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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2008

or



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

Commission File Number: 1-16371





IDT CORPORATION

(Exact Name of Registrant as Specified in its Charter)







|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|Delaware                                                       |  | 22-3415036                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)
|                                                               | 
|520 Broad Street, Newark, New Jersey                           |  | 07102                                  
|(Address of principal executive offices)                       |  | (Zip Code)                             

(973) 438-1000

(Registrants telephone number, including area code)





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

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



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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.):    Yes   ̈    No  x

As of June 2, 2008, the registrant had the following shares outstanding:



|                                      |  |                                                                     
|------------------------------------- |  | --------------------------------------------------------------------
|Common Stock, $.01 par value:         |  | 14,541,723 shares outstanding (excluding 10,533,137 treasury shares)
|Class A common stock, $.01 par value: |  | 9,816,988 shares outstanding                                        
|Class B common stock, $.01 par value: |  | 51,016,626 shares outstanding (excluding 12,623,262 treasury shares)









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IDT CORPORATION

TABLE OF CONTENTS



|                              |  |                                                                                       |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | --
|                              | 
|PART I. FINANCIAL INFORMATION |  | 3                                                                                    
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements (Unaudited)                                                      |  | 3 
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Balance Sheets                                                 |  | 3 
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Statements of Operations                                       |  | 4 
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5 
|                              |  |                                                                                      
|                              |  | Notes to Condensed Consolidated Financial Statements                                  |  | 6 
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 20
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risks                           |  | 45
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 45
|                              | 
|PART II. OTHER INFORMATION    |  | 46                                                                                   
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 46
|                              |  |                                                                                      
|Item 1A.                      |  | Risk Factors                                                                          |  | 46
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 46
|                              |  |                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                       |  | 46
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 46
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 47
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 47
|                              | 
|SIGNATURES                    |  | 48                                                                                   



2



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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

IDT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ------------ | - | --------- | -
|                                                                                                                                                                                            |  | April 30,2008  |           |   | July 31,2007 |  
|                                                                                                                                                                                            |  | (Unaudited)    |           |   | (Note 1)     |  
|                                                                                                                                                                                            |  | (in thousands) |          
|Assets                                                                                                                                                                                      |  |                |           |   |              |   |           |  
|Current assets:                                                                                                                                                                             |  |                |           |   |              |   |           |  
|Cash and cash equivalents                                                                                                                                                                   |  | $              | 128,877   |   |              | $ | 153,845   |  
|Marketable securities                                                                                                                                                                       |  |                | 140,350   |   |              |   | 388,140   |  
|Trade accounts receivable, net of allowance for doubtful accounts of $21,549 at April 30, 2008 and $19,654 at July 31,
2007                                                                 |  |                | 163,477   |   |              |   | 164,802   |  
|Prepaid expenses                                                                                                                                                                            |  |                | 20,465    |   |              |   | 28,920    |  
|Investments                                                                                                                                                                                 |  |                | 43,356    |   |              |   |          |  
|Other current assets                                                                                                                                                                        |  |                | 54,074    |   |              |   | 60,452    |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total current assets                                                                                                                                                                        |  |                | 550,599   |   |              |   | 796,159   |  
|Property, plant and equipment, net                                                                                                                                                          |  |                | 269,389   |   |              |   | 251,318   |  
|Goodwill                                                                                                                                                                                    |  |                | 100,805   |   |              |   | 101,515   |  
|Licenses and other intangibles, net                                                                                                                                                         |  |                | 10,111    |   |              |   | 13,824    |  
|Investments                                                                                                                                                                                 |  |                | 81,335    |   |              |   | 119,052   |  
|Deferred income tax assets, net                                                                                                                                                             |  |                | 233,996   |   |              |   |          |  
|Other assets                                                                                                                                                                                |  |                | 87,219    |   |              |   | 78,465    |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total assets                                                                                                                                                                                |  | $              | 1,333,454 |   |              | $ | 1,360,333 |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Liabilities and stockholders equity                                                                                                                                                        |  |                |           |   |              |   |           |  
|Current liabilities:                                                                                                                                                                        |  |                |           |   |              |   |           |  
|Trade accounts payable                                                                                                                                                                      |  | $              | 65,740    |   |              | $ | 47,467    |  
|Accrued expenses                                                                                                                                                                            |  |                | 219,057   |   |              |   | 288,017   |  
|Deferred revenue                                                                                                                                                                            |  |                | 94,268    |   |              |   | 112,757   |  
|Capital lease obligationscurrent portion                                                                                                                                                   |  |                | 11,277    |   |              |   | 21,049    |  
|Notes payablecurrent portion                                                                                                                                                               |  |                | 4,172     |   |              |   | 8,095     |  
|Other current liabilities                                                                                                                                                                   |  |                | 7,066     |   |              |   | 17,598    |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total current liabilities                                                                                                                                                                   |  |                | 401,580   |   |              |   | 494,983   |  
|Income taxes payable                                                                                                                                                                        |  |                | 365,603   |   |              |   |          |  
|Deferred income tax liabilities, net                                                                                                                                                        |  |                |          |   |              |   | 105,049   |  
|Capital lease obligationslong-term portion                                                                                                                                                 |  |                | 11,948    |   |              |   | 23,401    |  
|Notes payablelong-term portion                                                                                                                                                             |  |                | 106,679   |   |              |   | 82,847    |  
|Other liabilities                                                                                                                                                                           |  |                | 9,137     |   |              |   | 12,928    |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total liabilities                                                                                                                                                                           |  |                | 894,947   |   |              |   | 719,208   |  
|Minority interests                                                                                                                                                                          |  |                | 8,427     |   |              |   | 10,963    |  
|Commitments and contingencies                                                                                                                                                               |  |                |           |   |              |   |           |  
|Stockholders equity:                                                                                                                                                                       |  |                |           |   |              |   |           |  
|Preferred stock, $.01 par value; authorized shares10,000; no shares issued                                                                                                                 |  |                |          |   |              |   |          |  
|Common stock, $.01 par value; authorized shares100,000; 25,075 and 25,075 shares issued and 14,542 and 14,996 shares outstanding at
April 30, 2008 and July 31, 2007, respectively         |  |                | 251       |   |              |   | 251       |  
|Class A common stock, $.01 par value; authorized shares35,000; 9,817 shares issued and outstanding at April 30, 2008 and
July 31, 2007                                                     |  |                | 98        |   |              |   | 98        |  
|Class B common stock, $.01 par value; authorized shares200,000; 63,640 and 63,261 shares issued and 51,017 and 56,043 shares outstanding
at April 30, 2008 and July 31, 2007, respectively |  |                | 636       |   |              |   | 633       |  
|Additional paid-in capital                                                                                                                                                                  |  |                | 715,049   |   |              |   | 711,103   |  
|Treasury stock, at cost, consisting of 10,533 and 10,079 shares of common stock and 12,623 and 7,218 shares of Class B common stock at
April 30, 2008 and July 31, 2007, respectively       |  |                | (285,461  | ) |              |   | (240,355  | )
|Accumulated other comprehensive income                                                                                                                                                      |  |                | 9,544     |   |              |   | 10,750    |  
|Retained earnings (deficit)                                                                                                                                                                 |  |                | (10,037   | ) |              |   | 147,682   |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total stockholders equity                                                                                                                                                                  |  |                | 430,080   |   |              |   | 630,162   |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  
|Total liabilities and stockholders equity                                                                                                                                                  |  | $              | 1,333,454 |   |              | $ | 1,360,333 |  
|                                                                                                                                                                                            |  |                |           |   |              |   |           |  

See accompanying notes to condensed consolidated financial statements.



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IDT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|--------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | -------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                                              |  | Three Months EndedApril 30,           |         |   | Nine Months EndedApril 30, |  
|                                                                                              |  | 2008                                  |         |   | 2007                       |   |         | 2008 |  |   | 2007      |  
|                                                                                              |  | (In thousands, except per share data) |        
|Revenues                                                                                      |  | $                                     | 453,248 |   |                            | $ | 485,356 |      |  | $ | 1,398,039 |   |  | $ | 1,520,182 |  
|Costs and expenses:                                                                           |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Direct cost of revenues (exclusive of depreciation and amortization)                          |  |                                       | 359,276 |   |                            |   | 395,654 |      |  |   | 1,099,388 |   |  |   | 1,205,893 |  
|Selling, general and administrative (i)                                                       |  |                                       | 118,551 |   |                            |   | 112,283 |      |  |   | 350,771   |   |  |   | 327,163   |  
|Research and development                                                                      |  |                                       | 8,885   |   |                            |   | 55      |      |  |   | 9,808     |   |  |   | 4,814     |  
|Bad debt                                                                                      |  |                                       | 3,078   |   |                            |   | 3,100   |      |  |   | 24,373    |   |  |   | 7,481     |  
|Depreciation and amortization                                                                 |  |                                       | 17,460  |   |                            |   | 20,500  |      |  |   | 52,027    |   |  |   | 60,476    |  
|Restructuring and severance charges                                                           |  |                                       | 16,537  |   |                            |   | 1,756   |      |  |   | 20,719    |   |  |   | 8,082     |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Total costs and expenses                                                                      |  |                                       | 523,787 |   |                            |   | 533,348 |      |  |   | 1,557,086 |   |  |   | 1,613,909 |  
|Arbitration award                                                                             |  |                                       |        |   |                            |   |        |      |  |   | 40,000    |   |  |   |          |  
|Gain on sale of U.K.-based Toucan business                                                    |  |                                       |        |   |                            |   |        |      |  |   |          |   |  |   | 44,671    |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Loss from operations                                                                          |  |                                       | (70,539 | ) |                            |   | (47,992 | )    |  |   | (119,047  | ) |  |   | (49,056   | )
|Interest (expense) income, net                                                                |  |                                       | (301    | ) |                            |   | 4,762   |      |  |   | 5,301     |   |  |   | 13,518    |  
|Other (expense) income, net                                                                   |  |                                       | (8,348  | ) |                            |   | 30,643  |      |  |   | (9,633    | ) |  |   | 29,222    |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Loss from continuing operations before minority interests and income taxes                    |  |                                       | (79,188 | ) |                            |   | (12,587 | )    |  |   | (123,379  | ) |  |   | (6,316    | )
|Minority interests                                                                            |  |                                       | (345    | ) |                            |   | (2,699  | )    |  |   | (980      | ) |  |   | (9,059    | )
|Provision for income taxes                                                                    |  |                                       | (2,193  | ) |                            |   | (638    | )    |  |   | (9,012    | ) |  |   | (4,664    | )
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Loss from continuing operations                                                               |  |                                       | (81,726 | ) |                            |   | (15,924 | )    |  |   | (133,371  | ) |  |   | (20,039   | )
|Discontinued operations, net of tax:                                                          |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Loss from discontinued operations                                                             |  |                                       |        |   |                            |   |        |      |  |   |          |   |  |   | (7,165    | )
|(Loss) gain on sale of discontinued operations                                                |  |                                       | (485    | ) |                            |   |        |      |  |   | (4,529    | ) |  |   | 198,235   |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Total discontinued operations                                                                 |  |                                       | (485    | ) |                            |   |        |      |  |   | (4,529    | ) |  |   | 191,070   |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Net (loss) income                                                                             |  | $                                     | (82,211 | ) |                            | $ | (15,924 | )    |  | $ | (137,900  | ) |  | $ | 171,031   |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Earnings per share:                                                                           |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Basic and diluted:                                                                            |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Loss from continuing operations                                                               |  | $                                     | (1.09   | ) |                            | $ | (0.20   | )    |  | $ | (1.74     | ) |  | $ | (0.24     | )
|Total discontinued operations                                                                 |  |                                       | (0.01   | ) |                            |   |        |      |  |   | (0.06     | ) |  |   | 2.32      |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Net (loss) income                                                                             |  | $                                     | (1.10   | ) |                            | $ | (0.20   | )    |  | $ | (1.80     | ) |  | $ | 2.08      |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Weighted-average number of shares used in calculation of basic and diluted earnings per share |  |                                       | 75,014  |   |                            |   | 81,357  |      |  |   | 76,553    |   |  |   | 82,417    |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|Dividends declared per common share                                                           |  |                                       |        |   |                            | $ | 0.25    |      |  |   |          |   |  | $ | 0.25      |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  
|(i)     Stock-based compensation included in selling, general and administrative expenses     |  | $                                     |        |   |                            | $ | 1,473   |      |  | $ | 3,221     |   |  | $ | 5,924     |  
|                                                                                              |  |                                       |         |   |                            |   |         |      |  |   |           |   |  |   |           |  

See accompanying notes to condensed consolidated financial statements.



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IDT CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



|                                                                                                                                |  |                            |          |   |      |   |            |    
|------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | ---------- | ---
|                                                                                                                                |  | Nine Months EndedApril 30, |         
|                                                                                                                                |  | 2008                       |          |   | 2007 |  
|                                                                                                                                |  | (In thousands)             |         
|Net cash used in operating activities                                                                                           |  | $                          | (108,337 | ) |      | $ | (83,671    | )  
|Investing activities                                                                                                            |  |                            |          |   |      |   |            |    
|Capital expenditures                                                                                                            |  |                            | (15,149  | ) |      |   | (26,358    | )  
|Purchase of building                                                                                                            |  |                            | (24,778  | ) |      |   |           |    
|Collection of notes receivable, net                                                                                             |  |                            | 14,789   |   |      |   | 228        |    
|Investments and acquisitions, net of cash acquired                                                                              |  |                            | (21,829  | ) |      |   | (4,094     | )  
|Proceeds from sale of investments                                                                                               |  |                            | 10,945   |   |      |   |           |    
|Proceeds from sale of building                                                                                                  |  |                            | 4,872    |   |      |   |           |    
|Proceeds from sale of IDT Entertainment, net of cash sold and transaction costs                                                 |  |                            |         |   |      |   | 261,604    |    
|Proceeds from sale of U.K.-based Toucan business, net of transaction costs                                                      |  |                            |         |   |      |   | 38,380     |    
|Purchase of debt portfolios                                                                                                     |  |                            | (67,331  | ) |      |   | (47,276    | )  
|Principal collections and proceeds from resale of debt portfolios                                                               |  |                            | 20,399   |   |      |   | 14,399     |    
|Proceeds from sales and maturities of marketable securities                                                                     |  |                            | 633,242  |   |      |   | 1,331,938  |    
|Purchases of marketable securities                                                                                              |  |                            | (402,058 | ) |      |   | (1,325,194 | )  
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Net cash provided by investing activities                                                                                       |  |                            | 153,102  |   |      |   | 243,627    |    
|Financing activities                                                                                                            |  |                            |          |   |      |   |            |    
|Dividends paid                                                                                                                  |  |                            |         |   |      |   | (20,560    | )  
|Distributions to minority shareholders of subsidiaries                                                                          |  |                            | (3,897   | ) |      |   | (9,860     | )  
|Proceeds from exercises of stock options                                                                                        |  |                            | 94       |   |      |   | 5,195      |    
|Proceeds from employee stock purchase plan                                                                                      |  |                            | 808      |   |      |   | 1,075      |    
|Proceeds from sale leaseback transactions on capital leases                                                                     |  |                            |         |   |      |   | 13,283     |    
|Repayments of capital lease obligations                                                                                         |  |                            | (22,340  | ) |      |   | (15,594    | )  
|Repayments of borrowings                                                                                                        |  |                            | (3,032   | ) |      |   | (2,876     | )  
|Repurchases of common stock and Class B common stock                                                                            |  |                            | (45,279  | ) |      |   | (3,918     | )  
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Net cash used in financing activities                                                                                           |  |                            | (73,646  | ) |      |   | (33,255    | )  
|Discontinued operations                                                                                                         |  |                            |          |   |      |   |            |    
|Net cash used in operating activities                                                                                           |  |                            |         |   |      |   | (20,261    | )  
|Net cash provided by investing activities                                                                                       |  |                            |         |   |      |   | 3,847      |    
|Net cash provided by financing activities                                                                                       |  |                            |         |   |      |   | 7,536      |    
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Net cash used in discontinued operations                                                                                        |  |                            |         |   |      |   | (8,878     | )  
|Effect of exchange rate changes on cash and cash equivalents                                                                    |  |                            | 3,913    |   |      |   | 5,601      |    
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Net (decrease) increase in cash and cash equivalents                                                                            |  |                            | (24,968  | ) |      |   | 123,424    |    
|Cash and cash equivalents, beginning of period                                                                                  |  |                            | 153,845  |   |      |   | 151,192    | (*)
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Cash and cash equivalents, end of period                                                                                        |  | $                          | 128,877  |   |      | $ | 274,616    |    
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Supplemental schedule of non-cash investing and financing activities                                                            |  |                            |          |   |      |   |            |    
|Assumption of mortgage payable in connection with the purchase of the Companys headquarters office building                    |  | $                          | 26,851   |   |      | $ |           |    
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Receipt of the Companys Class B common stock and IDT Telecom shares as part of the proceeds from the sale of IDT
Entertainment |  | $                          |         |   |      | $ | 226,649    |    
|                                                                                                                                |  |                            |          |   |      |   |            |    
|Receipt of marketable securities as part of the proceeds from the sale of U.K.-based Toucan business                            |  | $                          |         |   |      | $ | 7,851      |    
|                                                                                                                                |  |                            |          |   |      |   |            |    



|(*) | Includes cash and cash equivalents of discontinued operations of $32.1 million as of July 31, 2006.
|--- | ---------------------------------------------------------------------------------------------------

See accompanying notes to condensed consolidated financial statements.



