U.K. subsidiary, Story Telecom Limited      (collectively, "Story Telecom") - wholly owned U.S.      subsidiary. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | Xfone      018 Ltd. ("Xfone 018") - majority owned Israeli subsidiary in which Xfone      holds a 69% ownership share. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------|

|   | B. | On      July 12, 2007, Story Telecom Limited (“Story Telecom UK”) notified      Mr. Davison, its Managing Director, that it was terminating his      employment, effective as of September 10, 2007. On July 25, 2007, the      Company received notification of a claim filed on July 23, 2007 by Mr.      Davison with the United Kingdom Employment Tribunals against Story Telecom      UK, alleging wrongful termination of his employment as Managing Director.      The claim did not seek any specific damages. On August 21, 2007, Story      Telecom UK responded to the United Kingdom Employment Tribunal by      rejecting Mr. Davison's claim. On      March 25, 2008, Story Telecom UK settled the above mentioned      claim. In      connection with the settlement, the Company purchased the shares of common      stock of Story Telecom, Inc., the parent company of Story Telecom UK      ("Story Telecom US"), owned by Mr. Davison and by Trecastle Holdings      Limited, a company owned and controlled by Mr. Davison, which increased      the Company's ownership interest in Story Telecom US from 69.6% to      100%. The aggregate purchase price was £270,000 ($538,083). As a      result, Story Telecom US became a wholly owned subsidiary of the      Company. |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |
|--------------------------------------------------------------------------------|
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

| As      part of the settlement, Story Telecom UK agreed to pay Mr. Davison £30,000      ($59,787) as compensation for loss of employment, which payment was made      without admission of liability.  In addition, Mr. Davison filed      a Withdrawal of Claim with the United Kingdom Employment Tribunal on March      31, 2008. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Story      Telecom, Inc.                     |   |   |       |
|----------------------------------------------|--------|--------|------------|
| Current      Assets, excluding cash acquired |   | $      | 1,820,479  |   |
| Fixed      assets                            |   |   | 9,970      |   |
| Total      Assets acquired                   |   |   | 1,830,449  |   |
|                                         |   |   |       |   |
| Current      liabilities                     |   |   | (1,679,409 | ) |
| Long      term liabilities                   |   |   | (2,400,809 | ) |
| Total      liabilities acquired              |   |   | (4,080,218 | )  |
|                                         |   |   |       |   |
| Net      liabilities assumed                 |   | $      | (2,249,769 | ) |
|                                         |   |   |       |   |
| Acquired      net assets (30.4%)*            |   | $      | -          |   |
|                                         |   |   |       |   |
| Purchase      price:                         |   |   |       |   |
| Cash      acquired, net                      |   | $      | 410,598    |   |
| Acquisition      costs                       |   |   | 279,609    |   |
| Total                                        |   |   | 690,207    |   |
|                                         |   |   |       |   |
| Goodwill                                     |   | $      | 690,207    |   |
|                                         |   |   |       |   |

----

| Xfone,      Inc. and Subsidiaries                                                    |
|--------------------------------------------------------------------------------------|
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007  |

|   | C. | On      February 26, 2008 (the “Closing Date”), the Company completed its      acquisition of NTS Communications, Inc. ("NTS") pursuant to that      certain Stock Purchase Agreement (the “Purchase Agreement”) entered into      on August 22, 2007 with NTS, and the equity owners of NTS as sellers (the      “NTS Shareholders”), as amended on February 14, 2008 and February 26,      2008.  Upon      closing of the acquisition, NTS and its six wholly owned subsidiaries, NTS      Construction Company, Garey M. Wallace Company, Inc., Midcom of Arizona,      Inc., Communications Brokers, Inc., NTS Telephone Company, LLC, and NTS      Management Company, LLC became the Company's wholly owned      subsidiaries. The      purchase price for the acquisition was approximately $42,000,000      (excluding acquisition related costs), plus (or less) (i) the difference      between NTS’ estimated working capital and the working capital target for      NTS as set forth in the Purchase Agreement, and (ii) the difference      between amounts allocated by NTS for its fiber optic network build-out      project anticipated in Texas and any indebtedness incurred by NTS in      connection with this project, each of which was subject to the Company’s      advance written approval.  After applying this formula, the      final aggregate purchase price was calculated as $41,900,000, and was paid      by the Company as follows: $35,414,715 was paid in cash; and 2,366,892      shares of the Company’s common stock, were issued to certain NTS      Shareholders who elected to reinvest all or a portion of their allocable      sale price in the Company’s Common Stock, pursuant to the terms of the      Purchase Agreement. The Company’s Board of Directors determined, in      accordance with the Purchase Agreement, the number of shares of the      Company’s Common Stock to be delivered to each participating NTS      Shareholder by dividing the portion of such NTS Shareholder’s allocable      sale price that the NTS Shareholder elected to receive in shares of the      Company’s Common Stock by 93% of the average closing price of the      Company’s Common Stock on the NYSE Amex LLC (formerly, the American Stock      Exchange and the NYSE Altermext US, LLC) for the ten consecutive trading      days preceding the trading day immediately prior to the Closing Date      (i.e., $2.74). The aggregate sales price reinvested by all such NTS      Shareholders was $6,485,284. On      April 25, 2008, the Company entered into a Third Amendment to      the purchase agreement, pursuant to which the Company agreed to an      extension of time for the calculation and payment of the post      closing working capital adjustment under the Purchase      Agreement.  |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                                    |
|--------------------------------------------------------------------------------------|
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007  |

| NTS      Communications, Inc.                                                                                                                                                                     |   |   |       |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|
| Current      Assets, excluding cash acquired                                                                                                                                                      |   | $      | 5,913,441  |   |
| Fixed      assets                                                                                                                                                                                 |   |   | 39,631,997 |   |
| Total      Assets acquired                                                                                                                                                                        |   |   | 45,545,438 |   |
|                                                                                                                                                                                              |   |   |       |   |
| Current      liabilities                                                                                                                                                                          |   |   | 8,076,113  |   |
| Long      Term liabilities                                                                                                                                                                        |   |   | 9,317,151  |   |
| Total      liabilities acquired                                                                                                                                                                   |   |   | 17,393,264 |   |
|                                                                                                                                                                                              |   |   |       |   |
| Net      assets assumed                                                                                                                                                                           |   | $      | 28,152,174 |   |
|                                                                                                                                                                                              |   |   |       |   |
| Acquired      net assets (100%)                                                                                                                                                                   |   | $      | 28,152,174 |   |
|                                                                                                                                                                                              |   |   |       |   |
| Purchase      price:                                                                                                                                                                              |   |   |       |   |
| Cash      paid, net(**)                                                                                                                                                                           |   | $      | 34,860,668 |   |
| Fair      market value of stock and options issued                                                                                                                                                |   |   | 1,412,507  |   |
| Acquisition      costs                                                                                                                                                                            |   |   | 4,081,154  |   |
| Total                                                                                                                                                                                             |   |   | 40,354,329 |   |
|                                                                                                                                                                                              |   |   |       |   |
| Customer      Relationship                                                                                                                                                                        |   |   | 2,344,000  |   |
|                                                                                                                                                                                              |   |   |       |   |
| License                                                                                                                                                                                           |   |   | 250,000    |   |
|                                                                                                                                                                                              |   |   |       |   |
| Goodwill                                                                                                                                                                                          |   | $      | 9,608,155  |   |
|                                                                                                                                                                                              |   |   |       |   |
| *      Allocation period was closed in December 2008. **      Includes $6,485,284 that was received for the issuance of      2,366,892 shares of the Company's      common stock.  |

----

|   | D. | On      November 26, 2008, Xfone USA, Inc., entered into a Sale and Purchase      Agreement (the “Agreement”) with Cybergate, Inc. (“Cybergate”), pursuant      to which Xfone USA purchased all of Cybergate’s operations. Cybergate      is a provider of Internet services including Internet access, web and      server hosting, data services and e-mail. The purchase price was an amount      equal to 50% of collected receivables derived from Cybergate's operations      up to $500,000, which is to be paid to Cybergate in monthly installments      equal to 50% of the prior month’s collected receivables derived from      Cybergate's operations as the same shall be billed on a regular basis by      Xfone USA.  The Agreement and the closing of the sale and      purchase have an effective date of November 1, 2008.  The      acquisition was not significant from an accounting      perspective. |
|--------|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

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

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

|   | C. | Restricted cash |
|--------|----|----------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | D. | Accounts      Receivable |
|--------|----|--------------------------|

|   | E. | 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       |   |

|   | F. | Other      Intangible Assets |
|--------|----|------------------------------|

|                     |   |   |      |
|--------------------------|--------|--------|-----------|
| 2009                     |   | $      | 750,669   |   |
| 2010                     |   |   | 621,086   |   |
| 2011                     |   |   | 595,169   |   |
| 2012                     |   |   | 272,252   |   |
| 2013      and thereafter |   |   | 812,663   |   |
|                     |   | $      | 3,051,839 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | G. | Long-Lived      Assets |
|--------|----|------------------------|

|   | H. | Revenue      Recognition |
|--------|----|--------------------------|

|   | I. | Use      of Estimates |
|--------|----|-----------------------|

|   | J. | Earnings      Per Share |
|--------|----|-------------------------|

|   | K. | Income      Taxes |
|--------|----|-------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | L. | Stock-Based      Compensation |
|--------|----|-------------------------------|

|                         |   |                         |   |   |   |   |
|------------------------------|--------|------------------------------|--------|--------|--------|--------|
|                         |   | Year      ended December 31, |   |
|                         |   | 2008                         |   |   | 2007   |   |
|                         |   |                         |   |   |   |   |
| Volatility                   |   |                         | 44.4%  |   |   |   | 42.5% |   |
| Risk-free      interest rate |   |                         | 3.1%   |   |   |   | 4.7% |   |
| Dividend      yield          |   |                         | 0%     |   |   |   | 0% |   |
| Forfeiture      rate         |   |                         | 20%    |   |   |   | 20% |   |
| Expected life      (years)   |   |                         | 6.0    |   |   |   | 5.2 |   |
|                         |   |                         |   |   |   |   |   |   |