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of IDT Corporation and its subsidiaries (the Company or
IDT) have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Certain reclassifications have been made to the prior years condensed consolidated financial statements to conform to the current years presentation. Operating results for the three and nine
months ended April 30, 2008 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2008. The balance sheet at July 31, 2007 has been derived from the Companys audited financial
statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. For further information, please refer to the consolidated
financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended July 31, 2007, as filed with the U.S. Securities and Exchange Commission.

In the three and nine months ended April 30, 2007, other income included $22.2 million relating to income from certain pooled investment vehicles.
Prior to the third quarter of fiscal 2007, the Company accounted for such investments at cost. However, in the third quarter of fiscal 2007, the Company concluded that such investments should be accounted for using the equity method, pursuant to the
guidance in Emerging Issues Task Force (EITF) Topic D-46, Accounting for Limited Partnership Investments and EITF 03-16, Accounting for Investments in Limited Liability Companies. The adjustment to Investments in the third
quarter of fiscal 2007 resulted in an overstatement of other income for the three and nine months ended April 30, 2007 of $18.6 million ($0.23 per share) and $15.4 million ($0.19 per share), respectively. In accordance with Accounting
Principles Board Opinion No. 28, Interim Financial Reporting, paragraph 29, the Company did not adjust prior periods results, as the adjustment was not considered to be material to the Companys fiscal 2007 full year results or to
prior periods.

The Company records Universal Service Fund (USF) charges that are billed to customers on a gross basis in its
results of operations, and records other taxes and surcharges on a net basis. USF charges in the amount of $0.9 million and $2.9 million in the three and nine months ended April 30, 2008, respectively, and $2.0 million and $8.1 million in the
three and nine months ended April 30, 2007, respectively, were recorded on a gross basis.

The Companys fiscal year ends on
July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2008 refers to the fiscal year ending July 31, 2008).

Note 2Income Taxes

Effective August 1,
2007, the Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with Statement of Financial Accounting Standards (SFAS) No. 109 and prescribes that a company
should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken or expected to be taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured in order to determine
the tax benefit to be recognized in the financial



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



statements. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition. The adoption of FIN 48 resulted in a one-time decrease in the opening balance of retained earnings of $19.8 million. In addition, the adoption included a reduction in deferred tax liabilities of $323.6 million and a corresponding
increase in non-current income tax payable.

As of August 1, 2007, the Company had unrecognized tax benefits of $311.8 million that if
recognized would have a favorable impact on the Companys effective tax rate. The Company believes it has adequately provided for all tax positions, however amounts asserted by taxing authorities could be greater than the accrued amounts.
Accordingly, additional tax provisions may be recorded in the future as revised estimates are made or the underlying matters are settled or resolved.

The Company classifies interest and penalties on income taxes as a component of income tax expense. As of August 1, 2007, accrued interest relating to the unrecognized tax benefits was $46.8 million. In the nine
months ended April 30, 2008, the Company recorded additional interest of $7.0 million. As of April 30, 2008, accrued interest relating to the unrecognized tax benefits was $53.8 million.

In fiscal 2006, the Internal Revenue Service (IRS) commenced an audit of the Companys fiscal 2001, 2002, 2003 and 2004 federal tax
returns that is still in process. Should an assessment by the IRS result from the audit, the Company may be liable for income taxes, interest and penalties, which could have an adverse effect on the Companys results of operations, cash flows
and financial condition. The Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2005 to 2007, state and local tax returns generally for fiscal 2001 to 2007 and foreign tax returns
generally for fiscal 2002 to 2007.

Note 3Arbitration Award

On November 26, 2007, the Company announced that its Net2Phone Cable Telephony subsidiary, which is included in its Wholesale Telecommunications Services segment, was awarded approximately 23 million,
plus interest from November 2005, in an arbitration proceeding against Altice One S.A. and certain of its affiliates. The arbitration proceeding related to Altices termination of cable telephony license agreements Net2Phone had entered into in
November 2004. The Company recorded a gain of $40.0 million for this arbitration award, including accrued interest, in the first quarter of fiscal 2008. The Company received 29.3 million in March 2008, which includes interest from
November 2005.

Note 4Purchased Debt Portfolios

The Company records revenues on its purchased debt portfolios using the effective yield method for substantially all of its debt portfolios. In fiscal 2007, the Companys first full year of operations in the debt
acquisition business, the cost recovery method was primarily used as the Company was developing the experience necessary to reasonably predict the timing and amount of collections from the individual portfolios purchased. Under the cost recovery
method, no revenue is recognized until the Company has fully collected the cost of the portfolio.



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The change in the carrying value of the purchased debt portfolios is as follows:



|                                                        |  |                                |         |  
|------------------------------------------------------- |  | ------------------------------ | ------- | -
|                                                        |  | Nine Months EndedApril 30,2008 |        
|                                                        |  | (in thousands)                 |        
|Balance, beginning of period                            |  | $                              | 51,112  |  
|Purchases of debt portfolios                            |  |                                | 67,331  |  
|Collections                                             |  |                                | (52,540 | )
|Proceeds from portfolio sales applied to carrying value |  |                                | (1,607  | )
|Revenue recognized                                      |  |                                | 33,748  |  
|Provision for bad debt                                  |  |                                | (16,052 | )
|                                                        |  |                                |         |  
|Balance, end of period                                  |  |                                | 81,992  |  
|Less current portion included in other current assets   |  |                                | (23,678 | )
|                                                        |  |                                |         |  
|Long term portion included in other assets              |  | $                              | 58,314  |  
|                                                        |  |                                |         |  

As of April 30, 2008, the original undiscounted contractual amount less collections since
acquisition was $1.7 billion.

During the nine months ended April 30, 2008, debt portfolios were purchased with a face value of $756.2
million for $67.3 million. The estimated cash flows expected to be collected at the date of acquisition for these portfolios was approximately $126.0 million.

Purchases during the nine months ended April 30, 2008 include $0.7 million for debt portfolios accounted for using the cost recovery method. As of April 30, 2008, the carrying value of debt portfolios
accounted for using the cost recovery method was nil.

Accretable yield represents the amount of revenue expected over the remaining life
of the investment in purchased debt portfolios. The change in accretable yield for the debt portfolios accounted for using the effective yield method is as follows:



|                             |  |                                |         |  
|---------------------------- |  | ------------------------------ | ------- | -
|                             |  | Nine Months EndedApril 30,2008 |        
|                             |  | (in thousands)                 |        
|Balance, beginning of period |  | $                              | 56,963  |  
|Additions                    |  |                                | 59,603  |  
|Revenue recognized           |  |                                | (30,798 | )
|Adjustments                  |  |                                | (507    | )
|                             |  |                                |         |  
|Balance, end of period       |  | $                              | 85,261  |  
|                             |  |                                |         |  



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The change in the provision for bad debt of the portfolios is as follows:



|                                   |  |                                |        |  
|---------------------------------- |  | ------------------------------ | ------ | -
|                                   |  | Nine Months EndedApril 30,2008 |       
|                                   |  | (in thousands)                 |       
|Balance, beginning of period       |  | $                              |       |  
|Provision for bad debt             |  |                                | 16,052 |  
|Uncollectible accounts written-off |  |                                | (5,148 | )
|                                   |  |                                |        |  
|Balance, end of period             |  | $                              | 10,904 |  
|                                   |  |                                |        |  

In the nine months ended April 30, 2008, the Company recorded bad debt expense of $16.1
million as a result of lower than expected cash collections to date and decreases in the estimated future cash collections for certain pools of portfolios.

Note 5Acquisition of E.G.L. Oil Shale, L.L.C.

As of April 10, 2008, the Companys wholly owned subsidiary,
American Shale Oil Corporation (AMSO), acquired a 75% equity interest in E.G.L. Oil Shale, L.L.C. (EGL) in exchange for cash of $2.5 million and certain commitments for future funding of EGLs operations. As of
April 22, 2008, the Company acquired an additional 14.9437% equity interest in EGL in exchange for cash of $3.0 million. EGL is one of three holders of 10-year leases granted by the U.S. Bureau of Land Management to research, test and
demonstrate the potential for commercial oil shale production in western Colorado. AMSO has committed to a minimum total investment of $11.0 million in EGL, which includes $2.5 million used for the purchase of the 75% interest in EGL. AMSOs
75% equity interest is subject to reduction if AMSO fails to meet further commitments to fund EGLs research, development and demonstration plan. Once EGL demonstrates the economic and environmental viability of its technology, it will have the
opportunity to expand its lease to 5,120 acres for commercial development.

The acquisition of EGL was accounted for under the purchase
method of accounting, and accordingly, the net assets and results of operations of the acquired business were included in the consolidated financial statements from the date of acquisition. The Company charged an aggregate of $5.5 million to
research and development expense at the acquisition date, which includes the amounts assigned to EGLs tangible and intangible assets to be used in its research and development project that have no alternative future use.

Note 6Purchase of Building and Assumption of Mortgage

On February 7, 2008, the Company completed the purchase of its headquarters office building in exchange for $24.8 million in cash and the assumption of the remainder of the existing mortgage on the building in the amount of $26.9
million. In addition, an affiliate of the seller repaid its $16.9 million note payable to the Company that was secured by an interest in the building.

The mortgage secures a promissory note that bears interest at the rate of 8.9% per annum and is payable in monthly installments of $0.3 million consisting of principal and interest. The maturity date of the note
is April 1, 2020. As of April 30, 2008, the mortgage balance was $26.7 million of which the current portion was $0.6 million.

Note
7Sale of IDT Entertainment

In the first quarter of fiscal 2007, the Company completed the sale of IDT Entertainment to Liberty
Media Corporation for (i) 14.9 million shares of IDT Class B common stock and Liberty Medias approximate 4.8%



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



interest in IDT Telecom, (ii) $220.0 million in cash, net of certain working capital adjustments, (iii) the repayment of $58.7 million of
IDT Entertainments intercompany indebtedness payable to IDT and (iv) the assumption of all of IDT Entertainments existing indebtedness. The Company is also eligible to receive additional consideration from Liberty Media based upon
any appreciation in the value of IDT Entertainment over the five-year period following the closing of the transaction or a shorter period under specified circumstances (Contingent Value), equal to 25% of the excess, if any, of the net
equity value of IDT Entertainment over $453 million. However, the Company would have to pay Liberty Media up to $3.5 million if the Contingent Value does not exceed $439 million. The Company recognized a gain of $205.2 million in fiscal 2007 in
connection with the sale, of which $198.2 million was recognized in the first quarter of fiscal 2007. Loss on sale of discontinued operations in the three and nine months ended April 30, 2008 of $0.5 million and $4.5 million, respectively,
included compensation, taxes and the costs of a lawsuit, all of which arose from and were directly related to the operations of IDT Entertainment prior to its disposal.

IDT Entertainment consisted primarily of animation and live-action production operations as well as a home entertainment distribution business. Through studios based in the United States and Canada, IDT Entertainment
developed and produced 2D and 3D animated content for distribution theatrically, on television, and direct-to-video/DVD. Production was focused on proprietary content and was also performed for third parties. IDT Entertainment was also involved in
the development and production of live-action content for feature films, television and direct-to-video/DVD distribution.

The sale met the
criteria to be reported as a discontinued operation and, accordingly, IDT Entertainments results of operations for all periods presented are classified as part of discontinued operations.

Summary Financial Data of Discontinued Operations

Revenues, loss before income taxes and net loss of IDT Entertainment included in discontinued operations is as follows:



|                         |  |                                |        |  
|------------------------ |  | ------------------------------ | ------ | -
|                         |  | Nine Months endedApril 30,2007 |       
|                         |  | (in thousands)                 |       
|Revenues                 |  | $                              | 17,905 |  
|                         |  |                                |        |  
|Loss before income taxes |  | $                              | (6,995 | )
|                         |  |                                |        |  
|Net loss                 |  | $                              | (7,165 | )
|                         |  |                                |        |  

Note 8Sale of Toucan

In the first quarter of fiscal 2007, the Company completed the sale of its United Kingdom-based consumer phone services business, Toucan, to Pipex Communications plc in exchange for $38.4 million in cash
(including the assumption of intercompany obligations owed to IDT and its subsidiaries) and 43.2 million Pipex ordinary shares, which were later sold for $7.9 million. Toucan was launched in November 2003 and marketed local, long distance,
broadband and wireless communications services in the United Kingdom. Pursuant to the terms of the agreement, Pipex assumed Toucans existing customer base and those employees supporting its operations. The Company provided Toucan with
termination, call center and other support services. As a result of these continuing services, the sale did not meet the criteria to be reported as a discontinued operation. Toucans historical results of operations are included in the
Companys Consumer Phone Services segment. The Companys results of operations for the nine months ended April 30, 2007 included revenues generated by



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Toucans operations of $16.4 million and loss from operations of $2.6 million. The Company recognized a gain of $44.7 million in fiscal 2007 in
connection with the sale.

Note 9Stock Repurchases and Cash Dividend

In June 2006, the Companys Board of Directors authorized a stock repurchase program for the repurchase of up to an aggregate of 25 million
shares of the Companys Class B common stock and common stock, without regard to class. In the nine months ended April 30, 2008, the Company repurchased an aggregate of 5.8 million shares of common stock and Class B common stock
for an aggregate purchase price of $44.5 million. As of April 30, 2008, 17.1 million shares remain available for repurchase under the stock repurchase program.

In the nine months ended April 30, 2008 and 2007, the Company acquired an aggregate of 0.1 million and 0.3 million shares, respectively, of its Class B common stock held by certain of its employees for
$0.8 million and $3.9 million, respectively, to satisfy the employees tax withholding obligations in connection with the vesting of restricted stock awards. Such shares are repurchased by the Company based on their fair market value on the
trading day immediately prior to the vesting date.

On March 14, 2007, the Companys Board of Directors authorized a cash
dividend of $0.25 per share of the Companys common stock, Class A common stock and Class B common stock. The $0.25 per share dividend in the aggregate amount of $20.6 million was paid on April 24, 2007 to shareholders of record at
the close of business on March 27, 2007. No dividend was authorized or paid in the nine months ended April 30, 2008.

Note 10Earnings
Per Share

The Company computes earnings per share under the provisions of SFAS No. 128, Earnings per Share, whereby basic
earnings per share is computed by dividing net income (loss) attributable to all classes of common shareholders by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per
share is determined in the same manner as basic earnings per share, except that the number of shares is increased to include non-vested restricted stock and to assume exercise of potentially dilutive stock options and contingently issuable shares
using the treasury stock method, unless the effect of such increase is anti-dilutive. For the three and nine months ended April 30, 2008 and 2007, the diluted earnings per share amounts equal basic earnings per share because the Company had
losses from continuing operations and the impact of the assumed exercise of stock options and non-vested restricted stock would have been anti-dilutive. Accordingly, the following securities have been excluded from the dilutive earnings per share
computation:



|                             |  |                |  |      
|---------------------------- |  | -------------- |  | -----
|                             |  | At April 30,  
|                             |  | 2008           |  | 2007 
|                             |  | (In thousands)
|Stock options                |  | 7,507          |  | 7,855
|Non-vested restricted stock  |  | 455            |  | 713  
|Contingently issuable shares |  | 167            |  | 114  
|                             |  |                |  |      
|Total                        |  | 8,129          |  | 8,682
|                             |  |                |  |      



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 11Comprehensive (Loss) Income

The Companys comprehensive (loss) income consists of the following:



|                                                         |                |                             |         |      |                            |   |         |   |  |      |          |   |  |   |        
|-------------------------------------------------------- | -------------- | --------------------------- | ------- | ---- | -------------------------- | - | ------- | - |  | ---- | -------- | - |  | - | -------
|                                                         |                | Three Months EndedApril 30, |         |      | Nine Months EndedApril 30,
|                                                         | 2008           |                             |         | 2007 |                            |   | 2008    |   |  | 2007
|                                                         | (in thousands)
|Net (loss) income                                        |                | $                           | (82,211 | )    |                            | $ | (15,924 | ) |  | $    | (137,900 | ) |  | $ | 171,031
|Foreign currency translation adjustments                 |                |                             | 5,154   |      |                            |   | 2,391   |   |  |      | (2,811   | ) |  |   | 5,980  
|Unrealized gains (loss) on available-for-sale securities |                |                             | 4,541   |      |                            |   | (4,119  | ) |  |      | 1,605    |   |  |   | 5,569  
|                                                         |                |                             |         |      |                            |   |         |   |  |      |          |   |  |   |        
|Comprehensive (loss) income                              |                | $                           | (72,516 | )    |                            | $ | (17,652 | ) |  | $    | (139,106 | ) |  | $ | 182,580
|                                                         |                |                             |         |      |                            |   |         |   |  |      |          |   |  |   |        

Note 12Restructuring and Severance Charges

The Companys restructuring and severance charges consist of the following:



|                                      |  |                             |        |                            |   |       |  |      |        |  |   |      
|------------------------------------- |  | --------------------------- | ------ | -------------------------- | - | ----- |  | ---- | ------ |  | - | -----
|                                      |  | Three Months EndedApril 30, |        | Nine Months EndedApril 30,
|                                      |  | 2008                        |        | 2007                       |   | 2008  |  | 2007
|                                      |  | (in thousands)             
|Prepaid Products                      |  | $                           | 6,516  |                            | $ | 402   |  | $    | 7,356  |  | $ | 2,451
|Consumer Phone Services               |  |                             | 689    |                            |   | 57    |  |      | 750    |  |   | 335  
|Wholesale Telecommunications Services |  |                             | 4,762  |                            |   | 675   |  |      | 6,116  |  |   | 3,968
|IDT Energy                            |  |                             |       |                            |   |      |  |      | 89     |  |   |     
|IDT Carmel                            |  |                             | 30     |                            |   |      |  |      | 30     |  |   |     
|IDT Capital                           |  |                             | 29     |                            |   | 200   |  |      | 876    |  |   | 689  
|Corporate                             |  |                             | 4,511  |                            |   | 422   |  |      | 5,502  |  |   | 639  
|                                      |  |                             |        |                            |   |       |  |      |        |  |   |      
|Total                                 |  | $                           | 16,537 |                            | $ | 1,756 |  | $    | 20,719 |  | $ | 8,082
|                                      |  |                             |        |                            |   |       |  |      |        |  |   |      

The charges in the three and nine months ended April 30, 2008 and 2007 consist primarily of
severance charges relating to a company-wide cost savings program initiated towards the end of the third quarter of fiscal 2006. As of April 30, 2008, this program resulted in the termination of approximately 1,110 employees.

The following table summarizes the remaining reserve balances related to the Companys restructuring activities (substantially all of which relates
to workforce reductions):



|            |  |                        |        |                   |   |          |  |   |                          |   |  |                         |      |   |  |   |       
|----------- |  | ---------------------- | ------ | ----------------- | - | -------- |  | - | ------------------------ | - |  | ----------------------- | ---- | - |  | - | ------
|            |  | Balance atJuly 31,2007 |        | Charged toExpense |   | Payments |  |   | Non-cashChargesand Other |   |  | Balance atApril 30,2008
|            |  | (in thousands)        
|IDT Telecom |  | $                      | 8,711  |                   | $ | 14,222   |  | $ | (14,294                  | ) |  | $                       | (534 | ) |  | $ | 8,105 
|IDT Energy  |  |                        |       |                   |   | 89       |  |   | (89                      | ) |  |                         |     |   |  |   |      
|IDT Carmel  |  |                        |       |                   |   | 30       |  |   | (30                      | ) |  |                         |     |   |  |   |      
|IDT Capital |  |                        | 834    |                   |   | 876      |  |   | (964                     | ) |  |                         | (211 | ) |  |   | 535   
|Corporate   |  |                        | 8,250  |                   |   | 5,502    |  |   | (8,201                   | ) |  |                         | 135  |   |  |   | 5,686 
|            |  |                        |        |                   |   |          |  |   |                          |   |  |                         |      |   |  |   |       
|Total       |  | $                      | 17,795 |                   | $ | 20,719   |  | $ | (23,578                  | ) |  | $                       | (610 | ) |  | $ | 14,326
|            |  |                        |        |                   |   |          |  |   |                          |   |  |                         |      |   |  |   |       



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 13Business Segment Information

The Company has the following five reportable business segments: Prepaid Products, Consumer Phone Services, Wholesale Telecommunications Services, IDT
Energy and IDT Carmel. All other operating segments that are not reportable individually are collectively called IDT Capital. Prepaid Products, Consumer Phone Services and Wholesale Telecommunications Services comprise the IDT Telecom division. The
operating results of these business segments are distinguishable and are regularly reviewed by the Companys chief operating decision maker.

The Prepaid Products segment markets and sells primarily prepaid and rechargeable calling cards and prepaid wireless phone services. The Consumer Phone Services segment provides consumer local and long distance services. The Wholesale
Telecommunications Services segment consists of wholesale carrier services provided to affiliates as well as other telecommunications companies, and cable telephony services. The IDT Energy segment operates the Companys Energy Services
Company, or ESCO, in New York State. IDT Carmel operates the Companys receivables portfolio management and collection businesses. IDT Capital consists of the IDT Local Media businesses (principally CTM Brochure Display and WMET radio), IDT
Internet Mobile Group (Zedge, a website providing a creation and distribution platform for mobile content and IDW, a comics, graphics novel, and childrens book publisher that creates and licenses original intellectual property), Alternative
Energy (which consists of American Shale Oil Corporation, the Companys U.S. oil shale research and development business, and other alternative energy initiatives) and other smaller businesses. Corporate costs include certain services, such as
corporate executive compensation, treasury, tax and accounting services, corporate governance including Board of Directors fees, internal and external audit, public and investor relations, corporate insurance, corporate legal, and business
development, and other corporate-related general and administrative expenses including, among others, facilities costs, charitable contributions and travel and entertainment, as well as depreciation expense on corporate assets. Corporate does not
generate any revenues, nor does it incur any direct cost of revenues.

In the first quarter of fiscal 2008, Wholesale Telecommunications
Services began charging for the telecommunications services it provides to other segments. Wholesale Telecommunications Services provides services primarily to Prepaid Products and to external customers. Wholesale Telecommunications Services
currently charges Prepaid Products at a rate of cost plus an agreed mark-up for its services. The costs of connectivity and operating the network assets, which historically were allocated to the Prepaid Products and Wholesale Telecommunications
Services segments, are now allocated primarily to the Wholesale Telecommunications Services segment. The Companys management believes that this change in structure better reflects the results of operations of both Wholesale Telecommunications
Services as a carrier services provider and Prepaid Products as a provider of calling cards and other prepaid products. In addition, in the first quarter of fiscal 2008, Ethnic Grocery Brands and certain other businesses that were historically
included in IDT Capital were transferred to IDT Telecoms Prepaid Products segment. In the second quarter of fiscal 2008, the Company began reporting IDT Carmel as a separate reportable segment, therefore IDT Carmel is no longer included in IDT
Capital. To the extent possible, comparative historical results have been reclassified and restated as if the current business segment structure existed in all periods presented, although these results may not be indicative of the results which
would have been achieved had the business segment structure been in effect during those periods.

The Company evaluates the performance of
its business segments based primarily on operating income (loss).



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##### Table of Contents

IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Operating results for the business segments of the Company are as follows:



|                                    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|----------------------------------- |  | --------------- | ------- | - | --------------------- | - | ----------------------------------- |  | - | --------- | - | --------- | - | ------- | ---------- | - | ------ | --------- |  | - | ------- | - |  | - | ------- | - |  | - | --------- | -
|(in thousands)                      |  | PrepaidProducts |         |   | ConsumerPhoneServices |   | WholesaleTelecommunicationsServices |  |   | IDTEnergy |   | IDTCarmel |   |         | IDTCapital |   |        | Corporate |  |   | Total   |  
|Three Months Ended April 30, 2008   |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Total revenues                      |  | $               | 182,762 |   |                       | $ | 20,779                              |  | $ | 248,062   |   |           | $ | 66,290  |            | $ | 12,513 |           |  | $ | 13,461  |   |  | $ |        |   |  | $ | 543,867   |  
|Intersegment revenues               |  |                 |        |   |                       |   |                                    |  |   | (90,619   | ) |           |   |        |            |   |       |           |  |   |        |   |  |   |        |   |  |   | (90,619   | )
|                                    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Net revenues                        |  |                 | 182,762 |   |                       |   | 20,779                              |  |   | 157,443   |   |           |   | 66,290  |            |   | 12,513 |           |  |   | 13,461  |   |  |   |        |   |  |   | 453,248   |  
|Operating (loss) income             |  |                 | (24,462 | ) |                       |   | 7,596                               |  |   | (10,438   | ) |           |   | 850     |            |   | 1,859  |           |  |   | (17,026 | ) |  |   | (28,918 | ) |  |   | (70,539   | )
|Restructuring and severance charges |  |                 | 6,516   |   |                       |   | 689                                 |  |   | 4,762     |   |           |   |        |            |   | 30     |           |  |   | 29      |   |  |   | 4,511   |   |  |   | 16,537    |  
|Three Months Ended April 30, 2007   |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Total revenues                      |  | $               | 230,667 |   |                       | $ | 30,674                              |  | $ | 289,199   |   |           | $ | 57,262  |            | $ | 952    |           |  | $ | 11,539  |   |  | $ |        |   |  | $ | 620,293   |  
|Intersegment revenues               |  |                 |        |   |                       |   |                                    |  |   | (134,937  | ) |           |   |        |            |   |       |           |  |   |        |   |  |   |        |   |  |   | (134,937  | )
|                                    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Net revenues                        |  |                 | 230,667 |   |                       |   | 30,674                              |  |   | 154,262   |   |           |   | 57,262  |            |   | 952    |           |  |   | 11,539  |   |  |   |        |   |  |   | 485,356   |  
|Operating (loss) income             |  |                 | (16,950 | ) |                       |   | 3,927                               |  |   | (6,184    | ) |           |   | 2,451   |            |   | (3,336 | )         |  |   | (8,848  | ) |  |   | (19,052 | ) |  |   | (47,992   | )
|Restructuring and severance charges |  |                 | 402     |   |                       |   | 57                                  |  |   | 675       |   |           |   |        |            |   |       |           |  |   | 200     |   |  |   | 422     |   |  |   | 1,756     |  
|Nine Months Ended April 30, 2008    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Total revenues                      |  | $               | 594,520 |   |                       | $ | 69,052                              |  | $ | 792,547   |   |           | $ | 173,434 |            | $ | 34,542 |           |  | $ | 40,105  |   |  | $ |        |   |  | $ | 1,704,200 |  
|Intersegment revenues               |  |                 |        |   |                       |   |                                    |  |   | (306,161  | ) |           |   |        |            |   |       |           |  |   |        |   |  |   |        |   |  |   | (306,161  | )
|                                    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Net revenues                        |  |                 | 594,520 |   |                       |   | 69,052                              |  |   | 486,386   |   |           |   | 173,434 |            |   | 34,542 |           |  |   | 40,105  |   |  |   |        |   |  |   | 1,398,039 |  
|Operating (loss) income             |  |                 | (55,489 | ) |                       |   | 16,824                              |  |   | 33,526    |   |           |   | 4,459   |            |   | (8,324 | )         |  |   | (41,105 | ) |  |   | (68,938 | ) |  |   | (119,047  | )
|Restructuring and severance charges |  |                 | 7,356   |   |                       |   | 750                                 |  |   | 6,116     |   |           |   | 89      |            |   | 30     |           |  |   | 876     |   |  |   | 5,502   |   |  |   | 20,719    |  
|Nine Months Ended April 30, 2007    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Total revenues                      |  | $               | 743,062 |   |                       | $ | 118,736                             |  | $ | 918,864   |   |           | $ | 145,414 |            | $ | 3,655  |           |  | $ | 37,315  |   |  | $ |        |   |  | $ | 1,967,046 |  
|Intersegment revenues               |  |                 |        |   |                       |   |                                    |  |   | (446,864  | ) |           |   |        |            |   |       |           |  |   |        |   |  |   |        |   |  |   | (446,864  | )
|                                    |  |                 |         |   |                       |   |                                     |  |   |           |   |           |   |         |            |   |        |           |  |   |         |   |  |   |         |   |  |   |           |  
|Net revenues                        |  |                 | 743,062 |   |                       |   | 118,736                             |  |   | 472,000   |   |           |   | 145,414 |            |   | 3,655  |           |  |   | 37,315  |   |  |   |        |   |  |   | 1,520,182 |  
|Operating (loss) income             |  |                 | (36,703 | ) |                       |   | 55,874                              |  |   | (11,057   | ) |           |   | 10,941  |            |   | (5,511 | )         |  |   | (16,030 | ) |  |   | (46,570 | ) |  |   | (49,056   | )
|Restructuring and severance charges |  |                 | 2,451   |   |                       |   | 335                                 |  |   | 3,968     |   |           |   |        |            |   |       |           |  |   | 689     |   |  |   | 639     |   |  |   | 8,082     |  

Operating income of Wholesale Telecommunications Services in the nine months ended April 30,
2008 includes the gain from the arbitration award of $40.0 million (see Note 3). Operating income of Consumer Phone Services in the nine months ended April 30, 2007 includes the gain from the sale of Toucan, the Companys United
Kingdom-based consumer phone services business, of $44.7 million (see Note 8).



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Note 14Legal Proceedings

On May 13, 2008, Aerotel, Ltd. filed a complaint against the Company in the United States District Court Southern District of New York. The lawsuit relates to a dispute concerning the Settlement Agreement between
the Company and Aerotel that the parties executed on August 17, 2007, which resulted in the dismissal of a patent infringement lawsuit entitled Aerotel, Ltd. et al. v. IDT Corporation. The current complaint alleges Breach of Contract,
Anticipatory Breach, and Breach of Covenant of Good Faith and Fair Dealing. Aerotel is seeking damages in the amount of at least $30 million. The complaint has not yet been served upon the Company. Once served with the complaint, the Company plans
to vigorously defend against the lawsuit.

On April 18, 2008, a federal jury awarded Alfred West, a former employee of the Company,
$10.5 million for breach of contract and a related claim related to Wests employment by the Company for six months in 2001. West has made a motion for an additional $4.4 million in prejudgment interest, which the Company has opposed. The
Company has made post-trial motions seeking to vacate the award and, if necessary, intends to appeal the judgment. Pending a final resolution, the Company accrued an expense of $10.5 million in April 2008 in its corporate general and administrative
expenses for this matter. Wests original contract claim was dismissed by a trial judge several years ago, but in 2005 West was awarded $1.5 million by a jury on a related claim. That award, however, was set aside by the trial judge in 2006 as
being unsupported by the evidence. In an appeal by West of that decision, an appellate court reinstated Wests breach of contract claim, which led to the second trial that concluded with the $10.5 million award.

On May 5, 2004, the Company filed a complaint in the Supreme Court of the State of New York, County of New York, seeking injunctive relief and
damages against Tyco Group, S.A.R.L., Tyco Telecommunications (US) Inc. (f/k/a TyCom (US) Inc.), Tyco International, Ltd., Tyco International (US) Inc., and TyCom Ltd. The Company alleged that the defendants breached a settlement agreement that
they had entered into with the Company to resolve certain disputes and civil actions among the parties. The Company alleged that the defendants did not provide the Company, as required under the settlement agreement, free of charge and for the
Companys exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the settlement agreement) (Wavelengths) on a global undersea fiber optic network that TyCom Ltd. was deploying at
that time. In June 2004, Tyco International (US) Inc. and Tyco Telecommunications (US) Inc. asserted several counterclaims against the Company, alleging that the Company breached the settlement agreement and is liable for damages for allegedly
refusing to accept the defendants offer regarding the Wavelengths referenced in the settlement agreement and for making a public statement that Tyco failed to provide the Company with the use of its Wavelengths. The parties completed pre-trial
discovery and each party filed motions for summary judgment. On July 11, 2007, the Court granted the Companys motion for partial summary judgment on liability, and granted its motion for summary judgment on Tycos counterclaims. On
November 21, 2007, Tyco filed a notice of appeal of the order granting the Companys motion for summary judgment on liability. On January 24, 2008, the Appellate Court granted a motion made by Tyco and stayed proceedings in the trial
court until the appeal is decided. The appeal was heard on February 21, 2008 and the parties are awaiting a decision.

On
March 29, 2004, D. Michael Jewett (Jewett), a former employee whose employment the Company terminated less than seven months after he was first hired, filed a complaint against the Company in the United States District Court,
District of New Jersey, following his termination. The complaint alleges (i) violations of the New Jersey Anti-Racketeering Statute; (ii) violations of the New Jersey Conscientious Employee Protection Act (CEPA);
(iii) violations of the New Jersey Law Against Discrimination (LAD); (iv) common law defamation; and (v) New Jersey common law intentional infliction of emotional distress (IIED). Jewett is seeking damages of
$31 million, plus attorneys fees. The Court dismissed the Anti-Racketeering claim and a portion of the LAD claim; and narrowed the remaining claims described above. The Company denies liability for



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the remaining claims. On January 25, 2006, Jewett filed an amended supplemental pleading which the Company moved to dismiss. Plaintiff opposed the
Companys motion. On September 11, 2007, Judge Chesler issued an order which dismissed the CEPA and LAD claims, without prejudice, against all individual defendants with the exception of Jewetts direct supervisor. Judge Chesler also
granted in part and denied in part the Companys motion to dismiss the supplemental complaint. Judge Chesler dismissed plaintiffs abuse of process and defamation claims with prejudice. However, the judge denied the motion to dismiss
the count for IIED. Thereafter, defendants were permitted to file another motion to dismiss plaintiffs IIED claim in the amended supplemental complaint, which the plaintiff opposed. On February 19, 2008, Judge Chesler issued an Opinion
and Order dismissing plaintiffs IIED claim. Plaintiff also sought leave to amend his complaint and supplemental complaint to add some additional claims, which was denied as well. The parties are engaged in discovery.

On or about April 1, 2004, Jewett sent a copy of his complaint to the United States Attorneys Office because in his complaint, Jewett alleged,
among other things, that improper payments were made to foreign officials in connection with an IDT Telecom contract. As a result, the Department of Justice, the Securities and Exchange Commission and the United States Attorney in Newark, New Jersey
conducted an investigation of this matter. The Company and the Audit Committee of the Companys Board of Directors initiated independent investigations, conducted by outside counsel, regarding certain of the matters raised in the Jewett
complaint and in these investigations. Neither the Companys nor the Audit Committees investigations have found any evidence that the Company made any such improper payments to foreign officials. The Company continues to cooperate with
these investigations.