|   | M. | Goodwill      and Indefinite-Lived Purchased IntangibleAssets |
|--------|----|---------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | N. | Reclassification |
|--------|----|------------------|

|   | O. | Inventory |
|--------|----|-----------|

|   | P. | Recent      Accounting Pronouncements |
|--------|----|---------------------------------------|

| 1.   | In      May 2008, the FASB issued FAS 163 (“FAS 163”), “Accounting for Financial      Guarantee Insurance Contracts—an interpretation of FASB Statement No.      60”.  This      Statement interprets Statement 60 and amends existing accounting      pronouncements to clarify their application to the financial guarantee      insurance contracts included within the scope of this      Statement.  FAS 163 is not expected to have a material impact on      the Company’s consolidated financialstatements. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | In      May 2008, the FASB issued FAS 162 (“FAS 162”), “The Hierarchy of Generally      Accepted Accounting Principles.” This statement identifies the sources of      accounting principles and the framework for selecting the principles to be      used in the preparation of financial statements of nongovernmental      entities that are presented in conformity with GAAP. Although this      statement formalizes the sources and hierarchy of GAAP within the      authoritative accounting literature, it does not change the accounting      principles that are already in place. This statement will be effective 60      days following the SEC’s approval of the Public Company Accounting      Oversight Board amendments to AU Section 411, “The Meaning of Present      Fairly in Conformity With Generally Accepted Accounting Principles.” FAS      162 is not expected to have a material impact on the Company’s      consolidated financial statements. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | In      April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful      Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS No. 142-3      amends the factors that should be considered in developing renewal or      extension assumptions used to determine the useful life of a recognized      intangible asset under FAS 142, Goodwill and Other Intangible      Assets (“FAS 142”). The intent of FSP FAS 142-3 is to improve the      consistency between the useful life of a recognized intangible asset under      FAS 142 and the period of expected cash flows used to measure the fair      value of the asset under FAS 141(R) and other applicable accounting      literature. FSP FAS 142-3 is effective for financial statements issued for      fiscal years beginning after December 15, 2008 and must be applied      prospectively to intangible assets acquired after the effective date. The      Company has not determined the impact, if any, of the adoption of FSP FAS      142-3. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | Effective      January 1, 2008, we adopted the provisions of FAS 157, Fair Value      Measurements, except as it applies to those nonfinancial assets and      nonfinancial liabilities as noted in proposed FSP FAS      157-b.  The partial adoption of FAS 157 did not have a material      impact on our consolidated financial position, results of operations or      cash flows.  FAS No. 157 defines fair value, establishes a      framework for measuring fair value in generally accepted accounting      principles, and expands disclosures about fair value measurements. This      statement does not require any new fair value measurements, but provides      guidance on how to measure fair value by providing a fair value hierarchy      used to classify the source of the information. In February 2008, the FASB      issued FASB Staff Position (“FSP”) 157-2,  Effective Date of      FASB Statement No. 157,  which delays the effective      date of FAS 157 for all nonfinancial assets and nonfinancial liabilities,      except for items that are recognized or disclosed at fair value in the      financial statements on a recurring basis (at least    annually). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

| 5.   | In      March 2008, the FASB issued FAS No. 161, Disclosures about Derivative      Instruments and Hedging Activities, an amendment of FASB Statement      No. 133,  which requires additional disclosures      about the objectives of the derivative instruments and hedging activities,      the method of accounting for such instruments under FAS 133 and its      related interpretations, and a tabular disclosure of the effects of such      instruments and related hedged items on our financial position, financial      performance, and cash flows. FAS 161 is effective for us beginning      January 1, 2009. We are currently assessing the potential impact that      adoption of FAS 161 may have on our financial  statements. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | Effective      January 1, 2008, we adopted the provisions of FAS 159, The Fair Value Option for      Financial Assets and Financial Liabilities.  The adoption      did not have a material impact on our consolidated financial position,      results of operations or cash flows.  FAS 159 gives us the      irrevocable option to carry many financial assets and liabilities at fair      values, with changes in fair value recognized in  earnings. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7.   | In      December 2007, the FASB issued FAS 141R, Business Combinations,      which replaces FAS 141. The statement retains the purchase method of      accounting for acquisitions, but requires a number of changes, including      changes in the way assets and liabilities are recognized in the purchase      accounting. It also changes the recognition of assets acquired and      liabilities assumed arising from contingencies, requires the      capitalization of in-process research and development at fair value, and      requires the expensing of acquisition-related costs as incurred. FAS 141R      is effective for us beginning January 1, 2009 and will apply      prospectively to business combinations completed on or after that      date. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 8.   | In      December 2007, the FASB issued FAS 160, Noncontrolling Interests in      Consolidated Financial Statements, an amendment of ARB No. 51,      which changes the accounting and reporting for minority interests.      Minority interests will be re-characterized as non-controlling interests      and will be reported as a component of equity separate from the parent’s      equity, and purchases or sales of equity interests that do not result in a      change in control will be accounted for as equity transactions. In      addition, net income attributable to the non-controlling interest will be      included in consolidated net income on the face of the income statement      and, upon a loss of control, the interest sold, as well as any interest      retained, will be recorded at fair value with any gain or loss recognized      in earnings. FAS 160 is effective for us beginning January 1, 2009 and      will apply prospectively, except for the presentation and disclosure      requirements, which will apply retrospectively. We are currently assessing      the potential impact that adoption of FAS 160 may have on our financial      statements. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                           |   | December      31 , |      |
|--------------------------------|--------|--------------------|-----------|
|                           |   | 2008               |      |   | 2007 |   |
| Prepaid      acquisition costs |   | $                  | -         |   |   | $ | 692,681 |   |
| Unbilled      revenues         |   |               | 1,211,445 |   |   |   | 280,364 |   |
| Prepaid      expenses          |   |               | 1,411,368 |   |   |   | 1,453,910 |   |
| Tax      authorities           |   |               | 736,702   |   |   |   | 331,105 |   |
| Other      receivables         |   |               | 932,122   |   |   |   | 796,371 |   |
|                           |   | $                  | 4,291,637 |   |   | $ | 3,554,431 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                                    |   |              |        |   |   |   |
|-----------------------------------------|--------|-------------------|-------------|--------|--------|--------|
|                                    |   | December      31, |        |
|                                    |   | 2008              |        |   | 2007   |   |
| Cost                                    |   |              |        |   |   |   |
| Communication      equipment            |   | $                 | 68,614,751  |   |   | $      | 5,214,315 |   |
| Fiber      network                      |   |              | 31,579,191  |   |   |   | - |   |
| Equipment      held under capital lease |   |              | 2,652,294   |   |   |   | 103,392 |   |
| Office      furniture and equipment     |   |              | 2,184,224   |   |   |   | 2,121,971 |   |
| Development      costs                  |   |              | 4,765,127   |   |   |   | 781,614 |   |
| Computer      equipment                 |   |              | 10,208,181  |   |   |   | 686,955 |   |
| Construction      equipment             |   |              | 519,865     |   |   |   | - |   |
| Motor      vehicles                     |   |              | 955,384     |   |   |   | 179,041 |   |
| Building      and plant                 |   |              | 7,636,405   |   |   |   | 685,730 |   |
|                                    |   |              | 129,115,422 |   |   |   | 9,773,018 |   |
|                                    |   |              |        |   |   |   |   |   |
| Accumulated      Depreciation           |   |              |        |   |   |   |   |   |
| Communication      equipment            |   |              | 56,902,873  |   |   |   | 1,372,233 |   |
| Fiber      network                      |   |              | 7,861,254   |   |   |   | -  |   |
| Equipment      held under capital lease |   |              | 2,049,532   |   |   |   | 24,267 |   |
| Office      furniture and equipment     |   |              | 1,756,484   |   |   |   | 1,690,335 |   |
| Development      costs                  |   |              | 327,004     |   |   |   | 344,800 |   |
| Computer      equipment                 |   |              | 8,163,705   |   |   |   | 414,712 |   |
| Construction      equipment             |   |              | 303,303     |   |   |   | - |   |
| Motor      vehicles                     |   |              | 726,338     |   |   |   | 30,324 |   |
| Building      and Plant            |   |              | 1,004,332   |   |   |   | 148,589 |   |
|                                    |   |              | 79,094,825  |   |   |   | 4,025,260 |   |
|                                    |   |              |        |   |   |   |   |   |
|                                    |   | $                 | 50,020,597  |   |   | $      | 5,747,758 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                           |   |               |       |   |   |   |
|--------------------------------|--------|--------------------|------------|--------|--------|--------|
|                           |   | December      31 , |       |
|                           |   | 2008               |       |   | 2007   |   |
| Cost:                          |   |               |       |   |   |   |
| Goodwill                       |   | $                  | 27,413,481 |   |   | $      | 16,872,088 |   |
| Customer      relations        |   |               | 3,326,448  |   |   |   | 982,448 |   |
| Trade      name                |   |               | 73,478     |   |   |   | 73,478 |   |
| License                        |   |               | 619,015    |   |   |   | 330,365 |   |
|                           |   |               | 31,432,422 |   |   |   | 18,258,379 |   |
|                           |   |               |       |   |   |   |   |   |
| Accumulated      amortization: |   |               |       |   |   |   |   |   |
| Customer      relations        |   |               | 855,776    |   |   |   | 232,475 |   |
| Trade      name                |   |               | 27,573     |   |   |   | 17,145 |   |
| License                        |   |               | 83,753     |   |   |   | 59,887 |   |
|                           |   |               | 967,102    |   |   |   | 309,507 |   |
|                           |   |               |       |   |   |   |   |   |
| Other      assets, net         |   | $                  | 30,465,320 |   |   | $      | 17,948,872 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                         |   | December      31 |      |
|------------------------------|--------|------------------|-----------|
|                         |   | 2008             |      |   | 2007 |   |
| Corporate      taxes         |   | $                | 322,321   |   |   | $ | 62,648 |   |
| Government      authorities  |   |             | 2,094,946 |   |   |   | 372,156 |   |
| Payroll      and other taxes |   |             | 951,296   |   |   |   | 94,232 |   |
| Accrued      expense         |   |             | 3,953,890 |   |   |   | 4,495,861 |   |
| Deferred      revenues       |   |             | 202,595   |   |   |   | - |   |
| Others                       |   |             | 149,822   |   |   |   | 297,148 |   |
|                         |   | $                | 7,674,870 |   |   | $ | 5,322,045 |   |