On June 1, 2006, the Company filed a complaint in the United States District Court for the District of New
Jersey alleging that eBay, Inc., Skype Technologies SA, Skype, Inc. and several as of yet unidentified business entities (collectively, Skype) infringed patents owned by the Company. The Companys complaint was amended to include
claims for Skypes alleged infringement of additional patents, all owned by the Company. The lawsuit seeks, among other things, an injunction enjoining Skype from infringing these patents and monetary damages in connection with Skypes
alleged infringement. Skype has answered the complaint and amended complaints, denying any liability with respect to the Companys claims. On February 20, 2008, eBay, Inc. filed a complaint (which was subsequently amended) in the United
States District Court for the Western District of Arkansas alleging that IDT Corporation, Net2Phone, Inc., IDT Telecom, Inc. and Union Telecard Alliance, LLC infringed U.S. Patent No. 6,067,350 that is owned by eBay, Inc. The lawsuit seeks,
among other things, an injunction enjoining the Company from infringing the patent and an undetermined amount of monetary damages in connection with the Companys alleged infringement. On April 23, 2008, the Company answered eBays
complaint and denied all wrongdoing. The Company also filed counterclaims against eBay, for infringement of three Net2Phone patents: U.S. Patents numbers 6,275,490; 5,974,414; and 6,631,399. The Company asked the court in Arkansas to enjoin
those portions of eBays auction business that infringe Net2Phone patents and to award Net2Phone damages as a result of eBays patent infringement. eBay has answered Net2Phones counterclaims and has denied all wrongdoing.

On March 8, 2007, IDT Telecom, Inc. and the Companys 51%-owned U.S. calling card distribution partnership, Union Telecard Alliance, LLC
filed a complaint and on April 2, 2007 an amended complaint in the United States District Court for the District of New Jersey against several prepaid calling card companies. The lawsuit alleges that the defendants are systematically falsely
promising minutes in their voice prompts and other advertisements that consumers cannot obtain from the cards they have bought. The Company sought an injunction barring the defendants from continuing their false promises as well as money damages and
asserts that the defendants have violated the federal Lanham Act as well as several states false advertising and deceptive trade practices statutes. The Company has settled with five of the defendant groups. However, on May 20, 2008, the
Court rescinded the Companys settlement agreement with one of the defendant groups (the group consisting



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



of Dollar Phone Services, Inc., Dollar Phone Enterprise, Inc., Dollar Phone Corp. and Dollar Phone Access Inc.) and ordered that this group of defendants be
restored to the case. On May 9, 2007, the judge in the case denied the Companys motion for a preliminary injunction, which decision was affirmed by the Court of Appeals for the Third Circuit, and also denied motions to dismiss filed by
all of the non-settling defendants who claimed that the Court lacked jurisdiction. The Company is continuing to pursue the case against the non-settling defendants.

In addition to the foregoing, the Company is subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this
regard, in the opinion of the Companys management, none of the legal proceedings to which the Company is a party, whether discussed above or otherwise, will have a material adverse effect on the Companys results of operations, cash flows
or its financial condition.

Note 15Commitments and Contingencies

The Company has purchase commitments and other obligations of approximately $4.3 million as of April 30, 2008. In February 2005, the Company entered
into a multi-year agreement to grant a telecommunications service provider the right to service certain of its domestic and international wireless traffic. Terms of the agreement are based on a minimum purchase of $75 million of services from the
telecommunications service provider through October 2009. As of April 30, 2008, telecommunications services of approximately $20 million have been purchased.

As of April 30, 2008, the Company was committed to invest up to an additional $7.5 million in a hedge fund when required by the General Partner of the fund.

On April 16, 2008, the Company entered into a retention agreement with Yona Katz, the Chief Operating Officer of its Telecom division, pursuant to
which Mr. Katz agreed to continue his employment until at least September 30, 2008, unless terminated earlier. Under certain circumstances, Mr. Katz may be eligible to receive severance compensation upon a termination of his
employment during a period of eighteen months from April 1, 2008. The total amount of the severance payment would be $2.2 million, provided that Mr. Katz executes and delivers a separation and general release agreement. The Company is
recording this compensation as an expense ratably over the period from April 1, 2008 to September 30, 2008. Also in April 2008, the Company entered into similar agreements with three other IDT Telecom executive employees. These employees
are eligible to receive aggregate severance compensation of $3.5 million upon termination of their employment under certain circumstances. Two of these employees agreed to continue their employment, one until at least July 31, 2008 and the
other until at least September 30, 2008. The Company is recording this compensation as an expense ratably over the respective service periods.

IDT Telecom in the U.S. records accruals for various telecom regulatory agency fees including: Telecommunications Relay Services Fund (TRS), Federal Communications Commission (FCC), North American Numbering Plan (NANPA), Local Number
Portability (LNP) and Universal Service Fund (USF). As of April 30, 2008, the accrued expense balance for these fees was $35.3 million. This balance reflects what the Company believes at this time to be its liability for all such fees, given
the methodologies used by the Universal Service Administration Corporation (USAC) for calculation of USF related fees. The USAC recently completed an audit of the Companys Form 499-A filings for calendar years 2005 and 2006, the results of
which did not significantly affect the Companys results of operations, cash flows or its financial condition.

As of April 30,
2008, the Company had letters of credit outstanding totaling $55.0 million, the majority of which expire by April 30, 2009. Cash and cash equivalents of $1.6 million and $2.4 million that serve as collateral was restricted against such letters
of credit, and is included in Cash and cash equivalents in the



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Companys condensed consolidated balance sheets as of April 30, 2008 and July 31, 2007, respectively. Also, current marketable securities of
$55.7 million and $76.3 million was restricted primarily against letters of credit, and is included in Marketable securities in the Companys condensed consolidated balance sheets as of April 30, 2008 and July 31, 2007,
respectively.

Note 16Recently Issued Accounting Standards Not Yet Adopted

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement
No. 157. This FSP delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at
least annually). The Company is required to adopt SFAS 157 effective August 1, 2008, except for the items within the scope of FSP 157-2, for which the Company is required to adopt SFAS 157 effective August 1, 2009. SFAS 157 does not
require any new fair value measurements, however, the Companys application of this statement will change current practice for some of its fair value measurements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 provides companies with an option to report selected financial assets and
liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159
does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS 107, Disclosures about Fair Value of Financial
Instruments. The Company is required to adopt SFAS 159 effective August 1, 2008. The Company does not currently expect to elect the fair value option for the valuation of any of its eligible assets or liabilities.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. SFAS 141(R) establishes principles and requirements for
how the acquirer: (a) recognizes and measures the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (b) recognizes and measures the goodwill acquired in the business combination or a
gain from a bargain purchase, and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141 (R) requires the acquiring entity
in a business combination to recognize the full fair value of the assets acquired and liabilities assumed in the transaction at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived
intangible asset at the acquisition date; the immediate expense recognition of transaction costs; changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense;
and restructuring plans will be accounted for separately from the business combination, among other things. The Company is required to apply SFAS 141(R) to business combinations with an acquisition date on or after August 1, 2009. SFAS 141
(R) fundamentally changes many aspects of existing accounting requirements for business combinations. As such, if the Company enters into any business combinations after the adoption of SFAS 141 (R), a transaction may significantly impact the
Companys financial position and results of operations, but not cash flows, when compared to acquisitions accounted for under current U.S. generally accepted accounting principles.

In December 2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51.
SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Also, SFAS 160 requires consolidated net income (loss)
to include the amounts attributable to both



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IDT CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



the parent and the noncontrolling interest, and it requires disclosure of the amounts of net income (loss) attributable to the parent and to the
noncontrolling interest. Finally, SFAS 160 requires increases and decreases in the noncontrolling ownership interest amount to be accounted for as equity transactions, and the gain or loss on the deconsolidation of a subsidiary will be measured
using the fair value of any noncontrolling equity investment rather than the carrying amount of the retained investment. The Company is required to adopt SFAS 160 on August 1, 2009. Upon the adoption of SFAS 160, the Company must reclassify
historical minority interests included in its consolidated balance sheet to stockholders equity, and reverse historical minority interests in its consolidated results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement
No. 133. SFAS 161 is intended to enhance the current disclosure framework of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 161 requires enhanced disclosure about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys
financial position, results of operations and cash flows. The Company is required to adopt SFAS 161 on August 1, 2009. The Company is currently evaluating the impact of SFAS 161 on the disclosures in its consolidated financial statements.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP 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 SFAS No. 142, Goodwill and Other Intangible Assets. The Company is required to
adopt FSP 142-3 on August 1, 2009. The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be
applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company is currently evaluating the impact of FSP 142-3 on its consolidated financial statements.



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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

The
following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto
and our Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended July 31, 2007, as filed with the U.S. Securities and Exchange Commission.

As used below, unless the context otherwise requires, the terms the Company, IDT, we, us,
and our refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and their subsidiaries, collectively.

Forward-Looking Statements

This Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words believes,
anticipates, expects, plans, intends, and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from
the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not
limited to, those discussed under Item 1A to Part II in this Quarterly Report on Form 10-Q and under Item 1A to Part I in our Annual Report on Form 10-K for the fiscal year ended July 31, 2007. The forward-looking statements are made
as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the
information set forth herein and the other information set forth from time to time in our reports filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our
Annual Report on Form 10-K for the year ended July 31, 2007.

Overview

General

We are a multinational holding company with operations that span several industries. Our
principal businesses consist of:



| |  |  | IDT Telecom, through which we provide telecommunications services and products worldwide to retail and wholesale customers, including prepaid and rechargeable
calling cards, consumer local and long distance service, prepaid wireless phone services and wholesale carrier services;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IDT Energy, which operates our Energy Services Company, or ESCO, in New York State;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | IDT Carmel, our receivables portfolio management and collection businesses;
| | - |  | ---------------------------------------------------------------------------



| |  |  | IDT Local Media, which is primarily comprised of CTM Brochure Display, our brochure distribution company, other advertising-based new product initiatives geared
towards small to medium sized businesses, and the WMET-AM radio station in the Washington D.C. metropolitan area;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | IDT Internet Mobile Group, a new media company that leverages digital, mobile, and traditional distribution mechanisms to create and distribute content. It does
this through its Zedge and IDW arms. Zedge is a website and platform geared toward the production and distribution of mobile content. IDW is a comics, graphics novel, and childrens book publisher that creates and licenses original IP; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Alternative Energy, which consists of American Shale Oil Corporation (AMSO), our U.S. oil shale research and development business, and other alternative energy
initiatives.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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We also hold assets and operate other smaller or early-stage initiatives and operations, including
intellectual property held in units of IDT Capital, IDT Spectrum, which holds a significant number of Federal Communications Commission licenses for commercial fixed wireless spectrum in the United States, IDT Global Israel, which is primarily
comprised of call center operations (which we are in the process of downsizing), and certain real estate investments.

We conduct our
business through the following five reportable segments: Prepaid Products, Consumer Phone Services and Wholesale Telecommunications Services, which comprise IDT Telecom, IDT Energy and IDT Carmel. All other operating segments that are not reportable
individually are collectively called IDT Capital. IDT Capital includes the following businesses: IDT Local Media, IDT Internet Mobile Group, Alternative Energy and various other smaller lines of business.

We are in the process of evaluating divestitures of non-core businesses and assets as well as reducing the operations of our non-profitable divisions and
reducing corporate overhead. We are also focusing on streamlining our core businesses and our businesses in which we believe there is potential for large enterprise value, as well as improving collections in IDT Carmel with a concentration on our
existing portfolios. In particular, we continue to reduce connectivity, development and network costs in IDT Telecom. We also plan to make modest investments in a very limited number of closely managed opportunities.

Acquisition

EGL

As of April 10, 2008, our wholly owned subsidiary, AMSO, acquired a 75% equity interest in E.G.L. Oil Shale, L.L.C. (EGL) in exchange for cash of
$2.5 million and certain commitments for future funding of EGLs operations. As of April 22, 2008, we acquired an additional 14.9437% equity interest in EGL in exchange for cash of $3.0 million. EGL is one of three holders of 10-year
leases granted by the U.S. Bureau of Land Management to research, test and demonstrate the potential for commercial oil shale production in western Colorado. We have committed to a minimum total investment of $11.0 million in EGL, which includes
$2.5 million used for our original purchase of the 75% interest in EGL. AMSOs 75% equity interest is subject to reduction if AMSO fails to meet further commitments to fund EGLs research, development and demonstration plan. Once EGL
demonstrates the economic and environmental viability of its technology, it will have the opportunity to expand its lease to 5,120 acres for commercial development.

Dispositions

Sale of IDT Entertainment

In the first quarter of fiscal 2007, we completed the sale of our IDT Entertainment segment to Liberty Media Corporation for (i) 14.9 million
shares of our Class B common stock and Liberty Medias approximate 4.8% interest in IDT Telecom, (ii) $220.0 million in cash, net of certain working capital adjustments, (iii) the repayment of $58.7 million of IDT Entertainments
intercompany indebtedness payable to us and (iv) the assumption of all of IDT Entertainments existing indebtedness. We are also eligible to receive additional consideration from Liberty Media based upon any appreciation in the value of
IDT Entertainment over the five-year period following the closing of the transaction or a shorter period under specified circumstances (Contingent Value), equal to 25% of the excess, if any, of the net equity value of IDT Entertainment
over $453 million. However, we would have to pay Liberty Media up to $3.5 million if the Contingent Value does not exceed $439 million. We recognized a gain of $205.2 million in fiscal 2007 in connection with the sale, of which $198.2 million was
recognized in the first quarter of fiscal 2007. Loss on sale of discontinued operations in the three and nine months ended April 30, 2008 of $0.5 million and $4.5 million, respectively, included compensation, taxes and the costs of a lawsuit,
all of which arose from and were directly related to the operations of IDT Entertainment prior to its disposal.



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IDT Entertainment consisted primarily of animation and live-action production operations as well as a
home entertainment distribution business. Through studios based in the United States and Canada, IDT Entertainment developed and produced 2D and 3D animated content for distribution theatrically, on television, and direct-to-video/DVD. Production
was focused on proprietary content and was also performed for third parties. IDT Entertainment was also involved in the development and production of live-action content for feature films, television and direct-to-video/DVD distribution.

The sale met the criteria to be reported as a discontinued operation and, accordingly, IDT Entertainments results of operations for all periods
presented are classified as part of discontinued operations.

Revenues, loss before income taxes and net loss of IDT Entertainment included
in discontinued operations is as follows:



|                         |  |                                |        |  
|------------------------ |  | ------------------------------ | ------ | -
|                         |  | Nine Months endedApril 30,2007 |       
|                         |  | (in thousands)                 |       
|Revenues                 |  | $                              | 17,905 |  
|                         |  |                                |        |  
|Loss before income taxes |  | $                              | (6,995 | )
|                         |  |                                |        |  
|Net loss                 |  | $                              | (7,165 | )
|                         |  |                                |        |  

Sale of Toucan

In the first quarter of fiscal 2007, we completed the sale of our United Kingdom-based consumer phone services business, Toucan, to Pipex
Communications plc, in exchange for $38.4 million in cash (including the assumption of intercompany obligations owed to us and our subsidiaries) and 43.2 million Pipex ordinary shares, which were later sold for $7.9 million.

Toucan was launched in November 2003 and marketed local, long distance, broadband and wireless communications services in the United Kingdom.
Pursuant to the terms of the agreement, Pipex assumed Toucans existing customer base and those employees supporting its operations. We provided Toucan with termination, call center and other support services. As a result of these continuing
services, the sale did not meet the criteria to be reported as a discontinued operation. Toucans historical results of operations are included in our Consumer Phone Services segment. Our results of operations for the nine months ended
April 30, 2007 included revenues generated by Toucans operations of $16.4 million and loss from operations of $2.6 million. We recognized a gain of $44.7 million in fiscal 2007 in connection with the sale.

Telecom Competition

Since our inception, we have
derived the majority of our revenues and operating expenses from IDT Telecoms businesses. IDT Telecoms revenues represented 82.3% of our total revenues from continuing operations in the nine months ended April 30, 2008, compared to
87.7% in the nine months ended April 30, 2007.

In our IDT Telecom businesses, our competitors continue to aggressively price their
services. In addition, with particular regard to our calling card business, we believe that there may have been a gradual shift in demand industry-wide away from calling cards and into wireless products, which, among other things, may have further
eroded pricing power. In our wholesale markets as well, we have generally had to pass along portions of our per-minute cost savings to our customers in the form of lower prices. These trends have impacted our telecom businesses, and as a result, we
have generally experienced declines in both our revenues and overall per-minute price realizations. At times, though, we have chosen to raise prices, particularly within our calling card business, in an effort to increase per-minute price
realizations, which generally results in a negative impact on minute



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##### Table of Contents

volumes, thereby reducing revenues. Minutes-of-use in our global calling card business has declined each quarter beginning in the third quarter of fiscal
2006, from 4.23 billion in the second quarter of fiscal 2006 to 2.04 billion in the third quarter of fiscal 2008. We continue to adjust our prices on selected calling cards in order to maintain a balance between per-minute price
realizations and level of revenues. We cannot predict whether we will continue to experience further declines in our calling card business. However, we do not expect any such further declines to be as steep as those experienced in previous quarters.

Critical Accounting Policies

Our
condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Our significant accounting policies are described in Note 1 to the consolidated financial
statements included in our Annual Report on Form 10-K for fiscal 2007. Critical accounting policies are those that require application of managements most subjective or complex judgments, often as a result of matters that are inherently
uncertain and may change in subsequent periods. Our critical accounting policies include those related to the allowance for doubtful accounts, goodwill, valuation of long-lived and intangible assets, income taxes and regulatory agency fees, and
contingent liabilities. For additional discussion of these critical accounting policies, see our Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal 2007.