|                                | Annual      Interest                     |   |             |      |   |   |     |
|-------------------------------------|------------------------------------------|--------|------------------|-----------|--------|--------|----------|
|                                | rate                                     |   | December      31 |      |
|                                |                                     |   | 2008             |      |   | 2007   |     |
| Convertible      note (1)           | Prime      + 1.5%                        |   |   $         | -         |   |   |   $ | 623,643 |   |
| Bank      loan                      |  0%                                 |   |             | -         |   |   |     | 50,120 |   |
| Bank      Loan (2)                  | WSJ      Prime                           |   |             | 2,502,642 |   |   |     | - |   |
| Loans      payable over 3-5 years   | Prime      + 1.0%                        |   |             | 363,553   |   |   |     | 615,041 |   |
| Minority      Partner Loan (3) | Israeli      Consumer Price Index + 4.0% |   |             | 512,333   |   |   |     | 491,756 |   |
| Non-recourse      loan (4)          | 2.75%                                    |   |             | 1,404,971 |   |   |     | - |   |
| Other      notes payable            | 5%      - 8%                             |   |             | 555,271   |   |   |     | 327,587 |   |
|                                |                                     |   |             | 5,338,770 |   |   |     | 2 ,108,147 |   |
|                                |                                     |   |             |      |   |   |     |   |   |
| less      current portion           |                                     |   |             | 1,225,677 |   |   |     | 1,094,339 |   |
|                                |                                     |   |             |      |   |   |     |   |   |
| Long      term portion              |                                     |   |   $         | 4,113,093 |   |   |   $ | 1,013,808 |   |
|                                |                                     |   |             |      |   |   |     |   |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

| 1.    | On      September 27, 2005, a Securities Purchase Agreement (the "Securities      Purchase Agreement") was entered into for a $2,000,000 financial      transaction by and among the Company, Xfone USA, Inc., eXpeTel      Communications, Inc., Gulf Coast Utilities, Inc. and Laurus Master Fund,      Ltd. The investment, which took the form of a Convertible Term Note      secured by the Company's United States assets, had a 3 year term and bore      interest at a rate equal to prime plus 1.5% per annum. The Term Note was      convertible, under certain conditions, into shares of the Company's common      stock at an initial conversion price equal to $3.48 per share. In      conjunction with this financial transaction, the Company issued to Laurus      Master Fund 157,500 warrants which are exercisable at $3.80 per share for      a period of five years. The closing of the financial transaction was on      September 28, 2005. The Securities Purchase Agreement provides that for so      long as twenty five percent (25%) of the principal amount of the Term Note      was outstanding, the Company, without the prior written consent of Laurus      Master Fund, could not, and could not permit any of the Subsidiaries (as      defined in the Securities Purchase Agreement) to directly or indirectly      declare or pay any dividends, other than dividends paid to the Company or      any of its wholly-owned Subsidiaries. The Term Note was fully paid off in      cash on September 26, 2008. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.    | Two      loans from commercial bank which are repaid on a monthly basis until      full repayment in September 2010. The loans bear interest at a rate      equivalent to Wall Street Journal Prime. Monthly payments are $17,750 and      $29,762.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.    | According      to an agreement between the Company, Xfone 018 Ltd. and the Company’s 26%      minority interest partner in Xfone 018 (the “Minority Partner”), the      Minority Partner provided in the fourth quarter of 2004, a      shareholder loan of approximately $400,000 to Xfone 018 (the “Minority      Partner Loan”). The Minority Partner Loan was established for four years,      unless otherwise agreed between the parties, with annual interest of 4%      and linkage to the Israeli Consumer Price Index.  As of December      31, 2008, the balance of the Minority Partner Loan is 1,947,890 NIS      ($512,333). On March 26, 2009, upon a resolution of Xfone 018's Board      of Directors of same date, the Minority Partner Loan was partially paid      off by way of set-off with a NIS 343,680 (approximately $81,325) loan      that Xfone 018 provided the Minority Partner on December 24,      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

| 4.    | NTS      Telephone Company, LLC, a wholly owned subsidiary of      NTS Communications, Inc. has received approval from the Rural      Utilities Service (“RUS”), a division of the United States Department of      Agriculture, for an $11.8 million, 17-year debt facility to complete      a telecommunications overbuild project in Levelland, Texas. The RUS loan      is non-recourse to NTS and all other NTS subsidiaries and is      cost-of-money loan, bearing interest at the average rate      for 10-year U.S. Treasury obligations. Advances are      requested as the construction progresses, and the interest rate is      set based upon the prevailing rate at the time of each individual      advance. The current average rate is approximately 2.75%.   |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year                     |   |   |      |
|--------------------------|--------|--------|-----------|
| 2009                     |   | $      | 1,225,677 |   |
| 2010                     |   |   | 2,257,774 |   |
| 2011                     |   |   | 148,204   |   |
| 2012                     |   |   | 71,674    |   |
| 2013      and thereafter |   |   | 1,635,441 |   |
|                     |   | $      | 5,338,770 |   |

----

| Xfone,      Inc. and Subsidiaries                                             |   |
|-------------------------------------------------------------------------------|--------|
|                                                                          |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and2007 |

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

| 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: |
|--------|----|-------------------------------------------|

|                     |   |   |       |   |
|--------------------------|--------|--------|------------|--------|
|                     |   |   |       |   |
| 2009                     |   | $      | 3,492,127  |   |
| 2010                     |   |   | 3,343,688  |   |
| 2011                     |   |   | 3,343,688  |   |
| 2012                     |   |   | 3,343,688  |   |
| 2013      and thereafter |   |   | 10,031,063 |   |
|                     |   | $      | 23,554,254 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

 capital leases expiring in various yearsthrough 2012. The assets and liabilities under capital leases are recorded atthe lower of the present value of the minimum lease payments or the fair valueof the asset. The assets are amortized (or depreciated) over the lower of theirrelated lease terms or their estimated productive lives. Amortization (ordepreciation) of assets under capital leases is included in depreciation expensefor 2007 and 2008. 

| 2009                                                  |   | $       | 288,688 |   |
|-------------------------------------------------------|--------|---------|---------|--------|
| 2010                                                  |   |    | 158,738 |   |
| 2011                                                  |   |    | 127,158 |   |
| 2012                                                  |   |    | 21,700  |   |
|                                                  |   |    |    |   |
| Total                                                 |   | $       | 596,284 |   |
|                                                  |   |    |    |   |
|  Total      minimum lease payments               |   | $  | 637,697 |   |
| Less:      amount representing interest               |   |    | (41,413 | )      |
|                                                  |   |    |    |   |
|  Present      value of net minimum lease payment |   | $  | 596,284 |   |

|                         |   |              |    |   |   |    |
|------------------------------|--------|-------------------|---------|--------|--------|---------|
|                         |   | December      31, |    |
|                         |   | 2008              |    |   | 2007   |    |
|                         |   |              |    |   |   |    |
| Communication      equipment |   |  $           | 492,721 |   |   |  $ | 60,986 |   |
| Construction      equipment  |   |              | 83,150  |   |   |    | - |   |
| Motor      Vehicles          |   |              | 20,413  |   |   |    | 60,561 |   |
|                         |   |  $           | 596,284 |   |   |  $ | 121,547 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

|                                           |   |               |      |   |   |   |
|------------------------------------------------|--------|--------------------|-----------|--------|--------|--------|
|                                           |   | December      31 , |      |
| Deferred      Tax Liabilities:                 |   | 2008               |      |   | 2007   |   |
| Accelerated      tax write off of fixed assets |   | $                  | 8,362,920 |   |   | $      | 1,103 |   |
|                                           |   |               |      |   |   |   |   |   |
| Deferred      Tax Assets:                      |   |               |      |   |   |   |   |   |
| Carry      forward losses                      |   |               | 3,604,417 |   |   |   | 363,768 |   |
| Accrued      vacation and severance pay        |   |               | 1,337,066 |   |   |   | 67,108 |   |
|                                           |   |               |      |   |   |   |   |   |
|                                           |   |               |      |   |   |   |   |   |
| Net      deferred taxes liabilities            |   | $                  | 3,421,437 |   |   | $      | 429,773 |   |

|                                                                                                            |   | December      31 , |     |
|-----------------------------------------------------------------------------------------------------------------|--------|--------------------|----------|
|                                                                                                            |   | 2008               |     |   | 2007 |   |
| Income      tax computed at statutory rate                                                                      |   | $                  | 588,225  |   |   | $ | (628,809 | ) |
|                                                                                                            |   |               |     |   |   |   |   |   |
| Effect      of tax authority adjustments                                                                        |   |               | 27,651   |   |   |   | 35,642 |   |
| Current      income (losses) for which no deferred tax expense (benefit) has been      recorded                 |   |               | -        |   |   |   | 39,860 |   |
| Difference      between income reported for tax purposes and income for financial      reporting purposes - net |   |               | 307,401  |   |   |   | 30,073 |   |
| Deferred      taxes on losses (utilization of losses)                                                           |   |               | (553,545 | ) |   |   | (506,877 | ) |
| Taxes      on losses for which a valuation allowance was not provided                                           |   |               |     |   |   |   | 603,686 |   |
| Taxes      in respect of prior years                                                                            |   |               | (52,574  | )  |   |   | 320 |   |
| Provision      for income taxes                                                                                 |   | $                  | 317,158  |   |   | $ | (426,105 | ) |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