In addition to these critical accounting policies, we believe that our revenue recognition policy under the effective yield method for our
purchased debt portfolios involves a higher degree of judgment. Beginning in fiscal 2008, we primarily utilize the effective yield method of accounting for recognizing revenue from our purchased debt portfolios. Upon acquisition of debt portfolios,
static pools of accounts are established, which are aggregated based on certain common risk criteria. We estimate future cash collections for each static pool based primarily on historical cash collections for pools with similar characteristics. An
internal rate of return (IRR) is calculated for each pool based on our cash flow projections. Income is recognized on a level-yield basis over the expected life of the pool based on the expected IRR. The IRR remains unchanged throughout the life of
the pool unless there is an increase in cash flows expected to be collected. Application of the effective yield method of accounting involves a high degree of judgment, particularly in the preparation of cash flow projections. If future cash
collections are materially different in amount or timing than the projections, our results of operations could be materially affected either positively or negatively.



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##### Table of Contents

Results of Operations

Three and Nine Months Ended April 30, 2008 Compared to Three and Nine Months Ended April 30, 2007

We evaluate the
performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of
operations.

Consolidated



|               |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|-------------- |  | --------------------------- | ----- | ------ | - | ----- | -------------------------- | - | ------ | - |  | ----- | -- | ---- | - | ------- |  | - | ------- |  | - | ------ | - |  | ----- | --
|               |  | Three months endedApril 30, |       | Change |   |       | Nine months endedApril 30, |   | Change |  
|               |  | 2008                        |       | 2007   |   | $     |                            |   | %      |   |  | 2008  |    | 2007 |   | $       |  |   | %       | 
|               |  | (in millions)               |      
|Revenues       |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|IDT Telecom    |  | $                           | 361.0 |        | $ | 415.6 |                            | $ | (54.6  | ) |  | (13.1 | )% |      | $ | 1,150.0 |  | $ | 1,333.8 |  | $ | (183.8 | ) |  | (13.8 | )%
|IDT Energy     |  |                             | 66.3  |        |   | 57.3  |                            |   | 9.0    |   |  | 15.8  |    |      |   | 173.4   |  |   | 145.4   |  |   | 28.0   |   |  | 19.3  |   
|IDT Carmel     |  |                             | 12.5  |        |   | 1.0   |                            |   | 11.5   |   |  | nm    |    |      |   | 34.5    |  |   | 3.7     |  |   | 30.8   |   |  | 845.0 |   
|IDT Capital    |  |                             | 13.5  |        |   | 11.5  |                            |   | 2.0    |   |  | 16.7  |    |      |   | 40.1    |  |   | 37.3    |  |   | 2.8    |   |  | 7.5   |   
|               |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|Total revenues |  | $                           | 453.3 |        | $ | 485.4 |                            | $ | (32.1  | ) |  | (6.6  | )% |      | $ | 1,398.0 |  | $ | 1,520.2 |  | $ | (122.2 | ) |  | (8.0  | )%
|               |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   



nmnot meaningful

Revenues. The decrease in consolidated revenues in the three and nine months ended
April 30, 2008 compared to the similar periods in fiscal 2007 was due to a decline in IDT Telecom revenues, partially offset by increases in IDT Energy and IDT Carmel revenues. The decrease in IDT Telecom revenues in the three and nine months
ended April 30, 2008 compared to the similar periods in fiscal 2007 resulted primarily from lower calling card sales in both the United States and in Europe, and the decline in consumer phone services revenues in the United States. In addition,
the decrease in IDT Telecom revenues in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007 reflects a $16.4 million reduction in revenues as a result of the sale of our U.K.-based consumer phone services
business, which was consummated in the first quarter of fiscal 2007. IDT Telecom minutes of use (excluding minutes related to our consumer phone services business, as the portion of such minute traffic carried in our network is insignificant)
declined 0.7% from 5.596 billion in the three months ended April 30, 2007 to 5.556 billion in the three months ended April 30, 2008, and declined 1.3% from 17.483 billion in the nine months ended April 30, 2007 to 17.255 billion in
the nine months ended April 30, 2008.

The increase in IDT Energy revenues in the three and nine months ended April 30, 2008
compared to the similar periods in fiscal 2007 was the result of increases in revenue from sales of both electricity and natural gas. The increase in IDT Carmel revenues in the three and nine months ended April 30, 2008 compared to the similar
periods in fiscal 2007 was primarily because IDT Carmel began using the effective yield method to recognize revenues effective August 1, 2007. Under the effective yield method, revenue is recognized on a level-yield basis over the expected life
of the pool of portfolios. In fiscal 2007, IDT Carmel used the cost recovery method to recognize revenues. Under the cost recovery method, no revenue is recognized until the cost of the portfolio is completely recovered or sold.



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##### Table of Contents

|                                    |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|----------------------------------- |  | --------------------------- | ----- | ------ | - | ----- | -------------------------- | - | ------ | - |  | ----- | -- | ---- | - | ------- |  | - | ------- |  | - | ------ | - |  | ----- | --
|                                    |  | Three months endedApril 30, |       | Change |   |       | Nine months endedApril 30, |   | Change |  
|                                    |  | 2008                        |       | 2007   |   | $     |                            |   | %      |   |  | 2008  |    | 2007 |   | $       |  |   | %       | 
|                                    |  | (in millions)               |      
|Costs and expenses                  |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|Direct cost of revenues             |  | $                           | 359.3 |        | $ | 395.6 |                            | $ | (36.3  | ) |  | (9.2  | )% |      | $ | 1,099.4 |  | $ | 1,205.9 |  | $ | (106.5 | ) |  | (8.8  | )%
|Selling, general and administrative |  |                             | 118.5 |        |   | 112.2 |                            |   | 6.3    |   |  | 5.6   |    |      |   | 350.8   |  |   | 327.1   |  |   | 23.7   |   |  | 7.2   |   
|Research and development            |  |                             | 8.9   |        |   | 0.1   |                            |   | 8.8    |   |  | nm    |    |      |   | 9.8     |  |   | 4.8     |  |   | 5.0    |   |  | 103.7 |   
|Bad debt                            |  |                             | 3.1   |        |   | 3.1   |                            |   |       |   |  |      |    |      |   | 24.4    |  |   | 7.5     |  |   | 16.9   |   |  | 225.8 |   
|Depreciation and amortization       |  |                             | 17.5  |        |   | 20.5  |                            |   | (3.0   | ) |  | (14.8 | )  |      |   | 52.0    |  |   | 60.5    |  |   | (8.5   | ) |  | (14.0 | ) 
|Restructuring and severance charges |  |                             | 16.5  |        |   | 1.8   |                            |   | 14.7   |   |  | 841.5 |    |      |   | 20.7    |  |   | 8.1     |  |   | 12.6   |   |  | 156.4 |   
|                                    |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   
|Total costs and expenses            |  | $                           | 523.8 |        | $ | 533.3 |                            | $ | (9.5   | ) |  | (1.8  | )% |      | $ | 1,557.1 |  | $ | 1,613.9 |  | $ | (56.8  | ) |  | (3.5  | )%
|                                    |  |                             |       |        |   |       |                            |   |        |   |  |       |    |      |   |         |  |   |         |  |   |        |   |  |       |   



nmnot meaningful

Direct Cost of Revenues. The decrease in direct cost of revenues in the three and nine months
ended April 30, 2008 compared to the similar periods in fiscal 2007 was due primarily to the decline in IDT Telecoms direct cost of revenues, partially offset by increases in IDT Energy, IDT Carmel and IDT Capitals direct cost of
revenues. The decreases in direct cost of revenues in IDT Telecom in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 reflect the decline in IDT Telecoms revenues and continued reductions in
connectivity costs. The increases in IDT Energys direct cost of revenues in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 were due to increases in electricity and natural gas consumption and
increases in the average unit costs. The increases in IDT Carmels direct cost of revenues in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 were primarily a result of the growth in collection
activity at IDT Carmel beginning in the second half of fiscal 2007 and continuing into fiscal 2008. The increases in IDT Capitals direct cost of revenues in the three and nine months ended April 30, 2008 compared to the similar periods in
fiscal 2007 were primarily due to increases in the direct cost of revenues of IDT Internet Mobile Group. Overall gross margin increased from 18.5% and 20.7% in the three and nine months ended April 30, 2007, respectively, to 20.7% and 21.4% in
the three and nine months ended April 30, 2008, respectively, due to increases in gross margins in IDT Telecom and IDT Carmel, partially offset by lower gross margins in IDT Energy and IDT Capital.

Selling, General and Administrative. The increase in selling, general and administrative expenses in the three and nine months ended
April 30, 2008 compared to the similar periods in fiscal 2007 was due primarily to an accrual of $10.5 million in April 2008 in corporate general and administrative expenses related to a jury award for an employment matter, and increases in
legal fees primarily in IDT Capital and charitable contributions. These increases were partially offset by reductions in IDT Telecoms compensation costs, sales and marketing expenses, consulting fees, facilities costs and stock-based
compensation. In addition, the decrease in IDT Telecoms selling, general and administrative expenses in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007 included a $7.8 million decrease as a result of the
sale of our U.K.-based Toucan consumer phone services business in the first quarter of fiscal 2007. As a percentage of total revenues, selling, general and administrative expenses increased from 23.1% and 21.5% in the three and nine months ended
April 30, 2007, respectively, to 26.2% and 25.1% in the three and nine months ended April 30, 2008, respectively, as selling, general and administrative expenses increased and total revenues decreased.

On April 18, 2008, a federal jury awarded Alfred West, a former employee of ours, $10.5 million for breach of contract and a related claim related
to Wests employment for six months in 2001. We have made post-trial motions seeking to vacate the award and, if necessary, intend to appeal the judgment.

Stock-based compensation expense included in selling, general and administrative expenses, primarily relating to the vesting of restricted stock and stock option grants, was approximately nil and $3.2 million in the
three and nine months ended April 30, 2008, respectively, compared to $1.5 million and $5.9 million in the three and nine months ended April 30, 2007, respectively. Stock-based compensation expense was reduced in the three months ended
April 30, 2008 due to the departure of certain executives during the quarter.



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##### Table of Contents

Research and Development.Research and development expenses in three and nine months
ended April 30, 2008 primarily include costs of $6.2 million related to Alternative Energy and $2.7 million and $3.6 million, respectively, related to Fabrix T.V., Ltd., an entity developing products for non-linear television. Research and
development expenses in the three and nine months ended April 30, 2007 include costs of $0.1 million and $4.8 million, respectively, incurred by our Wholesale Telecommunications Services segment for the internal development of new software
products and for substantial enhancements to existing software products to be sold. Wholesale Telecommunications Services substantially reduced its research and development activities by the end of fiscal 2007.As of April 10, 2008, our
wholly owned subsidiary, AMSO, acquired a 75% equity interest in EGL in exchange for cash of $2.5 million and certain commitments for future funding of EGLs operations. As of April 22, 2008, we acquired an additional 14.9437% equity
interest in EGL in exchange for cash of $3.0 million. EGL is one of three holders of 10-year leases granted by the U.S. Bureau of Land Management to research, test and demonstrate the potential for commercial oil shale production in western
Colorado. Once EGLdemonstrates the economic and environmental viability of its technology, it will have the opportunity to expand its lease to 5,120 acres for commercial development. We accounted for the acquisition of EGL under the purchase
method of accounting, and accordingly, the net assets and results of operations of the acquired businesswere included in the consolidated financial statements from the date of acquisition. We charged an aggregate of$5.5 million to
research and development expense at the acquisition date, which includes the amounts assigned to EGLs tangible and intangible assets to be used in its research and development project that have no alternative future use. Alternative Energy
incurred research and development expense of $0.7 million in the three months ended April 30, 2008.

Bad Debt. Bad debt
expense was substantially the same amount in the three months ended April 30, 2008 compared to the similar period in fiscal 2007, although the majority of bad debt expense in the three months ended April 30, 2007 was from IDT Telecom and
IDT Capital and the majority of bad debt expense in the three months ended April 30, 2008 was from IDT Telecom. The increase in bad debt expense in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007 was due
primarily to an increase in IDT Carmels bad debt expense. In the second quarter of fiscal 2008, IDT Carmel recorded bad debt expense of $16.1 million which reflected in part the particularly challenging collection environment as a result of
factors in the U.S. economy that IDT Carmel cannot control, which are likely to impact consumers willingness and ability to repay their debts to IDT Carmel.

Restructuring and Severance Charges. The restructuring and severance charges in the three and nine months ended April 30, 2008 and 2007 consist primarily of severance charges relating to a
company-wide cost savings program initiated towards the end of the third quarter of fiscal 2006. As of April 30, 2008, this program resulted in the termination of approximately 1,110 employees. In April 2008, IDT Telecom entered into retention
agreements with several executive employees. These employees are eligible to receive aggregate severance compensation of $5.7 million upon termination of their employment under certain circumstances. Certain of these employees agreed to continue
their employment until at least July 31, 2008 or September 30, 2008. IDT Telecom is recording this compensation as an expense ratably over the respective service periods.

The following table summarizes the changes in the reserve balances related to our restructuring activities (substantially all of which relates to
workforce reductions):



|            |  |                        |        |                   |   |          |  |   |                         |   |  |                         |      |   |  |   |       
|----------- |  | ---------------------- | ------ | ----------------- | - | -------- |  | - | ----------------------- | - |  | ----------------------- | ---- | - |  | - | ------
|            |  | Balance atJuly 31,2007 |        | Charged toExpense |   | Payments |  |   | Non-cashChargesandOther |   |  | Balance atApril 30,2008
|            |  | (in thousands)        
|IDT Telecom |  | $                      | 8,711  |                   | $ | 14,222   |  | $ | (14,294                 | ) |  | $                       | (534 | ) |  | $ | 8,105 
|IDT Energy  |  |                        |       |                   |   | 89       |  |   | (89                     | ) |  |                         |     |   |  |   |      
|IDT Carmel  |  |                        |       |                   |   | 30       |  |   | (30                     | ) |  |                         |     |   |  |   |      
|IDT Capital |  |                        | 834    |                   |   | 876      |  |   | (964                    | ) |  |                         | (211 | ) |  |   | 535   
|Corporate   |  |                        | 8,250  |                   |   | 5,502    |  |   | (8,201                  | ) |  |                         | 135  |   |  |   | 5,686 
|            |  |                        |        |                   |   |          |  |   |                         |   |  |                         |      |   |  |   |       
|Total       |  | $                      | 17,795 |                   | $ | 20,719   |  | $ | (23,578                 | ) |  | $                       | (610 | ) |  | $ | 14,326
|            |  |                        |        |                   |   |          |  |   |                         |   |  |                         |      |   |  |   |       



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Arbitration Award. On November 26, 2007, we announced that our Net2Phone Cable Telephony
subsidiary, which is included in our Wholesale Telecommunications Services segment, was awarded approximately 23 million, plus interest from November 2005, in an arbitration proceeding against Altice One S.A. and certain of its
affiliates. The arbitration proceeding related to Altices termination of cable telephony license agreements Net2Phone had entered into in November 2004. We recorded a gain of $40.0 million for this arbitration award, including accrued
interest, in the first quarter of fiscal 2008, which is included in income from operations.

Gain on sale of U.K.-based Toucan
business. In the first quarter of fiscal 2007, we completed the sale of our United Kingdom-based consumer phone services business, Toucan, to Pipex Communications plc, in exchange for $38.4 million in cash (including the assumption of
intercompany obligations owed to us and our subsidiaries) and 43.2 million Pipex ordinary shares, which were later sold for $7.9 million. We recognized a gain of $44.7 million in fiscal 2007 in connection with the sale. This gain on sale
is included in income from operations.



|                                           |  |                             |       |   |        |   |       |                            |  |   |        |   |  |        |    |  |      |        |   |   |   |       |   |  |   |        |   |  |        |   
|------------------------------------------ |  | --------------------------- | ----- | - | ------ | - | ----- | -------------------------- |  | - | ------ | - |  | ------ | -- |  | ---- | ------ | - | - | - | ----- | - |  | - | ------ | - |  | ------ | --
|                                           |  | Three months endedApril 30, |       |   | Change |   |       | Nine months endedApril 30, |  |   | Change |  
|                                           |  | 2008                        |       |   | 2007   |   |       | $                          |  |   | %      |   |  | 2008   |    |  | 2007 |        |   | $ |   |       | % | 
|                                           |  | (in millions)               |      
|Loss from operations                       |  | $                           | (70.5 | ) |        | $ | (48.0 | )                          |  | $ | (22.5  | ) |  | (47.0  | )% |  | $    | (119.1 | ) |   | $ | (49.1 | ) |  | $ | (70.0  | ) |  | (142.7 | )%
|Interest (expense) income, net             |  |                             | (0.3  | ) |        |   | 4.8   |                            |  |   | (5.1   | ) |  | (106.3 | )  |  |      | 5.3    |   |   |   | 13.5  |   |  |   | (8.2   | ) |  | (60.8  | ) 
|Other (expense) income, net                |  |                             | (8.3  | ) |        |   | 30.6  |                            |  |   | (38.9  | ) |  | (127.2 | )  |  |      | (9.6   | ) |   |   | 29.2  |   |  |   | (38.8  | ) |  | (133.0 | ) 
|Minority interests                         |  |                             | (0.4  | ) |        |   | (2.7  | )                          |  |   | 2.3    |   |  | 87.2   |    |  |      | (1.0   | ) |   |   | (9.0  | ) |  |   | 8.0    |   |  | 89.2   |   
|Provision for income taxes                 |  |                             | (2.2  | ) |        |   | (0.6  | )                          |  |   | (1.6   | ) |  | (243.7 | )  |  |      | (9.0   | ) |   |   | (4.6  | ) |  |   | (4.4   | ) |  | (93.2  | ) 
|                                           |  |                             |       |   |        |   |       |                            |  |   |        |   |  |        |    |  |      |        |   |   |   |       |   |  |   |        |   |  |        |   
|Loss from continuing operations            |  |                             | (81.7 | ) |        |   | (15.9 | )                          |  |   | (65.8  | ) |  | (413.2 | )  |  |      | (133.4 | ) |   |   | (20.0 | ) |  |   | (113.4 | ) |  | (565.6 | ) 
|(Loss) income from discontinued operations |  |                             | (0.5  | ) |        |   |      |                            |  |   | (0.5   | ) |  | nm     |    |  |      | (4.5   | ) |   |   | 191.0 |   |  |   | (195.5 | ) |  | (102.4 | ) 
|                                           |  |                             |       |   |        |   |       |                            |  |   |        |   |  |        |    |  |      |        |   |   |   |       |   |  |   |        |   |  |        |   
|Net (loss) income                          |  | $                           | (82.2 | ) |        | $ | (15.9 | )                          |  | $ | (66.3  | ) |  | (416.3 | )% |  | $    | (137.9 | ) |   | $ | 171.0 |   |  | $ | (308.9 | ) |  | (180.6 | )%
|                                           |  |                             |       |   |        |   |       |                            |  |   |        |   |  |        |    |  |      |        |   |   |   |       |   |  |   |        |   |  |        |   



nmnot meaningful

Interest (expense) income, net. The decrease in net interest in the three and
nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 was due primarily to a decrease in interest income as a result of lower interest bearing cash, cash equivalents and marketable securities balances and lower yields
on our interest bearing securities, as well as an increase in interest expense due to an increase in our notes payable. Our notes payables increased as a result of our purchase of our headquarters office building in February 2008 which included the
assumption of the remainder of the existing mortgage on the building in the amount of $26.9 million.

Other (Expense)
Income. Other (expense) income in the three and nine months ended April 30, 2008 and 2007 consists of the following:



|                                                               |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|-------------------------------------------------------------- |  | --------------------------- | ------ | -------------------------- | ---- | - | ------ |  | - | ------- | - |  | - | ------
|                                                               |  | Three months endedApril 30, |        | Nine months endedApril 30,
|                                                               |  | 2008                        |        |                            | 2007 |   | 2008   |  |   | 2007   
|                                                               |  | (in thousands)             
|Realized gains (losses) on marketable securities               |  | $                           | 396    |                            |      | $ | 5,128  |  | $ | (10,660 | ) |  | $ | 4,807 
|Other than temporary decline in value of marketable securities |  |                             | (7,545 | )                          |      |   |       |  |   | (7,545  | ) |  |   |      
|Realized and unrealized (losses) gains on investments          |  |                             | (2,054 | )                          |      |   | 21,981 |  |   | (1,261  | ) |  |   | 22,593
|Foreign currency transaction gains                             |  |                             | 996    |                            |      |   | 3,027  |  |   | 5,448   |   |  |   | 1,343 
|Gain on sale of building                                       |  |                             |       |                            |      |   |       |  |   | 4,130   |   |  |   |      
|Other                                                          |  |                             | (141   | )                          |      |   | 507    |  |   | 255     |   |  |   | 479   
|                                                               |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       
|Total other (expense) income                                   |  | $                           | (8,348 | )                          |      | $ | 30,643 |  | $ | (9,633  | ) |  | $ | 29,222
|                                                               |  |                             |        |                            |      |   |        |  |   |         |   |  |   |       



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In the three and nine months ended April 30, 2007, other income included $22.2 million relating to
income from certain pooled investment vehicles. Prior to the third quarter of fiscal 2007, we had accounted for such investments at cost. However, in the third quarter of fiscal 2007, we concluded that such investments should be accounted for using
the equity method, pursuant to the guidance in Emerging Issues Task Force (EITF) Topic D-46, Accounting for Limited Partnership Investments and EITF 03-16, Accounting for Investments in Limited Liability Companies. The adjustment to
Investments in the third quarter of fiscal 2007 resulted in an overstatement of other income for the three and nine months ended April 30, 2007 of $18.6 million ($0.23 per share) and $15.4 million ($0.19 per share), respectively. In
accordance with Accounting Principles Board Opinion 28, Interim Financial Reporting, paragraph 29, we did not adjust results for prior periods, as the adjustments were not considered to be material to our fiscal 2007 full year results or to
prior periods.

Minority Interests. Minority interests arise mostly from the 49% minority owners of Union Telecard
Alliance, or UTA, our calling card distributor in the United States, and in fiscal 2008, from the 46.67% minority owners of IDW. The decrease in minority interest expense in the three and nine months ended April 30, 2008 compared to the similar
periods in fiscal 2007 was primarily due to a decrease in the net income of UTA in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007.

Income Taxes. Effective August 1, 2007, we adopted Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109. Income tax expense increased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 due primarily
to interest of $2.3 million and $7.0 million recorded in the three and nine months ended April 30, 2008, respectively, on unrecognized tax benefits in accordance with FIN 48. Income tax expense also results from income generated by our foreign
subsidiaries that cannot be offset against losses generated in the United States. In fiscal 2006, the Internal Revenue Service (IRS) commenced an audit of our federal tax returns for fiscal years 2001, 2002, 2003 and 2004 that is still in process.

IDT TelecomPrepaid Products, Consumer Phone Services and Wholesale Telecommunications Services Segments

IDT Telecom operates as three business segments: Prepaid Products, Consumer Phone Services and Wholesale Telecommunications Services. In the first quarter
of fiscal 2008, Wholesale Telecommunications Services began charging for the telecommunications services it provides to other segments. Wholesale Telecommunications Services provides services primarily to Prepaid Products and to external customers.
Wholesale Telecommunications Services currently charges its affiliates at a rate of cost plus an agreed mark-up for its services. The costs of connectivity and operating the network assets, which historically were allocated to the Prepaid Products
and Wholesale Telecommunications Services segments, are now allocated primarily to the Wholesale Telecommunications Services segment. We believe that this change in structure better reflects the results of operations of both Wholesale
Telecommunications Services as a carrier services provider and Prepaid Products as a provider of calling cards and other prepaid products. In addition, in the first quarter of fiscal 2008, Ethnic Grocery Brands and certain other businesses that were
included in IDT Capital were transferred to IDT Telecoms Prepaid Products segment. To the extent possible, comparative historical results have been reclassified and restated as if the current business segment structure existed in all periods
presented, although these results may not be indicative of the results which would have been achieved had the business segment structure been in effect during those periods.



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|                                                                                  |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|--------------------------------------------------------------------------------- |  | ---------------------------------------- | ------ | - | ------ | - | ------ | -------------------------- |  | - | ------- | - |  | ----- | -- |  | ---- | ------- | - | - | - | ------- | - |  | - | ------- | - |  | ----- | --
|                                                                                  |  | Three months endedApril 30,              |        |   | Change |   |        | Nine months endedApril 30, |  |   | Change  |  
|                                                                                  |  | 2008                                     |        |   | 2007   |   |        | $                          |  |   | %       |   |  | 2008  |    |  | 2007 |         |   | $ |   |         | % | 
|                                                                                  |  | (in millions, except revenue-per-minute) |       
|Revenues                                                                          |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|Prepaid Products                                                                  |  | $                                        | 182.8  |   |        | $ | 230.6  |                            |  | $ | (47.8   | ) |  | (20.8 | )% |  | $    | 594.5   |   |   | $ | 743.1   |   |  | $ | (148.6  | ) |  | (20.0 | )%
|Consumer Phone Services                                                           |  |                                          | 20.8   |   |        |   | 30.7   |                            |  |   | (9.9    | ) |  | (32.3 | )  |  |      | 69.1    |   |   |   | 118.7   |   |  |   | (49.6   | ) |  | (41.8 | ) 
|Wholesale Telecommunications Services                                             |  |                                          | 248.0  |   |        |   | 289.2  |                            |  |   | (41.2   | ) |  | (14.2 | )  |  |      | 792.5   |   |   |   | 918.9   |   |  |   | (126.4  | ) |  | (13.7 | ) 
|Intersegment Eliminations                                                         |  |                                          | (90.6  | ) |        |   | (134.9 | )                          |  |   | 44.3    |   |  | 32.8  |    |  |      | (306.1  | ) |   |   | (446.9  | ) |  |   | 140.8   |   |  | 31.5  |   
|                                                                                  |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|Total revenues                                                                    |  | $                                        | 361.0  |   |        | $ | 415.6  |                            |  | $ | (54.6   | ) |  | (13.1 | )% |  | $    | 1,150.0 |   |   | $ | 1,333.8 |   |  | $ | (183.8  | ) |  | (13.8 | )%
|                                                                                  |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|Wholesale Telecommunications Services-revenues from external customers only       |  | $                                        | 157.4  |   |        | $ | 154.3  |                            |  | $ | 3.1     |   |  | 2.1   | %  |  | $    | 486.4   |   |   | $ | 472.0   |   |  | $ | 14.4    |   |  | 3.0   | % 
|Minutes of use:                                                                   |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|Prepaid Products                                                                  |  |                                          | 2,038  |   |        |   | 2,591  |                            |  |   | (553    | ) |  | (21.3 | )% |  |      | 6,593   |   |   |   | 8,733   |   |  |   | (2,140  | ) |  | (24.5 | )%
|Wholesale Telecommunications Services-total                                       |  |                                          | 5,474  |   |        |   | 5,495  |                            |  |   | (21     | ) |  | (0.4  | )  |  |      | 16,984  |   |   |   | 17,131  |   |  |   | (147    | ) |  | (0.9  | ) 
|Total minutes of use                                                              |  |                                          | 5,556  |   |        |   | 5,596  |                            |  |   | (40     | ) |  | (0.7  | )  |  |      | 17,255  |   |   |   | 17,483  |   |  |   | (228    | ) |  | (1.3  | ) 
|Wholesale Telecommunications Services-minutes provided to external customers only |  |                                          | 3,518  |   |        |   | 3,005  |                            |  |   | 513     |   |  | 17.1  |    |  |      | 10,662  |   |   |   | 8,750   |   |  |   | 1,912   |   |  | 21.9  |   
|Average revenue-per-minute:                                                       |  |                                          |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |         |   |   |   |         |   |  |   |         |   |  |       |   
|Prepaid Products                                                                  |  | $                                        | 0.0838 |   |        | $ | 0.0836 |                            |  | $ | 0.0002  |   |  | 0.2   | %  |  | $    | 0.0848  |   |   | $ | 0.0808  |   |  | $ | 0.0040  |   |  | 4.9   | % 
|Wholesale Telecommunications Services-total                                       |  |                                          | 0.0453 |   |        |   | 0.0526 |                            |  |   | (0.0073 | ) |  | (13.9 | )  |  |      | 0.0467  |   |   |   | 0.0536  |   |  |   | (0.0069 | ) |  | (13.0 | ) 
|Total average revenue-per-minute                                                  |  |                                          | 0.0591 |   |        |   | 0.0663 |                            |  |   | (0.0072 | ) |  | (10.9 | )  |  |      | 0.0606  |   |   |   | 0.0674  |   |  |   | (0.0068 | ) |  | (10.1 | ) 
|Wholesale Telecommunications Servicesexternal only                               |  |                                          | 0.0448 |   |        |   | 0.0513 |                            |  |   | (0.0065 | ) |  | (12.8 | )  |  |      | 0.0456  |   |   |   | 0.0539  |   |  |   | (0.0083 | ) |  | (15.4 | ) 

Revenues. We experienced revenue declines in the three and nine months ended
April 30, 2008 compared to the similar periods in fiscal 2007 in our U.S., European and South American calling card businesses, and U.S. consumer phone services business. Intersegment eliminations represent the revenues that Wholesale
Telecommunications Services records from services provided primarily to Prepaid Products and are excluded from total revenues. Wholesale Telecommunications Services currently charges its affiliates at a rate of cost plus an agreed mark-up for its
services. As a percentage of IDT Telecoms overall revenues before intersegment eliminations, Prepaid Products revenues decreased from 41.7% in the nine months ended April 30, 2007 to 40.8% in the nine months ended April 30, 2008,
Consumer Phone Services revenues decreased from 6.7% in the nine months ended April 30, 2007 to 4.8% in the nine months ended April 30, 2008 and Wholesale Telecommunications Services revenues increased from 51.6% in the nine months ended
April 30, 2007 to 54.4% in the nine months ended April 30, 2008.

Total minutes-of-use declined by 0.7% and 1.3% in the three and
nine months ended April 30, 2008, respectively, compared to the similar periods in fiscal 2007. The total minutes-of-use in our Wholesale Telecommunications Services segment decreased 0.4% and 0.9% in the three and nine months ended
April 30, 2008, respectively, compared to the similar periods in fiscal 2007, as the growth of 17.1% and 21.9% in minutes-of-use by external customers in the three and nine months ended April 30, 2008, respectively, compared to the similar
periods in fiscal 2007 was more than offset by a drop in minutes-of-use provided to internal customers. The decrease in Prepaid Products minutes-of-use of 21.3% and 24.5% in the three and nine months ended April 30, 2008, respectively, compared
to the similar periods in fiscal 2007 was primarily attributable to calling cards in the United States, Europe, and South America, partially offset by an increases in Asia. The



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decline in calling card minutes-of-use arose as a result of competitive pressures, a shift in overall market demand away from calling cards and into wireless
products, and our decision to reduce the discounts on our newly introduced calling cards.

Average revenue per minute is the average price
realization we recognize on the minutes we sell within our Prepaid Products and Wholesale Telecommunications Services businesses. It excludes minutes of use related to our U.S. Consumer Phone Services business, as the domestic traffic generated by
this business is not carried on our network, and the international traffic generated by this business, though carried on our own network, is relatively insignificant.

The decline in Prepaid Products revenues of 20.8% and 20.0% in the three and nine months ended April 30, 2008, respectively, compared to the similar periods in fiscal 2007 was primarily driven by lower calling
card sales in the United States, Europe and South America. Prepaid Products average revenue per minute increased 0.2% and 4.9% in the three and nine months ended April 30, 2008, respectively, compared to the similar periods in fiscal 2007 due
to increases in the average revenue per minute of our other retail products such as rechargeable calling cards, partially offset by a decline in the average revenue per minute in our prepaid calling cards in the United States, Europe and South
America. We cannot predict whether we will continue to experience further declines in our calling card business. However, we do not expect any such further declines to be as steep as those experienced in previous quarters.

The decline in Consumer Phone Services revenues of $9.9 million and $49.6 million in the three and nine months ended April 30, 2008, respectively,
compared to the similar periods in fiscal 2007 was primarily a result of our decision to stop marketing our U.S. consumer phone services following the FCCs termination of the UNE-P pricing regime in calendar 2005, which resulted in an
increased cost structure and inferior economics for this business. The decline in revenues was also the result of price increases that we implemented beginning in the fourth quarter of fiscal 2007, which contributed to the increase in gross margins
as well as an increase in customer churn. In addition, the decrease in the nine months ended April 30, 2008 reflects a $16.4 million reduction in revenues compared to the similar periods in fiscal 2007 as a result of the sale of our U.K.-based
Toucan consumer phone services business, which was consummated in the first quarter of fiscal 2007. The customer base for our U.S. bundled, unlimited local and long distance consumer phone services business was approximately 54,200 as of
April 30, 2008 compared to 96,400 as of April 30, 2007. We currently offer local service in the following 11 states: New York, New Jersey, Pennsylvania, Maryland, Delaware, Massachusetts, New Hampshire, West Virginia, Maine, Rhode Island
and California. In April and May 2007, we sold our entire bundled, unlimited local and long distance phone services business in Florida and Georgia consisting of approximately 5,400 customers. In addition, the customer base for long distance-only
services was 141,800 as of April 30, 2008, compared to 218,900 as of April 30, 2007.

The decrease in total revenues in our
Wholesale Telecommunications Services segment in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 was due to the decline in intersegment revenues from our Prepaid Products segment. This decline was
partially offset by an increase in revenues from external customers. Although minutes of use from external customers in our Wholesale Telecommunications Services segment increased 17.1% and 21.9% in the three and nine months ended April 30,
2008, respectively, compared to the similar periods in fiscal 2007, the increased traffic volumes were offset by lower per-minute price realizations. Revenues from internationally-originated wholesale minutes continued to account for an increasing
proportion of overall wholesale revenues, owing to the continued weakness in the U.S. dollar versus most major foreign currencies, which results in our rates (delineated in U.S. dollars as our costs are in U.S. dollars) being relatively attractive
compared to others rates. The decrease in average revenue-per-minute from external customers in our Wholesale Telecommunications Services segment in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal
2007 was due primarily to continued competition.