| 1. | Pursuant      to a Company’s Board of Directors’ resolution dated December 25, 2006, on      March 28, 2007, the Company and its Chairman of the Board, Mr. Abraham      Keinan entered into a consulting agreement, to be effective as of January      1, 2007 (the “Keinan Consulting Agreement”).The      Keinan Consulting Agreement provides that Mr. Keinan shall render the      Company advisory, consulting and other services in relation to the      business and operations of the Company (excluding its business and      operations in the United Kingdom).In      consideration of the performance of the Services pursuant to the Keinan      Consulting Agreement, the Company initially paid Mr. Keinan a monthly fee      of £10,000 ($14,160), which was increased by the Board of Directors      following the recommendation of the Audit Committee and the Compensation      Committee to £16,000 ($22,656) effective as of June 1, 2008 (the “Fee”).      In addition to the Fee, the Company shall pay directly and/or reimburse      Mr. Keinan for his Expenses. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2. | Pursuant      to a Company’s Board of Directors’ resolution dated December 25, 2006, on      March 28, 2007, the Company and its President, CEO and Director, Mr. Guy      Nissenson entered into a consulting agreement, to be effective as of      January 1, 2007 (the “Nissenson Consulting Agreement”).The      Nissenson Consulting Agreement provides that Mr. Nissenson shall render      the Company advisory, consulting and other services in relation to the      business and operations of the Company (excluding its business and      operations in the United Kingdom).In      consideration of the performance of the Services pursuant to the Nissenson      Consulting Agreement, the Company shall pay Mr. Nissenson a monthly fee of      £10,000 ($14,160), which was increased by the Board of Directors following      the recommendation of the Audit Committee and the Compensation Committee      to £16,000 ($22,656) effective as of June 1, 2008 (the “Fee”). In addition      to the Fee, the Company shall pay directly and/or reimburse Mr. Keinan for      his Expenses. |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3. | Mr.      Haim Nissenson, father of Mr. Guy Nissenson, the Company’s President,      Chief Executive Officer, and Director, is the Managing Director of      Dionysos Investments (1999) Ltd. (“Dionysos”). Dionysos is owned and      controlled by certain members of the Nissenson family, other than Mr. Guy      Nissenson. On February 8, 2007, pursuant to the recommendations of the      Audit Committee of the Company and the resolutions of its Board of      Directors dated December 25, 2006 and February 4, 2007, the Company and      Dionysos entered into a First Amendment (the “First Amendment”) to      the Dionysos Consulting Agreement entered into with the Company on      November 18, 2004. Pursuant to the First Amendment, Dionysos s was      compensated by the Company for the Services provided to the Company in the      amount of GBP 8,000 ($16,876) per month, beginning on January 1, 2007 and      was entitled for a success fee for any investments in the Company made by      Israeli investors during fiscal year 2007, provided such investments were      a direct or indirect result of the Services provided to the Company. The      success fee was equal to 0.5% (half percent) of the gross proceeds of such      investments.On      January 28, 2008, in accordance with the recommendation of the Audit      Committee and in recognition of and following the successful efforts of      Dionysos in raising capital for the Company in Israel during 2007 the      Board of Directors of the Company approved and confirmed by resolution the      engagement of Dionysos to serve as the Company’s consultant for the fiscal      year ended December 31, 2008 at the same level of compensation which was      agreed to and paid for the fiscal year ended December 31,      2007.On      January 15, 2009, pursuant to the recommendation of the Audit Committee of      the Company and the resolution of the Board of Directors, the Company and      Dionysos entered into a Second Amendment to the Consulting Agreement (the      “Second Amendment”).  The Second Amendment confirmed the automatic      renewal of the Consulting Agreement for an additional two-year period and      set the same compensation levels for fiscal 2009 and 2010 that were      established for fiscal 2007 and 2008.  Accordingly, Dionysos will      continue to be paid £8,000 (approximately $16,876), based on the exchange      rate as of January 15, 2009) per month, plus reimbursements for expenses,      and will receive a success fee of 0.5% of the gross proceeds for any      investments in the Company made by Israeli investors during fiscal 2009      and/or 2010 that result from Dionysos’ services to the      Company.  The      parties also agreed that in or about December 2010, the Audit Committee      and Board of Directors would review and reconsider for approval the      above-mentioned compensation for any future term(s).  |
|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

| 4. | Stock      Purchase Agreement |
|----|-------------------------------|

|   | · | Abraham      Keinan confirmed that all his businesses activities and initiatives in the      field of telecommunications are conducted through Swiftnet, and would      continue for at least 18 months after the conclusion of this      transaction.                                                                                                                                                                                                                                                                        |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | · | Campbeltown      Business declared that it is not involved in any business that competes      with Swiftnet and would not be involved in such business at least for 18      months after this transaction is concluded.                                                                                                                                                                                                                                                                                                       |
|   | · | Campbeltown      Business would invest $100,000 in Swiftnet, in exchange for 20% of the      total issued shares of Swiftnet;                                                                                                                                                                                                                                                                                                                                                                                                 |
|   | · | Campbeltown      Business would also receive 5% of the Company's issued and outstanding      shares following the Company's acquisition with Swiftnet. In June 2000,      Campbeltown Business invested the $100,000 in Swiftnet. Xfone acquired      Swiftnet and Campbeltown received 720,336 shares of the Company's common      stock for its 20% interest in Swiftnet.                                                                                                                                                   |
|   | · | Swiftnet      and Abraham Keinan would guarantee that Campbeltown Business' 20% interest      in the outstanding shares of Swiftnet would be exchanged for at least 10%      of the Company's outstanding shares and that Campbeltown Business would      have in total at least 15% of the Company's total issued shares after the      Company's acquisition occurred.                                                                                                                                                      |
|   | · | Campbeltown      Business would have the right to nominate 33% of the members of the      Company's board of directors and Swiftnet's board of directors. When      Campbeltown Business ownership in the Company's common stock was less than      7%, Campbeltown Business would have the right to nominate only 20% of the      Company's board members but always at least one member. In the case that      Campbeltown Business ownership in the Company's common stock was less than      2%, this right would expire. |
|   | · | Campbeltown      Business would have the right to nominate a vice president in Swiftnet.      Mr. Guy Nissenson was nominated as of the time of the June 19, 2000      agreement. If for any reason Guy Nissenson will leave his position,      Campbeltown Business and Abraham Keinan will agree on another nominee. The      Vice President will be employed with suitable  conditions.                                                                                                                                    |
|   | · | Campbeltown      Business will have the right to participate under the same terms and      conditions in any investment or transaction that involve equity rights in      Swiftnet or the Company conducted by Abraham Keinan at the relative      ownership portion.                                                                                                                                                                                                                                                         |
|   | · | Keinan      and Campbeltown Business have signed a right of first refusal agreement      for the sale of their shares.                                                                                                                                                                                                                                                                                                                                                                                                        |   |

| 5. | The      Company leases its facilities in the USA, UK, and Israel under      operating lease agreement, which will expire in 2009 and thereafter. The      minimum lease payments under non-cancelable operating leases are as      follows: |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Year      ended December 31, |   |   |
|------------------------------|--------|--------|
|                         |   |   |   |
| 2009                         |   | $      | 1,819,041 |   |
| 2010                         |   |   | 1,327,747 |   |
| 2011                         |   |   | 1,117,412 |   |
| 2012                         |   |   | 961,485 |   |
| 2013      and thereafter     |   |   | 694,164 |   |
|                         |   | $      | 5,919,849 |   |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

| 6. | The      Company has commission agreements with various agents that are entitled to      commission of approximately 5%-12% of the total sale amount after      deduction of any baddebts. |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  The      Company has been granted license from the Ministry of Communication for      the provision of international telecommunication services in Israel for 20      years until July 2024. At the end of each of the license period, the      Minister of Communications may extend the period of the license for one or      more successive periods of ten years. According      to the license terms, the Company is obligated to pay royalties to the      State of Israel at the rate of 1.5% of the royalty-bearing income in 2009.      The rate of these royalties will be reduced by 0.5% to a rate of 1% in      2010.  The Company's 26% minority interest partner in the      Company’s Israeli subsidiary provided the State of Israel with a bank      guarantee of NIS 10 million to ensure compliance with the provisions of      the license.  The      Company paid $97,228 and $99,022 as royalties during 2008 and 2007      respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | The      Board of Directors has resolved to indemnify the directors and officers of      the Company in respect of damages that they may incur in connection      with the Company being a public company, to the extent that these damages      are not covered by the directors’ and officers’ liability      insurance. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 1.   | Xfone      018 Ltd. has received credit facilities from Bank Hapoalim B.M. in Israel      in order to finance its activities. As of December 31, 2008, the credit      facilities include a revolving credit line of 500,000 NIS ($118,315), a      short-term credit line of 2,250,000 NIS ($532,418), and long-term credit      line of 1,290,000 NIS ($364,098). In addition, the bank made available to      Xfone 018 a long-term facility of 3,150,000 NIS ($745,385) to procure      equipment. In 2008, the credit facilities were secured with: (a) a      floating charge on Xfone 018 assets, securities, banknotes, unissued      capital stock, reputation, and any property and right including profits      thereof Xfone 018 has or may have at any time and in any manner; (b) a      fixed charge on its telecommunication equipment (including switches) and      insurance rights thereof; (c) subordination of a Term Note of $800,000.      This Term Note was executed in July 2004 by Xfone 018 in favor of the      Company; (d) assignment of rights by way of pledge on the Partner      Communications Company Ltd. contract, the Cellcom Israel Ltd. contract,      the Pelephone Communications Ltd. contract, and the credit companies      contracts with Xfone 018; (e) personal collateral by Abraham Keinan and      Guy Nissenson, which includes a pledge on 1,000,000 shares of common stock      of the Company owned by Mr. Keinan, and an undertaking to provide Bank      Hapoalim with an additional financial guarantee of up to $500,000 under      certain circumstances. The Company agreed to indemnify Abraham Keinan      and/or Guy Nissenson on account of any damage and/or loss and/or expense      (including legal expenses) that they may incur in connection with the      stock pledge and/or any other obligation made by them to Bank Hapoalim in      connection with the collateral; (f) The Company and Swiftnet Limited      issued a Letter of Guarantee, unlimited in amount, in favor of the bank,      guaranteeing all debt and indebtedness of Xfone 018 towards the bank; (g)      subordination of the Minority Partner Loan (as defined below). As of      December 31, 2008, Xfone 018 has a balance due of 1,382,228 NIS      ($363,552) under the foregoing credit facility. On      March 16, 2009, Xfone 018 assigned to the bank, by way of pledge, its      rights pursuant to the agreement with the credit company Poalim Express      Ltd. On March 17, 2009, Xfone 018 received the bank's approval for an      increase in its short-term credit line to a total facility of      5,250,000 NIS ($1,242,310). Xfone 018 undertook to comply, as of March 31,      2009, with certain covenants concerning its capital and the annual ratio      between its total liabilities and EBITDA. On      March 26, 2009 the Company received the bank's confirmation according to      which the following guarantees are waived: (a) subordination of a Term      Note of $800,000 (appears above as "(c)"); (b) a pledge on 1,000,000      shares of common stock of the Company owned by Mr. Keinan, and an      undertaking to provide Bank Hapoalim with an additional financial      guarantee of up to $500,000 under certain circumstances (appears above as      "(e)"); and (c) subordination of the Minority Partner Loan(appears above      as "(g)"). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

| 2.   | According      to an agreement between the Company, Xfone 018 Ltd. and the Company's 26%      minority interest partner in Xfone 018 (the “Minority Partner”), the      Minority Partner provided in 2004 a bank guarantee of 10,000,000 NIS      ($2,366,303) to the Ministry of Communications of the State of Israel      which replaced an existing bank guarantee given by the Company in      connection with Xfone 018’s license to provide international telecom      services in Israel. As part of the agreement, the Company agreed to      indemnify the Minority Partner for any damage caused to him due to the      forfeiture of the bank guarantee with the Ministry of Communications on      account of any act and/or omission of Xfone 018, provided that the said      act or omission is performed against the opinion of the Minority Partner      or without his knowledge. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | On      November 5, 2007, Bank Hapoalim B.M. in Israel provided a bank guarantee      of 322,500 NIS ($76,313) to the Ministry of Communications of the State of      Israel in connection with a November 7, 2007 license to commence an      experimental deployment of Local Telephone Services utilizing Voice over      Broadband (VoB) technology, which was granted to Xfone 018. In connection      with the bank guarantee, Xfone 018 executed an indemnification agreement      in favor of Bank Hapoalim. The bank guarantee will expire on April 30,      2009. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.   | On      December 11, 2008, the Company signed a Letter of Guarantee (the      “Guarantee”), pursuant to which the Company agreed to guarantee the      obligations of Xfone 018 under a certain contract dated March 13, 2008      (the “Contract”), entered into by and between Xfone 018 and Tikshoov      Digital Ltd. (“Tikshoov”) and a certain Agreement dated December 11 2008,      entered into by and between Xfone 018 and Tikshoov (the      “Agreement”).  Pursuant to the Contract, Xfone 018 provides telephone      services to Tikshoov for participants in a television call-in game show.      Xfone 018 collects the telephone service fees from the participants and      delivers the fees to Tikshoov, after deducting applicable monthly fees and      costs.  Pursuant to the Guarantee, if for any reason Xfone 018 fails      to comply with its obligations under the Contract and pursuant to the      Agreement in whole or in part, the Company will pay to Tikshoov directly      any amounts due and outstanding.  The Company has agreed to make any      payments pursuant to the Guarantee within three (3) business days upon      Tikshoov's first demand, without deducting any amounts that the Company      may claim from Tikshoov and free of any taxes or withholdings.  The      Guarantee terminates and becomes null and void upon the full satisfaction      of Xfone 018's obligations.  |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5.   | Guarantee      provided in respect of lease of construction equipment by NTS      Communications, in the amount of $7,397 as of December 31,      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 6.   | Our      U.S subsidiary, NTS Communications, Inc. ("NTS"), has a $4,000,000      revolving line of credit with commercial bank.  The facility is      secured by an assignment of all NTS's trade accounts receivable.  The      line bears interest at a rate equivalent to Wall Street Journal      Prime.  The line matured on March 10, 2009 and negotiations for its      renewal have not been completed as of the report date. As of      February 26, 2008, the date of the Company's acquisition of NTS      Communications, there were no funds advanced against the line.  At      December 31, 2008, the total amount advanced was      $3,850,000. |

| 7.   | Our      U.S subsidiary, NTS Communications, Inc., has $3,083,533 notes payable for      the purchase of certain fixed assets. These notes payable are secured by      fixed assets in the form of installment loan  agreements. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | A. | The      holders 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      January 16, 2007, and in conjunction with a December 24, 2006 Securities      Purchase Agreement the Company issued an aggregate of 172,414 warrants to      Halman-Aldubi Provident Funds Ltd. and Halman-Aldubi Pension Funds Ltd.      The warrants are exercisable on a one to one basis into restricted shares      of the Company’s common stock, at an exercise price of $3.40, and have a      term of five years. On February 1, 2007, and in conjunction with a      December 24, 2006 Securities Purchase Agreement the Company issued an      aggregate of 344,828 restricted shares of the Company’s common stock, at a      purchase price of $2.90 per share, to Halman-Aldubi Provident Funds Ltd.      and Halman-Aldubi Pension Funds Ltd. |
|   | C. | On      March 20, 2007, following the closing of the acquisition of the assets of      Canufly.net in 2006, and due to the satisfaction of certain earn out      provisions in the Asset Purchase Agreement, the Company issued to the      shareholders of Canufly.net additional 20,026 restricted shares of common      stock and 14,364 warrants exercisable at $2.98 per share for a period of      five years.                                                                                                                                                                                                                                                                                                                                                             |
|   | D. | On      October 23, 2007, the Company entered into Subscription Agreements with 15      investors affiliated with Gagnon Securities, Inc. which agreed to      purchase an aggregate of 1,000,000 shares of the Company's common stock at      a price of $3.00 per share, for a total subscription amount of      $3,000,000. The 1,000,000 shares were issued on November 6,      2007.                                                                                                                                                                                                                                                                                                                                                                              |

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| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

|   | E. | On      November 4, 2007, the Company entered into Subscription Agreements with:      (i) XFN - RLSI Investments, LLC, an entity affiliated with Richard L.      Scott Investments, LLC, a U.S. institutional investor, which agreed to      purchase 250,000 shares of the Company's common stock at a price of      $3.00 per share, for a total subscription amount of $750,000; and (ii)      certain Israeli institutional investors, which agreed to purchase an      aggregate of 700,000 shares of the Company's common stock, at a price      of $3.00 per share, for a total subscription amount of $2,100,000 . The      950,000 shares were issued on November 13, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | F. | In      conjunction with the consummation of the merger and in exchange for all of      the capital stock of I-55 Telecommunications, LLC, the Company issued      a total of 223,702 shares of common stock valued at $671,687 and 79,029      warrants exercisable for a period of five years into shares of common      stock, with an exercise price of $3.38 (the “Xfone Stock and Warrant      Consideration”). A portion of the Xfone Stock and Warrant Consideration      issued at closing was placed in an escrow. The Company determined a breach      of the representations and warranties in the Merger Agreement resulting      from the failure of I-55 Telecommunications to disclose the liability due      and payable to the Louisiana Universal Service Fund (“LA USF”)      through the period of October 2005, at which time Xfone USA undertook the      management role of I-55 Telecommunications. Pursuant to Section 1(g) of      the Escrow Agreement dated as of March 31, 2006 by and among Xfone      USA, the Escrow Agent, and the President and Sole Member of I-55      Telecommunications, and in accordance with Article 6.02 of the Merger      Agreement, Xfone USA notified the other parties that it believed that it      had suffered a loss of $30,626 pursuant to the provisions of Article 6.02      of the Merger Agreement dated as of August 26, 2005. Having not received      any response from the President and Sole Member of I-55      Telecommunications, nor from his counsel, on October 15, 2007, and after      the allotted response time allowed, Xfone USA instructed the Escrow Agent      (Trustmark National Bank) to deliver from the Escrow Fund of the President      and Sole Member of I-55 Telecommunications, to the Company, 7,043 shares      of Common Stock and 4,838 Xfone Stock Warrants. The 7,043 shares of Common      Stock and 4,838 Xfone Stock Warrants were returned to the Company for      cancellation on October 31, 2007.  |
|   | G. | On      February 26, 2008, the Company completed the issuance of 800,000 Units (as      defined below) to XFN-RLSI Investments, LLC, an entity affiliated with      Richard L. Scott Investments, LLC, a U.S. institutional investor, and      500,000 Units to certain investors affiliated with or who are customers of      Gagnon Securities LLC, pursuant to Subscription Agreements entered into      with each of the investors on December 13, 2007.  Each “Unit”      consists of two shares of the Company’s Common Stock and one warrant to      purchase one share of Common Stock, exercisable for a period of five years      from the date of issuance at an exercise price of $3.10 per      share.  The Units were sold at a price of $6.20 per Unit, for an      aggregate purchase price of $8,060,000.  Costs      of the issuance were $27,499 for net proceeds of      $8,032,501.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|   | H. | In      connection with the closing of the acquisition of NTS Communications, Inc.      on February 26, 2008, the Company issued 2,366,892 shares of the      Company’s Common Stock to certain former NTS Shareholders who elected to      reinvest all or a portion of their allocable sale price in the Company’s      Common Stock, pursuant to the terms of the NTS Purchase      Agreement.  The Company’s Board of Directors determined, in      accordance with the Purchase Agreement, the number of shares of the      Company’s Common Stock to be delivered to each participating NTS      Shareholder by dividing the portion of such NTS Shareholder’s allocable      sale price that the NTS Shareholder elected to receive in shares of the      Company’s Common Stock by 93% of the average closing price of the      Company’s Common Stock on the American Stock Exchange (now NYSE Amex) for      the ten consecutive trading days preceding the trading day immediately      prior to the Closing Date (i.e., $2.74).  The aggregate sales      price reinvested by all such NTS Shareholders was  $6,463,536,      net of issuance expenses of $21,748. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | I. | On      March 25, 2008, the Company issued the holders of the Bonds, for no      additional consideration, 956,020 (non-tradable) warrants, each      exercisable at an exercise price of $3.50 with a term of 4 years,      commencing on September 2, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | J. | On      April 7, 2008, Rafael Dick, the former Managing Director of the Company's      Israeli subsidiary Xfone 018 Ltd. exercised 4,105 of his outstanding      options under the Company's 2004 Stock Option Plan, at an exercise price      of $3.50 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