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|                                            |  |                                       |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |        |   |   |   |         |   |  |   |         |   |  |       |   
|------------------------------------------- |  | ------------------------------------- | ------ | - | ------ | - | ------ | -------------------------- |  | - | ------- | - |  | ----- | -- |  | ---- | ------ | - | - | - | ------- | - |  | - | ------- | - |  | ----- | --
|                                            |  | Three months endedApril 30,           |        |   | Change |   |        | Nine months endedApril 30, |  |   | Change  |  
|                                            |  | 2008                                  |        |   | 2007   |   |        | $                          |  |   | %       |   |  | 2008  |    |  | 2007 |        |   | $ |   |         | % | 
|                                            |  | (in millions, except cost-per-minute) |       
|Direct cost of revenues                     |  |                                       |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |        |   |   |   |         |   |  |   |         |   |  |       |   
|Prepaid Products                            |  | $                                     | 149.4  |   |        | $ | 193.4  |                            |  | $ | (44.0   | ) |  | (22.8 | )% |  | $    | 484.4  |   |   | $ | 621.0   |   |  | $ | (136.6  | ) |  | (22.0 | )%
|Consumer Phone Services                     |  |                                       | 7.2    |   |        |   | 17.9   |                            |  |   | (10.7   | ) |  | (59.7 | )  |  |      | 32.2   |   |   |   | 69.7    |   |  |   | (37.5   | ) |  | (53.8 | ) 
|Wholesale Telecommunications Services       |  |                                       | 216.3  |   |        |   | 258.6  |                            |  |   | (42.3   | ) |  | (16.4 | )  |  |      | 689.0  |   |   |   | 815.5   |   |  |   | (126.5  | ) |  | (15.5 | ) 
|Intersegment Eliminations                   |  |                                       | (90.6  | ) |        |   | (134.9 | )                          |  |   | 44.3    |   |  | 32.8  |    |  |      | (306.1 | ) |   |   | (446.9  | ) |  |   | 140.8   |   |  | 31.5  |   
|                                            |  |                                       |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |        |   |   |   |         |   |  |   |         |   |  |       |   
|Total direct cost of revenues               |  | $                                     | 282.3  |   |        | $ | 335.0  |                            |  | $ | (52.7   | ) |  | (15.7 | )% |  | $    | 899.5  |   |   | $ | 1,059.3 |   |  | $ | (159.8  | ) |  | (15.1 | )%
|                                            |  |                                       |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |        |   |   |   |         |   |  |   |         |   |  |       |   
|Average termination cost-per-minute         |  |                                       |        |   |        |   |        |                            |  |   |         |   |  |       |    |  |      |        |   |   |   |         |   |  |   |         |   |  |       |   
|Prepaid Products                            |  | $                                     | 0.0706 |   |        | $ | 0.0731 |                            |  | $ | (0.0025 | ) |  | (3.5  | )% |  | $    | 0.0709 |   |   | $ | 0.0702  |   |  | $ | 0.0007  |   |  | 1.0   | % 
|Total Wholesale Telecommunications Services |  |                                       | 0.0404 |   |        |   | 0.0477 |                            |  |   | (0.0073 | ) |  | (15.2 | )  |  |      | 0.0413 |   |   |   | 0.0481  |   |  |   | (0.0068 | ) |  | (14.2 | ) 
|Total average termination cost-per-minute   |  |                                       | 0.0493 |   |        |   | 0.0564 |                            |  |   | (0.0071 | ) |  | (12.6 | )  |  |      | 0.0498 |   |   |   | 0.0565  |   |  |   | (0.0067 | ) |  | (11.8 | ) 

Direct Cost of Revenues. The decrease in direct cost of revenues in the three and nine
months ended April 30, 2008 compared to the similar periods in fiscal 2007 in Prepaid Products was due primarily to the lower minutes-of-use and, in the three months ended April 30, 2008 compared to the similar period in fiscal 2007, lower
termination cost-per-minute. Direct cost of revenues for Consumer Phone Services decreased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 due to lower revenues and the favorable settlement of a
long-standing dispute with one of our connectivity suppliers. In addition, in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007, direct cost of revenues for Consumer Phone Services decreased $11.0 million as a
result of the sale of our U.K.-based consumer phone services business, which was consummated in the first quarter of fiscal 2007. Direct cost of revenues of Prepaid Products and Consumer Phone Services include charges from Wholesale
Telecommunications Services. Direct cost of revenues for Wholesale Telecommunication Services decreased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily due to continued reductions in
connectivity costs as we continue to reduce excess capacity in our network. In addition, we continue to migrate portions of our network from time-division multiplexing (TDM) to Voice over Internet Protocol (VoIP), which results in the need for less
circuits. Our average termination cost-per-minute represents the average direct cost for minutes purchased by Wholesale Telecommunications Services in order to terminate calls related to our Prepaid Products and Wholesale Carrier businesses. These
costs exclude minutes of use related to our Consumer Phone Services business, as its on-network traffic is insignificant.



|                                      |      |                             |   |      |        |   |  |                            |   |  |        |   |  |      |   |  |      |  
|------------------------------------- | ---- | --------------------------- | - | ---- | ------ | - |  | -------------------------- | - |  | ------ | - |  | ---- | - |  | ---- | -
|                                      |      | Three months endedApril 30, |   |      | Change |   |  | Nine months endedApril 30, |   |  | Change |  
|                                      | 2008 |                             |   | 2007 |        |   |  | 2008                       |   |  | 2007   |   | 
|Gross margin percentage               |      |                             |   |      |        |   |  |                            |   |  |        |   |  |      |   |  |      |  
|Prepaid Products                      |      | 18.3                        | % |      | 16.2   | % |  | 2.1                        | % |  | 18.5   | % |  | 16.4 | % |  | 2.1  | %
|Consumer Phone Services               |      | 65.2                        |   |      | 41.6   |   |  | 23.6                       |   |  | 53.4   |   |  | 41.3 |   |  | 12.1 |  
|Wholesale Telecommunications Services |      | 12.8                        |   |      | 10.6   |   |  | 2.2                        |   |  | 13.1   |   |  | 11.2 |   |  | 1.9  |  
|                                      |      |                             |   |      |        |   |  |                            |   |  |        |   |  |      |   |  |      |  
|Total gross margin percentage         |      | 21.8                        | % |      | 19.4   | % |  | 2.4                        | % |  | 21.8   | % |  | 20.6 | % |  | 1.2  | %
|                                      |      |                             |   |      |        |   |  |                            |   |  |        |   |  |      |   |  |      |  

Gross Margins. Gross margins in our Prepaid Products segment increased in the three and
nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily because of increased gross margins on U.S. calling cards as a result of continued reductions in connectivity costs as described above.

Gross margins in our Consumer Phone Services segment increased in the three and nine months ended April 30, 2008 compared to the similar periods in
fiscal 2007 primarily as a result of the favorable settlement of a



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long-standing dispute with one of our connectivity suppliers, which reduced direct cost of revenues, as well as price increases we implemented beginning in
the fourth quarter of fiscal 2007, which also resulted in an increase in customer churn and a decrease in revenue in fiscal 2008.

Gross
margins in our Wholesale Telecommunications Services segment increased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 as a result of reductions in connectivity costs as described above.



|                                                   |      |                             |      |        |   |      |                            |   |        |   |      |       |      |  |   |       |  |   |       |  |   |       |   |  |       |   
|-------------------------------------------------- | ---- | --------------------------- | ---- | ------ | - | ---- | -------------------------- | - | ------ | - | ---- | ----- | ---- |  | - | ----- |  | - | ----- |  | - | ----- | - |  | ----- | --
|                                                   |      | Three months endedApril 30, |      | Change |   |      | Nine months endedApril 30, |   | Change |  
|                                                   | 2008 |                             | 2007 |        | $ |      |                            | % |        |   | 2008 |       | 2007 |  | $ |       |  | % |      
|                                                   |      | (in millions)               |     
|Selling, general and administrative expenses       |      |                             |      |        |   |      |                            |   |        |   |      |       |      |  |   |       |  |   |       |  |   |       |   |  |       |   
|Prepaid Products                                   |      | $                           | 40.4 |        | $ | 45.3 |                            | $ | (4.9   | ) |      | (10.7 | )%   |  | $ | 131.3 |  | $ | 131.2 |  | $ | 0.1   |   |  |      |   
|Consumer Phone Services                            |      |                             | 4.3  |        |   | 7.0  |                            |   | (2.7   | ) |      | (39.1 | )    |  |   | 15.1  |  |   | 31.3  |  |   | (16.2 | ) |  | (51.7 | )%
|Wholesale Telecommunications Services              |      |                             | 29.7 |        |   | 26.5 |                            |   | 3.2    |   |      | 12.0  |      |  |   | 80.1  |  |   | 77.1  |  |   | 3.0   |   |  | 3.9   |   
|                                                   |      |                             |      |        |   |      |                            |   |        |   |      |       |      |  |   |       |  |   |       |  |   |       |   |  |       |   
|Total selling, general and administrative expenses |      | $                           | 74.4 |        | $ | 78.8 |                            | $ | (4.4   | ) |      | (5.6  | )%   |  | $ | 226.5 |  | $ | 239.6 |  | $ | (13.1 | ) |  | (5.5  | )%
|                                                   |      |                             |      |        |   |      |                            |   |        |   |      |       |      |  |   |       |  |   |       |  |   |       |   |  |       |   

Selling, General and Administrative. The decrease in selling, general and administrative
expenses in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 was the result of reductions in compensation costs, sales and marketing expenses, consulting fees, facilities costs and stock-based
compensation. In addition, the decrease in selling, general and administrative expenses in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007 included a $7.8 million decrease as a result of the sale of our
U.K.-based consumer phone services business in the first quarter of fiscal 2007. The increase in selling, general and administrative expenses in our Wholesale Telecommunications Services segment in the three and nine months ended April 30, 2008
compared to the similar periods in fiscal 2007 was primarily due to the recognition of compensation costs associated with the Altice One arbitration award, which we received in March 2008. As a percentage of IDT Telecoms total revenues,
selling, general and administrative expenses increased from 19.0% and 18.0% in the three and nine months ended April 30, 2007, respectively, to 20.6% and 19.7% in the three and nine months ended April 30, 2008, respectively, as IDT
Telecoms revenues decreased at a faster rate than its selling, general and administrative expenses.



|                                        |      |                             |      |        |   |     |                            |   |        |   |      |        |      |  |   |     |  |   |     |  |   |      |   |  |        |   
|--------------------------------------- | ---- | --------------------------- | ---- | ------ | - | --- | -------------------------- | - | ------ | - | ---- | ------ | ---- |  | - | --- |  | - | --- |  | - | ---- | - |  | ------ | --
|                                        |      | Three months endedApril 30, |      | Change |   |     | Nine months endedApril 30, |   | Change |  
|                                        | 2008 |                             | 2007 |        | $ |     |                            | % |        |   | 2008 |        | 2007 |  | $ |     |  | % |    
|                                        |      | (in millions)               |     
|Research and development expenses       |      |                             |      |        |   |     |                            |   |        |   |      |        |      |  |   |     |  |   |     |  |   |      |   |  |        |   
|Prepaid Products                        |      | $                           | 2.7  |        | $ |    |                            | $ | 2.7    |   |      | nm     |      |  | $ | 3.6 |  | $ |    |  | $ | 3.6  |   |  | nm     |   
|Wholesale Telecommunications Services   |      |                             |     |        |   | 0.1 |                            |   | (0.1   | ) |      | (100.0 | )%   |  |   |    |  |   | 4.8 |  |   | (4.8 | ) |  | (100.0 | )%
|                                        |      |                             |      |        |   |     |                            |   |        |   |      |        |      |  |   |     |  |   |     |  |   |      |   |  |        |   
|Total research and development expenses |      | $                           | 2.7  |        | $ | 0.1 |                            | $ | 2.6    |   |      | nm     |      |  | $ | 3.6 |  | $ | 4.8 |  | $ | (1.2 | ) |  | (25.8  | )%
|                                        |      |                             |      |        |   |     |                            |   |        |   |      |        |      |  |   |     |  |   |     |  |   |      |   |  |        |   



nmnot meaningful

Research and Development.The increase in research and development expenses in our Prepaid Products
segment in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 was primarily due to costs related to Fabrix T.V., Ltd., an entity developing products for non-linear television. Research and development
expenses in fiscal 2007 in our Wholesale Telecommunications Services segment



32



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##### Table of Contents

related to the internal development of new software products and for substantial enhancements to existing software products to be sold. Our Wholesale
Telecommunications Services segment substantially reduced its research and development activities by the end of fiscal 2007.



|                                          |      |                             |      |        |   |     |                            |   |        |      |       |      |  |   |      |   |   |     |  |   |     |  |       |  
|----------------------------------------- | ---- | --------------------------- | ---- | ------ | - | --- | -------------------------- | - | ------ | ---- | ----- | ---- |  | - | ---- | - | - | --- |  | - | --- |  | ----- | -
|                                          |      | Three months endedApril 30, |      | Change |   |     | Nine months endedApril 30, |   | Change |     
|                                          | 2008 |                             | 2007 |        | $ |     | %                          |   |        | 2008 |       | 2007 |  | $ |      | % |  
|                                          |      | (in millions)               |     
|Restructuring and severance charges       |      |                             |      |        |   |     |                            |   |        |      |       |      |  |   |      |   |   |     |  |   |     |  |       |  
|Prepaid Products                          |      | $                           | 6.5  |        | $ | 0.4 |                            | $ | 6.1    |      | nm    |      |  | $ | 7.4  |   | $ | 2.5 |  | $ | 4.9 |  | 200.1 | %
|Consumer Phone Services                   |      |                             | 0.7  |        |   | 0.1 |                            |   | 0.6    |      | nm    |      |  |   | 0.7  |   |   | 0.3 |  |   | 0.4 |  | 123.7 |  
|Wholesale Telecommunications Services     |      |                             | 4.8  |        |   | 0.7 |                            |   | 4.1    |      | 606.1 | %    |  |   | 6.1  |   |   | 4.0 |  |   | 2.1 |  | 54.2  |  
|                                          |      |                             |      |        |   |     |                            |   |        |      |       |      |  |   |      |   |   |     |  |   |     |  |       |  
|Total restructuring and severance charges |      | $                           | 12.0 |        | $ | 1.2 |                            | $ | 10.8   |      | 955.8 | %    |  | $ | 14.2 |   | $ | 6.8 |  | $ | 7.4 |  | 110.6 | %
|                                          |      |                             |      |        |   |     |                            |   |        |      |       |      |  |   |      |   |   |     |  |   |     |  |       |  



nmnot meaningful

Restructuring and Severance Charges. The charges in the three and nine months ended April 30,
2008 and 2007 consist primarily of severance charges relating to the company-wide cost savings program initiated towards the end of the third quarter of fiscal 2006. In April 2008, we entered into retention agreements with several executive Telecom
employees. These employees are eligible to receive aggregate severance compensation of $5.7 million upon termination of their employment under certain circumstances. Certain of these employees agreed to continue their employment until at least
July 31, 2008 or September 30, 2008. IDT Telecom is recording this compensation as an expense ratably over the respective service periods.

Wholesale Telecommunications Services segment income from operations. On November 26, 2007, we announced that our Net2Phone Cable Telephony subsidiary, which is included in our Wholesale Telecommunications
Services segment, was awarded approximately 23 million, plus interest from November 2005, in an arbitration proceeding against Altice One S.A. and certain of its affiliates. The arbitration proceeding related to Altices termination
of cable telephony license agreements Net2Phone had entered into in November 2004. We recorded a gain of $40.0 million for this arbitration award, including accrued interest, in the nine months ended April 30, 2008, which is included in income
from operations.

Consumer Phone Services segment income from operations. In the first quarter of fiscal 2007, we completed the sale
of our U.K.-based consumer phone services business, Toucan, to Pipex Communications plc, in exchange for $38.4 million in cash (including the assumption of intercompany obligations owed to us and our subsidiaries) and 43.2 million Pipex
ordinary shares, which were later sold for $7.9 million. We recorded a gain of $44.7 million in connection with the sale in the nine months ended April 30, 2007, which is included in income from operations.



|                                      |      |                             |       |      |        |   |       |                            |  |   |        |   |      |       |    |      |   |       |   |  |   |       |   |  |   |       |   |  |        |   
|------------------------------------- | ---- | --------------------------- | ----- | ---- | ------ | - | ----- | -------------------------- |  | - | ------ | - | ---- | ----- | -- | ---- | - | ----- | - |  | - | ----- | - |  | - | ----- | - |  | ------ | --
|                                      |      | Three months endedApril 30, |       |      | Change |   |       | Nine months endedApril 30, |  |   | Change |  
|                                      | 2008 |                             |       | 2007 |        |   | $     |                            |  | % |        |   | 2008 |       |    | 2007 |   |       | $ |  |   | %     |  
|                                      |      | (in millions)               |      
|(Loss) income from operations         |      |                             |       |      |        |   |       |                            |  |   |        |   |      |       |    |      |   |       |   |  |   |       |   |  |   |       |   |  |        |   
|Prepaid Products                      |      | $                           | (24.5 | )    |        | $ | (16.9 | )                          |  | $ | (7.6   | ) |      | (44.3 | )% |      | $ | (55.5 | ) |  | $ | (36.7 | ) |  | $ | (18.8 | ) |  | (51.2  | )%
|Consumer Phone Services               |      |                             | 7.6   |      |        |   | 3.9   |                            |  |   | 3.7    |   |      | 93.4  |    |      |   | 16.8  |   |  |   | 55.9  |   |  |   | (39.1 | ) |  | (69.9  | ) 
|Wholesale Telecommunications Services |      |                             | (10.4 | )    |        |   | (6.2  | )                          |  |   | (4.2   | ) |      | (68.8 | )  |      |   | 33.5  |   |  |   | (11.1 | ) |  |   | 44.6  |   |  | 403.2  |   
|                                      |      |                             |       |      |        |   |       |                            |  |   |        |   |      |       |    |      |   |       |   |  |   |       |   |  |   |       |   |  |        |   
|Total (loss) income from operations   |      | $                           | (27.3 | )    |        | $ | (19.2 | )                          |  | $ | (8.1   | ) |      | (42.2 | )% |      | $ | (5.2  | ) |  | $ | 8.1   |   |  | $ | (13.3 | ) |  | (163.3 | )%
|                                      |      |                             |       |      |        |   |       |                            |  |   |        |   |      |       |    |      |   |       |   |  |   |       |   |  |   |       |   |  |        |   