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| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |

|   | K. | In      2006, in conjunction with the consummation of the merger and in exchange      for all of the capital stock of I-55 Internet Services, the Company issued      a total of 789,863 shares of Common Stock valued at $2,380,178 and 603,939      warrants exercisable for a period of five years into shares of Common      Stock, with an exercise price of $3.31, valued based on the Black Scholes      option-pricing model (the “Xfone Stock and Warrant Consideration”). A      portion of the Xfone Stock and Warrant Consideration issued at closing was      placed in an escrow account, to be held pending certain      adjustments. The Company subsequently made the following two claims      against such escrow account: Claim #1: The Company made a claim on      March 27, 2007 to adjust the total consideration based upon the changes in      customer billings as determined pursuant to a formula set forth in the      First Amendment to the Merger Agreement (the “Customer Billing Adjustment      Amount”), which the Company had determined was $247,965.57. Claim #2: The      Company determined an undisclosed liability, in accordance with Article      6.03 of the I-55 Internet Services, Inc. Merger Agreement (as amended), in      the amount of $147,550 and on November 28, 2006, sent a claim for this      amount. The Shareholder Representatives of I-55 Internet Services      disputed the amounts in both claims submitted and so the parties entered      into negotiations on May 2, 2007, where they agreed to reduce the amount      claimed in Claim #1 by $104,948.46, which represents adjustments made to      the 90-Day column, Trade Accounts, and certain accounts that had      previously been listed as having 90-Day balances but were subsequently      confirmed as not having 90-Day balances, and by the final amount billed to      EBI Comm, Inc. (“EBI”) in 2005 prior to the assets of EBI being purchased      by Xfone USA, and agreed to reduce the original Loss amount claimed in      Claim #2 by $6,800.00, representing additional services purchased with      Zipa, Inc. under the direction of Xfone USA during the Management      Agreement period from October 2005 through March 2006. Upon settlement of      the claims, two Joint Deposition Notices for the escrow agent, Trustmark      National Bank, were delivered to the Shareholder Representatives of I-55      Internet Services for execution, however, a Shareholder Representative      refused to execute the notices pending approval of the claims by the      shareholders of I-55 Internet Services.  On June 7, 2007, the      shareholders met and rejected the figure agreed upon with respect to Claim      #1 and accepted the figure agreed upon with respect to Claim #2.  On      or about May 12, 2008, after further negotiations, Xfone USA and I-55      agreed to value Claim #1 at $143,017.11 and Claim #2 at $140,750.00 for a      total agreed loss of $283,767.11.  This resulted in the Company’s      receipt of 62,850 shares of Xfone Common Stock and 44,470 Xfone Stock      Warrants from the Escrow Account in satisfaction of these claims      (the “Returned Xfone Stock and Warrant Consideration”) and the balance of      the Xfone Common Stock and Xfone Stock Warrants remaining in the Escrow      Account was distributed to the selling I-55 Internet shareholders and the      escrow account was closed out on June 16, 2008. The components of the      Returned Xfone Stock and Warrant Consideration were cancelled by the      Company on June 3, 2008. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | L. | On      December 16, 2008 the annual meeting of stockholders approved and      authorized the issuance of an aggregate of 321,452 warrants to purchase      shares of the Company’s common stock to Wade Spooner, former President and      Chief Executive Officer of Xfone USA, Inc., pursuant to the terms of a      certain Separation Agreement and Release dated August 15, 2008 between Mr.      Spooner, Xfone USA, Inc. and the Company, as well as the issuance of the      aggregate 321,452 shares of the Company’s common stock upon exercise of      such common stock purchase warrants. The issuance of the warrants is      pending the Company’s receipt of a new approval from the Tel Aviv Stock      Exchange.   The      total value of the warrants, based on Black-Scholes option-pricing-model      is $11,627.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   | M. | On      December 16, 2008 the annual meeting of stockholders approved and      authorized the issuance of an aggregate of 160,727 warrants to purchase      shares of the Company’s common stock to Ted Parsons, former Executive Vice      President and Chief Marketing Officer of Xfone USA, Inc., pursuant to the      terms of a certain Separation Agreement and Release dated August 15, 2008      between Mr. Parsons, Xfone USA, Inc. and the Company, as well as the      issuance of the aggregate 160,727 shares of the Company’s common stock      upon exercise of such common stock purchase warrants. The issuance of the      warrants is pending the Company’s receipt of a new approval from the Tel      Aviv Stock Exchange.  The      total value of the warrants, based on Black-Scholes option-pricing-model      is $5,813.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|                                                                |   | Number      of warrants |      |   | Weighted      average exercise price |   |
|---------------------------------------------------------------------|--------|-------------------------|-----------|--------|--------------------------------------|--------|
| Warrants outstanding      at January 1, 2007                   |   |                    | 4,622,219 |   |                                 | $      | 3.91 |   |
| Granted                                                             |   |                    | 1,486,778 |   |                                 | $      | 3.13 |   |
| Forfeited                                                           |   |                    | (4,838    | )      |                                 | $      | 3.38 |   |
|                                                                |   |                    |      |   |                                 |   |   |   |
| Warrants outstanding      at January 1, 2008                   |   |                    | 6,104,159 |   |                                 | $      | 3.72 |   |
| Granted                                                             |   |                    | 1,438,199 |   |                                 | $      | 3.5 |   |
| Forfeited                                                           |   |                    | (44,470   | )      |                                 | $      | 3.31 |   |
| Warrants outstanding      and exercisable at December 31, 2008 |   |                    | 7,497,888 |   |                                 | $      | 3.68 |   |

|                 | Warrants      vested and exercisable |
|----------------------|--------------------------------------|
| Range      price ($) | Number      of warrants              | Weighted      average remaining contractual life (years) | Weighted      average exercise price |
| $2.86-$3.5           | 5,011,376                            | 3.02 | $3.24 |
| $3.63-$6.8           | 2,486,512                            | 1.44 | $4.60 |

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| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                                                                  |   | Number      of warrants |      |   | Weighted      average exercise price |   |
|-----------------------------------------------------------------------|--------|-------------------------|-----------|--------|--------------------------------------|--------|
| Warrants outstanding      at the beginning of the year           |   |                    | 6,104,159 |   |                                 | $      | 3.72 |   |
| Granted                                                               |   |                    | 1,438,199 |   |                                 | $      | 3.50 |   |
| Forfeited                                                             |   |                    | (44,470   | )      |                                 | $      | 3.31 |   |
| Warrants outstanding      and exercisable at the end of the year |   |                    | 7,497,888 |   |                                 | $      | 3.68 |   |

|   | A. | In      November 2004, Xfone's Board of Directors approved the adoption of the      principal items forming Xfone's 2004 stock option plan (The “2004 Plan”)      for the benefit of employees, officers, directors, consultants and      subcontractors of the Company including its subsidiaries. The 2004      Plan was approved by a special meeting of shareholders on March 13, 2006.      The purpose of the 2004 Plan is to enable the Company to attract and      retain the best available personnel for positions of substantial      responsibility, to provide an incentive to such persons presently engaged      with the Company and to promote the success of the Company business. The      2004 Plan provides for the grant of options an aggregate of 5,500,000      shares of Xfone's common stock. The 2004 Plan is administered by the      board that determines the persons to whom options are granted, the number      of options that are granted, the number of shares to be covered by each      option, the options may be exercised and whether the options is an      incentive or non-statutoryoption. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | On      June 5, 2007, the Company’s Board of Directors approved a grant of 20,000      options to Israel Singer, and a grant of 20,000 options to Morris Mansour.      The options were granted under and subject to the Company’s 2004 Stock      Option Plan with the following terms: Date of Grant - June 5, 2007;      Exercise Price - $3.50 per share; Vesting Date - 12 months from the Date      of Grant; Expiration Date - 5 years from the Vesting  Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | C. | On      June 5, 2007, the Company’s Board of Directors approved a grant of 200,000      options to Brian Acosta, the Chief Technical Officer of Xfone USA, under      the Company’s 2004 Plan. The options are granted under the following      terms: Date of Grant - June 5, 2007; Exercise Price - $3.146 per share;      Vesting Date - (a) 25,000 options on March 31, 2009; (b) 50,000 options on      March 31, 2010; and (c) 125,000 options on March 31, 2011; Expiration Date      - 5 years from the Vesting Date; Termination - in the event of termination      of employment prior to the completion of Mr. Acosta’s second year of      employment with Xfone USA, then 175,000 of the aforementioned options      shall automatically terminate; in the event of termination of employment      during Mr. Acosta’s third year of employment with Xfone USA, then 125,000      of the aforementioned options shall automatically    terminate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   | D. | On      June 5, 2007, the Company’s Board of Directors approved a grant of 200,000      options to Hunter McAllister, the Vice President Business Development of      Xfone USA, under the Company’s 2004 Plan. The options are granted under      the following terms: Date of Grant  -  June      5, 2007; Exercise Price  -  $3.146      per share; Vesting Date  -  (a)      25,000 options on March 31, 2009; (b) 50,000 options on March 31, 2010;      and (c) 125,000 options on March 31, 2011; Expiration Date  -  5      years from the Vesting Date; Termination  -  in      the event of termination of employment prior to the completion of Mr.      McAllister’s second year of employment with Xfone USA, then 175,000 of the      aforementioned options shall automatically terminate; in the event of      termination of employment during Mr. McAllister’s third year of employment      with Xfone USA, then 125,000 of the aforementioned options shall      automatically terminate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   | E. | On      October 28, 2007, the Company’s Board of Directors adopted and approved      the Company’s 2007 Stock Incentive Plan (the "2007 Plan") which is      designated for the benefit of employees, directors, and consultants of the      Company and its affiliates. The 2007 Plan was approved on December 17,      2007, at an Annual Meeting of shareholders of the Company. The 2007 Plan      authorizes the issuance of awards for up to a total of 8,000,000 shares of      the Company’s common stock underlying such awards.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   | F. | On      August 26, 2007, the Company entered into a contractual obligation to      grant the General Manager of Xfone 018 the following number of options to      purchase shares of the Company’s common stock under the 2007 plan, (the      “Plan”):(1) Within      30 days of adoption of the Plan, the Company will grant options to      purchase 300,000 shares of Common Stock, at an exercise price of $3.50 per      share, of which (i) options to purchase 75,000 shares will vest on August      26, 2008,; and (ii) options to purchase 18,750 shares will be vest at the      end of every 3 month period thereafter.(2) At      the end of each calendar year between 2008 and 2011, and upon the      achievement by Xfone 018 100% of its Targets for each such year, the      General Manager of Xfone 018 will be granted options to purchase 25,000      shares of the Company’s Common Stock under the Plan, for an exercise price      of $3.50 per share, which will be exercisable 30 days after the Company      publishes its annual financial statements for such year. The      options will expire 120 days after termination of employment with Xfone      018.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   | G. | On      April 7, 2008, Rafael Dick, the former Managing Director of the Company's      Israeli subsidiary Xfone 018 Ltd. exercised 4,105 of his outstanding      options under the Company's 2004 Stock Option Plan, at an exercise price      of $3.50 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | H. | On      February 26, 2008, NTS Communications, Inc. entered into Employment      Agreements with each of Barbara Baldwin, who, prior to the closing, served      as NTS’ President and CEO, Jerry Hoover, who, prior to the closing, served      as NTS’ Executive Vice President - Chief Financial Officer, and Brad      Worthington, who, prior to the closing, served as NTS’ Executive Vice      President - Chief Operating Officer (each an “Officer,” and collectively      the “Officers”).  The Employment Agreements provide for      continued employment of the Officers with NTS in their respective      capacities, and are for five-year terms each, effective as of the Closing      Date. Pursuant      to the terms of the Employment Agreements, the Officers were granted the      following stock option awards under the Company’s 2007 Stock Incentive      Plan on the Closing Date: Ms. Baldwin was granted options to purchase      250,000 shares of the Company’s Common Stock, and each of Messrs. Hoover      and Worthington was granted options to purchase 400,000 shares of the      Company’s Common Stock.  Each option is immediately exercisable,      expires five years from the grant date, and has an exercise price of      $2.794.  The total value of the options, based on Black-Scholes      option pricing model is $1,412,507. Additionally, at the end of each      Officer’s second year employment, the officer will be granted options      to purchase 267,000 shares of the Company’s Common Stock, which will be      immediately exercisable at $5.00 per share, and will expire five years      from such grant date. The total value of the options, based on      Black-Scholes option-pricing-model is$882,316. |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                                                        |   | Number      of options |       |   | Weighted      average exercise price |
|-------------------------------------------------------------|--------|------------------------|------------|--------|--------------------------------------|
| Options      outstanding at January 1, 2007                 |   |                   | 5,350,000  |   |                                 | $ | 3.69 |   |
| Granted      (a)                                            |   |                   | 740,000    |   |                                 | $ | 3.31 |   |
| Exercised                                                   |   |                   | (6,300     | )      |                                 | $ | 3.50 |   |
| Forfeited                                                   |   |                   | (368,700   | )      |                                 | $ | 3.50 |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
| Options      outstanding at January 1, 2008                 |   |                   | 5,715,000  |   |                                 | $ | 3.65 |   |
| Granted      (b)                                            |   |                   | 1,851,000  |   |                                 | $ | 3.75 |   |
| Exercised                                                   |   |                   | (4,105     | )      |                                 | $ | 3.50 |   |
| Forfeited                                                   |   |                   | (1,195,895 | )      |                                 | $ | 4.34 |   |
| Options      outstanding at December 31, 2008               |   |                   | 6,366,000  |   |                                 | $ | 3.55 |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
| Options      vested and exercisable as of December 31, 2007 |   |                   | 3,689,063  |   |                                 | $ | 3.50 |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
| Options      vested and exercisable as of December 31, 2008 |   |                   | 4,810,313  |   |                                 | $ | 2.74 |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
| Weighted      average fair value of options granted in 2007 |   |                   |       |   |                                 | $ | 1.13 |   |
|                                                        |   |                   |       |   |                                 |   |   |   |
| Weighted      average fair value of options granted in 2008 |   |                   |       |   |                                 | $ | 1.24 |   |

| (a)   | Include      options under contractual obligation as specified in note 13.2      ( F ) |
|-----------------|----------------------------------------------------------------------------------------|

| (b)   | Include      options under contractual obligation as specified in note 13.2      ( H ) |
|-----------------|----------------------------------------------------------------------------------------|

|                       | Options      vested and exercisable |
|----------------------------|-------------------------------------|
| Range      price ($)       | Number      of options              | Weighted      average remaining contractual life (years) | Weighted      average exercise price |
| $2.794                     | 1,050,000                           | 4.16 | $2.794 |
| $3.146      – $3.500 | 3,760,313                           | 2.27 | $3.500 |

|                                         |   | Year      Ended December 31 , 2008 |      |
|----------------------------------------------|--------|------------------------------------|-----------|
|                                         |   | Weighted      Average              |      |
|                                         |   | Income                             |      |  Shares |   | Per      ShareAmounts |   |
| Net      Income                              |   | $                                  | 2,047,237 |   |   |   |   |   |   |
| Basic      EPS:                              |   |                               |      |   |   |   |   |   |   |
| Income      available to common stockholders |   | $                                  | 2,047,237 |   | 17,624,249 |   | $ | 0.116 |   |
| Effect      of dilutive securities:          |   |                               |      |   |   |   |   |   |   |
| Options      and warrants (*)           |   |                               | -         |   | - |   |   | - |   |
| Diluted      EPS:                            |   |                               |      |   |   |   |   |   |   |
| Income      available to common stockholders |   | $                                  | 2,047,237 |   | 17,624,249 |   | $ | 0.116 |   |

|                                         |   | Year      Ended December 31 , 2007 |        |
|----------------------------------------------|--------|------------------------------------|-------------|
|                                         |   | Weighted      Average              |        |
|                                         |   | Income                             |        |  Shares | Per      ShareAmounts |   |
| Net      Income                              |   | $                                  | (1,283,892  | ) |   |   |   |   |
| Basic      EPS:                              |   |                               |        |   |   |   |   |   |
| Income      available to common stockholders |   | $                                  | (1,283,892  | ) | 11,777,645 |   | (0.109 | )  |
| Effect      of dilutive securities:          |   |                               |        |   |   |   |   |   |
| Options      and warrants  (*)          |   | -                                  |        | - |   |   |   |
| Diluted      EPS:                            |   |                               |        |   |   |   |   |   |
| Income      available to common stockholders |   | $                                  | (1,283,892) | ) | 11,777,645 |   | (0.109 | )  |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|                                      |   | Years      ended        |    |
|-------------------------------------------|--------|-------------------------|---------|
|                                      |   | December       31, |    |
|                                      |   | 2008                    |    |   | 2007 |   |
| Campbeltown      Business Ltd.:           |   |                    |    |   |   |   |
|                                      |   |                    |    |   |   |   |
| Fees                                      |   | $                       | -       |   |   | $ | 4,302 |   |
| Accrued      Expenses                     |   |                    | -       |   |   |   | - |   |
|                                      |   |                    |    |   |   |   |   |   |
|                                      |   |                    |    |   |   |   |   |   |
| Abraham      Keinan                       |   |                    |    |   |   |   |   |   |
|                                      |   |                    |    |   |   |   |   |   |
| Fees                                      |   |                    | 263,181 |   |   |   | 254,350 |   |
| Accrued      expenses                     |   |                    | 46,696  |   |   |   | 20,050 |   |
|                                      |   |                    |    |   |   |   |   |   |
| Guy      Nissenson                        |   |                    |    |   |   |   |   |   |
|                                      |   |                    |    |   |   |   |   |   |
|  Fees                                |   |                    | 250,334 |   |   |   | 242,490 |   |
| Accrued      expenses                     |   |                    | 46,696  |   |   |   | 20,050 |   |
|                                      |   |                    |    |   |   |   |   |   |
|                                      |   |                    |    |   |   |   |   |   |
| Auracall      Limited:                    |   |                    |    |   |   |   |   |   |
|                                      |   |                    |    |   |   |   |   |   |
| Related      revenues (*)                 |   |                    | -       |   |   |   | 3,324,726 |   |
| Commissions      (*)                      |   |                    | -       |   |   |   | 417,907 |   |
|                                      |   |                    |    |   |   |   |   |   |
| Dionysos      Investments (1999) Limited: |   |                    |    |   |   |   |   |   |
| Fees                                      |   |                    | 151,016 |   |   |   | 183,363 |   |
| Accrued      Expenses                     |   |                    | 25,956  |   |   |   | 146,542 |   |
|                                      |   |                    |    |   |   |   |   |   |
| Balance:                                  |   |                    |    |   |   |   |   |   |
| Guy      Nissenson                        |   |                    | -       |   |   |   | - |   |
| Abraham      Keinan                       |   |                    | -       |   |   |   | (7,205 | ) |

----

| Xfone,      Inc. and Subsidiaries                                              |   |
|--------------------------------------------------------------------------------|--------|
|                                                                           |   |    |   |   |   |   |   |
| NOTES      TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER      31, 2008 and 2007 |   |

|   | A. | Certain      Telecommunication operators act as collection channels for the Company. In      2008, the Company had two major collection channels, one in the U.K. and      one in Israel. Collections through these channels accounted to      approximately 4.4% and 4.9% of the Company’s total revenues in 2008,      respectively, and 22% and 6% of the Company’s total revenues in 2007,      respectively. With respect to collection of monies for the Company, these      Telecommunication operators are not deemed to be customers of the Company.         |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | B. | Approximately,      45%, 4.2% and 2% of the Company's purchases are from three suppliers for      the year ended December 31, 2008, and 25%, 20%, 7% are from three      suppliers for the year ended December 31,  2007. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   | Years      Ended  |       |
|-------------------------------------------------|--------|-------------------|------------|
|                                            |   | December      31, |       |
|                                            |   | 2008              |       |   | 2007 |   |
| Revenues:                                       |   |              |       |   |   |   |
| United      Kingdom                             |   | $                 | 18,393,886 |   |   | $ | 24,263,610 |   |
| United      States                              |   |              | 62,716,819 |   |   |   | 12,290,891 |   |
| Israel                                          |   |              | 9,228,275  |   |   |   | 8,169,433 |   |
|                                            |   |              |       |   |   |   |   |   |
| Total      revenues                             |   |              | 90,338,980 |   |   |   | 44,723,934 |   |
|                                            |   |              |       |   |   |   |   |   |
| Cost      of revenues                           |   |              |       |   |   |   |   |   |
| United      Kingdom                             |   |              | 7,745,190  |   |   |   | 10,696,915 |   |
| United      States                              |   |              | 35,457,045 |   |   |   | 5,904,797 |   |
| Israel                                          |   |              | 3,930,078  |   |   |   | 3,024,610 |   |
|                                            |   |              |       |   |   |   |   |   |
| Total      cost of revenues                     |   |              | 47,132,313 |   |   |   | 19,626,322 |   |
|                                            |   |              |       |   |   |   |   |   |
| Gross      Profit:                              |   |              |       |   |   |   |   |   |
| United      Kingdom                             |   |              | 10,648,696 |   |   |   | 13,566,695 |   |
| United      States                              |   |              | 27,259,774 |   |   |   | 6,386,094 |   |
| Israel                                          |   |              | 5,298,197  |   |   |   | 5,144,823 |   |
|                                            |   |              |       |   |   |   |   |   |
|                                            |   |              | 43,206,667 |   |   |   | 25,097,612 |   |
|                                            |   |              |       |   |   |   |   |   |
| Operating      expenses:                        |   |              |       |   |   |   |   |   |
| United      Kingdom                             |   |              | 8,447,281  |   |   |   | 12,556,993 |   |
| United      States                              |   |              | 23,603,645 |   |   |   | 6,466,501 |   |
| Israel                                          |   |              | 3,919,840  |   |   |   | 2,963,461 |   |
|                                            |   |              |       |   |   |   |   |   |
|                                            |   |              | 35,970,766 |   |   |   | 21,986,955 |   |
|                                            |   |              |       |   |   |   |   |   |
| Operating      Profit:                          |   |              |       |   |   |   |   |   |
| United      Kingdom                             |   |              | 2,201,415  |   |   |   | 1,009,702 |   |
| United      States                              |   |              | 3,656,129  |   |   |   | (80,407 | ) |
| Israel                                          |   |              | 1,378,357  |   |   |   | 2,181,362 |   |
|                                            |   |              |       |   |   |   |   |   |
|                                            |   |              | 7,235,901  |   |   |   | 3,110,657 |   |
|                                            |   |              |       |   |   |   |   |   |
| Non-      recurring loss                        |   |              | 189,610    |   |   |   | 2,856,803 |   |
|                                            |   |              |       |   |   |   |   |   |
| Expenses      related to Headquarters in the US |   |              | 2,232,095  |   |   |   | 1,283,296 |   |
|                                            |   |              |       |   |   |   |   |   |
| Operating      Income (Loss)                    |   | $                 | 4,814,196  |   |   | $ | (1,029,442 | ) |

----

|                             |   | Years      Ended  |      |
|----------------------------------|--------|-------------------|-----------|
|                             |   | December      31, |      |
|                             |   | 2008              |      |   | 2007 |   |
| Depreciation      expenses:      |   |              |      |   |   |   |
| United      Kingdom              |   | $                 | 282,026   |   |   | $ | 149,064 |   |
| United      States               |   |              | 2,771,016 |   |   |   | 618,290 |   |
| Israel                           |   |              | 266,683   |   |   |   | 277,367 |   |
|                             |   |              |      |   |   |   |   |   |
| Total      depreciation expenses |   |              | 3,319,725 |   |   |   | 1,044,721 |   |

|                         |   | Years      Ended  |      |
|------------------------------|--------|-------------------|-----------|
|                         |   | December      31, |      |
|                         |   | 2008              |      |   | 2007 |   |
| Interest      expenses:      |   |              |      |   |   |   |
| United      Kingdom          |   | $                 | 47,722    |   |   | $ | 77,893 |   |
| United      States           |   |              | 2,892,051 |   |   |   | 638,049 |   |
| Israel                       |   |              | 311,041   |   |   |   | 236,849 |   |
|                         |   |              |      |   |   |   |   |   |
| Total      interest expenses |   |              | 3,250,814 |   |   |   | 952,791 |   |

|                         |   | December      31, |       |
|------------------------------|--------|-------------------|------------|
|                         |   | 2008              |       |   | 2007 |   |
| Fixed      assets, net:      |   |              |       |   |   |   |
| United      Kingdom          |   | $                 | 929,464    |   |   | $ | 1,181,928 |   |
| United      States           |   |              | 47,322,257 |   |   |   | 3,006,848 |   |
| Israel                       |   |              | 1,768,876  |   |   |   | 1,558,982 |   |
|                         |   |              |       |   |   |   |   |   |
| Total      fixed assets, net |   |              | 50,020,597 |   |   |   | 5,747,758 |   |

|                              |   | Years      Ended  |      |
|-----------------------------------|--------|-------------------|-----------|
|                              |   | December      31, |      |
|                              |   | 2008              |      |   | 2007 |   |
| Fixed      assets additions:      |   |              |      |   |   |   |
| United      Kingdom               |   | $                 | 269,427   |   |   | $ | 257,783 |   |
| United      States                |   |              | 7,700,392 |   |   |   | 707,334 |   |
| Israel                            |   |              | 476,577   |   |   |   | 357,790 |   |
|                              |   |              |      |   |   |   |   |   |
| Total      fixed assets additions |   |              | 8,446,396 |   |   |   | 1,322,907 |   |

----

FINANCIAL STATEMENT

|  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)                                                                                                                                                                                                                                               |
| 3.11                      | Reamended      and Restated Bylaws of Xfone, Inc. dated January 15,    2009.(55)                                                                                                                                                                                                                                                                               |
| 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 InternationalLtd.(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 IlanShoshani.(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)  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 16.1   | Letter      dated January 31, 2006 from Chaifetz & Schreiber, P.C. to the      Securities and Exchange Commission. (20)                                                                            |
| 21.1   | List of Subsidiaries (Amended as of April      2009)                                                                                                                                                   |
| 23     | Consent of Stark Winter      Schenkein & Co., LLP dated April 29,    2009                                                                                                                     |
| 23.6   | Consent of Yarel &      Partners C.P.A. (Isr.) dated April 27, 2009.                                                                                                                               |
| 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.                                       |
|  (20) | Denotes      previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s      Form 8-K/A #1.                                       |
|  (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.                                              |

----

|  (26) | Reserved.                                                                                                        |
|------------|------------------------------------------------------------------------------------------------------------------|
|  (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.         |
|  (40) | Denotes      previously filed exhibit: filed on October 25, 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. |

----

TU

|                           | XFONE,      INC. |                                                                    |
|--------------------------------|------------------|-------------------------------------------------------------------------|
|                           |             |                                                                    |   |
| Date:      April      30, 2009 | By:              | /s/ Guy      Nissenson                                             |   |
|                           |             | Guy      Nissenson President,      Chief Executive Officer and Director |   |
|                           |             |                                                                    |   |
|                           |             |                                                                    |   |

| Signature               | Title                                                                               | Date                |
|-------------------------|-------------------------------------------------------------------------------------|---------------------|
|                    |                                                                                |                |
| /s/      Abraham Keinan | Chairman      of the Board                                                          | April      30, 2009 |
| Abraham      Keinan     |
|                    |
| /s/      Guy Nissenson  | President,      Chief Executive Officer, and Director                               | April      30, 2009 |
| Guy      Nissenson      |
|                    |
| /s/      Itzhak Almog   | Director      and Chairman of the Audit Committee and the Nominating      Committee | April      30, 2009 |
| Itzhak      Almog       |
|                    |
| /s/      Eyal J. Harish | Director                                                                            | April      30, 2009 |
| Eyal      J. Harish     |
|                    |
| /s/      Israel Singer  | Director      and member of the Audit Committee                                     | April      30, 2009 |
| Israel      Singer      |
|                    |
| /s/      Niv Krikov     | Treasurer,      Chief Financial Officer, and Principal Accounting Officer           | April      30, 2009 |
| Niv      Krikov         |

----

|  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)                                                                                                                                                                                                                                               |
| 3.11                      | Reamended      and Restated Bylaws of Xfone, Inc. dated January 15,    2009.(55)                                                                                                                                                                                                                                                                               |
| 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 InternationalLtd.(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 IlanShoshani.(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)  |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 16.1   | Letter      dated January 31, 2006 from Chaifetz & Schreiber, P.C. to the      Securities and Exchange Commission. (20)                                                                            |
| 21.1   | List of Subsidiaries (Amended as of April 2009)                                                                                                                                                        |
| 23     | Consent of Stark Winter      Schenkein & Co., LLP dated April 29,    2009                                                                                                                     |
| 23.6   | Consent of Yarel &      Partners C.P.A. (Isr.) dated April 27, 2009.                                                                                                                               |
| 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.                                       |
|  (20) | Denotes      previously filed exhibit: filed on January 31, 2006 with Xfone, Inc.’s      Form 8-K/A #1.                                       |
|  (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.                                              |

----

|  (26) | Reserved.                                                                                                        |
|------------|------------------------------------------------------------------------------------------------------------------|
|  (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.         |
|  (40) | Denotes      previously filed exhibit: filed on October 25, 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. |

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