33



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##### Table of Contents

IDT Energy Segment



|                                    |      |                             |      |        |   |      |                           |   |        |   |      |       |      |  |   |       |  |   |       |  |   |      |   |  |       |   
|----------------------------------- | ---- | --------------------------- | ---- | ------ | - | ---- | ------------------------- | - | ------ | - | ---- | ----- | ---- |  | - | ----- |  | - | ----- |  | - | ---- | - |  | ----- | --
|                                    |      | Three months endedApril 30, |      | Change |   |      | Ninemonths endedApril 30, |   | Change |  
|                                    | 2008 |                             | 2007 |        | $ |      |                           | % |        |   | 2008 |       | 2007 |  | $ |       |  | % |      
|                                    |      | (in millions)               |     
|Revenues                            |      | $                           | 66.3 |        | $ | 57.3 |                           | $ | 9.0    |   |      | 15.8  | %    |  | $ | 173.4 |  | $ | 145.4 |  | $ | 28.0 |   |  | 19.3  | % 
|Direct cost of revenues             |      |                             | 59.9 |        |   | 50.8 |                           |   | 9.1    |   |      | 17.8  |      |  |   | 154.8 |  |   | 123.5 |  |   | 31.3 |   |  | 25.4  |   
|Selling, general and administrative |      |                             | 5.3  |        |   | 3.8  |                           |   | 1.5    |   |      | 41.0  |      |  |   | 13.7  |  |   | 10.8  |  |   | 2.9  |   |  | 27.5  |   
|Bad debt                            |      |                             | 0.2  |        |   | 0.2  |                           |   |       |   |      | 22.9  |      |  |   | 0.3   |  |   | 0.2   |  |   | 0.1  |   |  | 40.4  |   
|Restructuring and severance charges |      |                             |     |        |   |     |                           |   |       |   |      |      |      |  |   | 0.1   |  |   |      |  |   | 0.1  |   |  | nm    |   
|                                    |      |                             |      |        |   |      |                           |   |        |   |      |       |      |  |   |       |  |   |       |  |   |      |   |  |       |   
|Income from operations              |      | $                           | 0.9  |        | $ | 2.5  |                           | $ | (1.6   | ) |      | (65.3 | )%   |  | $ | 4.5   |  | $ | 10.9  |  | $ | (6.4 | ) |  | (59.2 | )%
|                                    |      |                             |      |        |   |      |                           |   |        |   |      |       |      |  |   |       |  |   |       |  |   |      |   |  |       |   



nmnot meaningful

Revenues. IDT Energys revenues consisted of electricity sales of $29.9 million and $94.1
million in the three and nine months ended April 30, 2008, respectively, compared to $25.5 million and $77.8 million for the same periods in fiscal 2007, and natural gas sales of $36.4 million and $79.3 million in the three and nine months
ended April 30, 2008, respectively, compared to $31.8 million and $67.6 million in the same periods in fiscal 2007. IDT Energys revenues are impacted by the weather and the seasons, with natural gas revenues typically increasing in the
second and third fiscal quarters due to increased gas heat use, and electricity revenues typically increasing in the fourth and first fiscal quarters due to increased air conditioning use.

We experienced higher electricity revenues in the three and nine months ended April 30, 2008 compared to the same periods in fiscal 2007 primarily
as a result of increased electricity consumption by our larger consumer base. Average electricity rates remained substantially unchanged; in the three months ended April 30, 2008 our average electricity rates increased slightly whereas in the
nine months ended April 30, 2008 we experienced a slight decrease in our average electricity rates, both as compared to the same period in fiscal 2007. We experienced higher natural gas revenues in the three and nine months ended April 30,
2008 compared to the same periods in fiscal 2007 as a result of increased natural gas consumption by our larger consumer base and an increase in our average natural gas rates. As of April 30, 2008, IDT Energys subscriber base consisted of
approximately 343,000 meters compared to 284,000 meters as of April 30, 2007. We expect revenues to continue to increase in fiscal 2008 compared to fiscal 2007, although the rate of increase is expected to be lower than the increase we
experienced in fiscal 2007.

Direct Cost of Revenues. IDT Energy purchases natural gas through wholesale suppliers and various
utility companies, and electricity through the New York State competitive wholesale market for capacity, energy and ancillary services administrated by the NYISONew Yorks Independent System Operator. IDT Energys direct cost of
revenues consisted of electricity cost of $26.3 million and $82.7 million in the three and nine months ended April 30, 2008, respectively, compared to $21.7 million and $62.9 million in the same periods in fiscal 2007, and cost of natural gas
of $33.6 million and $72.1 million in the three and nine months ended April 30, 2008, respectively, compared to $29.1 million and $60.6 million in the same periods in fiscal 2007. Direct cost of revenues increased due to the increase in
electricity and natural gas consumption and increases in the average unit cost of both electricity and natural gas in the three and nine months ended April 30, 2008 compared to the same periods in fiscal 2007.

Gross margins in IDT Energy decreased to 9.7% and 10.7% in the three and nine months ended April 30, 2008, respectively, compared to 11.2% and 15.1%
in the comparable periods in fiscal 2007. Comprising these figures were gross margins on electricity sales in the three and nine months ended April 30, 2008 of 12.0% and 12.1%, respectively, compared to 14.6% and 19.2% in the comparable periods
in fiscal 2007 and gross margins on natural gas sales in the three and nine months ended April 30, 2008 of 7.8% and 9.0%, respectively, compared to 8.4% and 10.4% in the comparable periods in fiscal 2007. The gross margin declines in the three
and nine



34



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##### Table of Contents

months ended April 30, 2008 compared to the same periods in fiscal 2007 occurred because we did not pass on all of the cost increases to our customers,
which was partially attributable to our desire to increase our market share. IDT Energy plans to continue to target margins per unit that will achieve income from operations, and plans to take advantage of opportunities to maximize the margin per
unit as they arise.

Selling, General and Administrative. The increase in selling, general and administrative expenses in the three
and nine months ended April 30, 2008 as compared to the comparable periods in fiscal 2007 was due primarily to increases in compensation expense, billing related fees and customer acquisition costs. As a percentage of total IDT Energy revenues,
selling, general and administrative expenses increased from 6.6% and 7.4% in the three and nine months ended April 30, 2007, respectively, to 8.1% and 7.9% in the three and nine months ended April 30, 2008, respectively, as the increases
in IDT Energys selling, general and administrative expenses were greater than the increases in its revenues.

IDT Carmel Segment



|                                    |  |                             |      |      |        |      |   |                            |   |      |        |       |   |  |      |      |   |   |   |      |   |  |   |      |   |  |       |   
|----------------------------------- |  | --------------------------- | ---- | ---- | ------ | ---- | - | -------------------------- | - | ---- | ------ | ----- | - |  | ---- | ---- | - | - | - | ---- | - |  | - | ---- | - |  | ----- | --
|                                    |  | Three months endedApril 30, |      |      | Change |      |   | Nine months endedApril 30, |   |      | Change |      
|                                    |  | 2008                        |      | 2007 |        |      | $ |                            | % |      |        | 2008  |   |  | 2007 |      |   | $ |   |      | % | 
|                                    |  | (in millions)               |     
|Revenues                            |  | $                           | 12.5 |      | $      | 1.0  |   |                            | $ | 11.5 |        | nm    |   |  | $    | 34.5 |   |   | $ | 3.7  |   |  | $ | 30.8 |   |  | 845.0 | % 
|Direct cost of revenues             |  |                             | 8.7  |      |        | 3.2  |   |                            |   | 5.5  |        | 168.6 | % |  |      | 21.7 |   |   |   | 6.4  |   |  |   | 15.3 |   |  | 240.9 |   
|Selling, general and administrative |  |                             | 1.8  |      |        | 1.0  |   |                            |   | 0.8  |        | 79.7  |   |  |      | 4.7  |   |   |   | 2.7  |   |  |   | 2.0  |   |  | 75.5  |   
|Bad debt                            |  |                             |     |      |        |     |   |                            |   |     |        |      |   |  |      | 16.1 |   |   |   |     |   |  |   | 16.1 |   |  | nm    |   
|Depreciation and amortization       |  |                             | 0.1  |      |        | 0.1  |   |                            |   |     |        | 144.0 |   |  |      | 0.3  |   |   |   | 0.1  |   |  |   | 0.2  |   |  | 212.5 |   
|                                    |  |                             |      |      |        |      |   |                            |   |      |        |       |   |  |      |      |   |   |   |      |   |  |   |      |   |  |       |   
|Income (loss) from operations       |  | $                           | 1.9  |      | $      | (3.3 | ) |                            | $ | 5.2  |        | 155.7 | % |  | $    | (8.3 | ) |   | $ | (5.5 | ) |  | $ | (2.8 | ) |  | (51.0 | )%
|                                    |  |                             |      |      |        |      |   |                            |   |      |        |       |   |  |      |      |   |   |   |      |   |  |   |      |   |  |       |   



nmnot meaningful

Revenues. IDT Carmels revenues increased in the three and nine months ended April 30,
2008 compared to the similar periods in fiscal 2007 primarily because IDT Carmel began using the effective yield method to recognize revenues effective August 1, 2007. Under the effective yield method, revenue is recognized on a level-yield
basis over the expected life of the pool of portfolios using an internal rate of return based on the expected future collections on the portfolios. In fiscal 2007, IDT Carmels first full year of operations in the debt acquisition business, IDT
Carmel used the cost recovery method to recognize revenues since it was developing the experience necessary to reasonably predict the timing and amount of collections from the individual portfolios purchased. Under the cost recovery method, no
revenue is recognized until the cost of the portfolio is completely recovered or sold.

Direct Cost of Revenues. The increase in IDT
Carmels direct cost of revenues was primarily a result of the growth in collection activity at IDT Carmel in the second half of fiscal 2007 and into fiscal 2008.

Gross margins in IDT Carmel increased to 30.3% and 37.0% in the three and nine months ended April 30, 2008, respectively, from negative 241.3% and negative 74.7% in the comparable periods in fiscal 2007. IDT
Carmels gross margin increased because of the increase in its revenues as described above.

Selling, General and
Administrative. Selling, general and administrative expenses increased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily due to increases in the number of employees in IDT
Carmels workforce.

Bad Debt. Bad debt expense in the nine months ended April 30, 2008 of $16.1 million was recorded in
the second quarter of fiscal 2008 as a result of lower than expected cash collections and decreases in the estimated



35



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##### Table of Contents

future cash collections for certain pools of portfolios. This bad debt expense reflected in part the particularly challenging collection environment as a
result of factors in the U.S. economy that IDT Carmel cannot control, which are likely to impact consumers willingness and ability to repay their debts to IDT Carmel. These factors include, among others: a slowdown in the economy, problems in
the credit and housing markets and reductions in consumer spending.

IDT Carmels strategy to improve its cash flow include the
following: (1) increase the number of collectors in its collections arm to reduce reliance on outside agencies, (2) complete technology implementations to improve the effectiveness of in-house collectors, (3) sell underperforming
portfolios, (4) concentrate on credit card portfolios and (5) reduce selling, general and administrative expenses. There can be no assurance that IDT Carmels strategy will result in improvements in IDT Carmels cash flow in the
future. Also, IDT Carmel cannot predict when the current economic environment will improve and there can be no assurance that such improvement will result in improvements in IDT Carmels future cash flows. Also, IDT Carmel did not add to its
debt portfolio this quarter to wait out the market uncertainty that is currently impacting this industry.

IDT Capital

As of April 10, 2008, our wholly owned subsidiary, AMSO, acquired a 75% equity interest in EGL in exchange for cash of $2.5 million and certain
commitments for future funding of EGLs operations. As of April 22, 2008, we acquired an additional 14.9437% equity interest in EGL in exchange for cash of $3.0 million. EGL is one of three holders of 10-year leases granted by the U.S.
Bureau of Land Management to research, test and demonstrate the potential for commercial oil shale production in western Colorado. Once EGL demonstrates the economic and environmental viability of its technology, it will have the opportunity to
expand its lease to 5,120 acres for commercial development.

In the first quarter of fiscal 2008, Ethnic Grocery Brands and certain other
businesses that were included in IDT Capital were transferred to IDT Telecoms Prepaid Products segment. In the second quarter of fiscal 2008, IDT Carmel became a separate reportable segment and is no longer included in IDT Capital. To the
extent possible, comparative historical results for IDT Capital and IDT Telecom have been reclassified to conform to the current business segment presentation, although these results may not be indicative of the results which would have been
achieved had the business segment structure been in effect during those periods.



|                      |  |                             |      |        |   |      |                            |   |        |   |  |       |   |      |   |      |  |   |      |  |   |      |   |  |       |  
|--------------------- |  | --------------------------- | ---- | ------ | - | ---- | -------------------------- | - | ------ | - |  | ----- | - | ---- | - | ---- |  | - | ---- |  | - | ---- | - |  | ----- | -
|                      |  | Three months endedApril 30, |      | Change |   |      | Nine months endedApril 30, |   | Change |  
|                      |  | 2008                        |      | 2007   |   | $    |                            |   | %      |   |  | 2008  |   | 2007 |   | $    |  |   | %    | 
|                      |  | (in millions)               |     
|Revenues              |  |                             |      |        |   |      |                            |   |        |   |  |       |   |      |   |      |  |   |      |  |   |      |   |  |       |  
|Local Media           |  | $                           | 5.4  |        | $ | 4.9  |                            | $ | 0.5    |   |  | 10.1  | % |      | $ | 16.6 |  | $ | 16.3 |  | $ | 0.3  |   |  | 1.7   | %
|Internet Mobile Group |  |                             | 2.7  |        |   | 0.1  |                            |   | 2.6    |   |  | nm    |   |      |   | 7.3  |  |   | 0.2  |  |   | 7.1  |   |  | nm    |  
|Alternative Energy    |  |                             |     |        |   |     |                            |   |       |   |  |      |   |      |   |     |  |   |     |  |   |     |   |  |      |  
|All other             |  |                             | 5.4  |        |   | 6.5  |                            |   | (1.1   | ) |  | (17.3 | ) |      |   | 16.2 |  |   | 20.8 |  |   | (4.6 | ) |  | (22.1 | )
|                      |  |                             |      |        |   |      |                            |   |        |   |  |       |   |      |   |      |  |   |      |  |   |      |   |  |       |  
|Total revenues        |  | $                           | 13.5 |        | $ | 11.5 |                            | $ | 2.0    |   |  | 16.7  | % |      | $ | 40.1 |  | $ | 37.3 |  | $ | 2.8  |   |  | 7.5   | %
|                      |  |                             |      |        |   |      |                            |   |        |   |  |       |   |      |   |      |  |   |      |  |   |      |   |  |       |  



nmnot meaningful

Revenues. The increase in IDT Capitals revenues in the three and nine months ended
April 30, 2008 compared to the similar periods in fiscal 2007 was primarily due to an increase in IDT Internet Mobile Groups revenues, offset by a decrease in revenues in the all other lines of business. IDT Internet Mobile
Group revenues increased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily as a result of business acquisitions in December 2006 and June 2007. In December 2006, we acquired for IDT
Internet Mobile Group 90% of Norway-based Zedge.net. In June 2007, we acquired for IDT Internet Mobile Group a controlling interest in IDW Publishing.



36



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##### Table of Contents

The all other lines of business include IDT Spectrum, IDT Global Israel (which is primarily
comprised of call center operations, which we are in the process of downsizing) and other smaller initiatives and operations, including some of our intellectual property and certain real estate investments. Revenues in the all other
lines of business decreased in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily due to our decision to stop offering our English as a Second Language and Hispanic insurance businesses at
the end of fiscal 2007.



|                              |  |                             |     |        |   |     |                            |   |        |  |      |    |      |   |      |  |   |      |  |   |     |  |      |  
|----------------------------- |  | --------------------------- | --- | ------ | - | --- | -------------------------- | - | ------ |  | ---- | -- | ---- | - | ---- |  | - | ---- |  | - | --- |  | ---- | -
|                              |  | Three months endedApril 30, |     | Change |   |     | Nine months endedApril 30, |   | Change | 
|                              |  | 2008                        |     | 2007   |   | $   |                            | % |        |  | 2008 |    | 2007 |   | $    |  | % |     
|                              |  | (in millions)               |    
|Direct cost of revenues       |  |                             |     |        |   |     |                            |   |        |  |      |    |      |   |      |  |   |      |  |   |     |  |      |  
|Local Media                   |  | $                           | 1.8 |        | $ | 1.8 |                            | $ |       |  | (4.8 | )% |      | $ | 5.2  |  | $ | 5.0  |  | $ | 0.2 |  | 3.6  | %
|Internet Mobile Group         |  |                             | 1.5 |        |   |    |                            |   | 1.5    |  | nm   |    |      |   | 4.3  |  |   |     |  |   | 4.3 |  | nm   |  
|Alternative Energy            |  |                             |    |        |   |    |                            |   |       |  |     |    |      |   |     |  |   |     |  |   |    |  |     |  
|All other                     |  |                             | 5.1 |        |   | 4.7 |                            |   | 0.4    |  | 8.7  |    |      |   | 13.8 |  |   | 11.8 |  |   | 2.0 |  | 17.6 |  
|                              |  |                             |     |        |   |     |                            |   |        |  |      |    |      |   |      |  |   |      |  |   |     |  |      |  
|Total direct cost of revenues |  | $                           | 8.4 |        | $ | 6.5 |                            | $ | 1.9    |  | 28.1 | %  |      | $ | 23.3 |  | $ | 16.8 |  | $ | 6.5 |  | 38.8 | %
|                              |  |                             |     |        |   |     |                            |   |        |  |      |    |      |   |      |  |   |      |  |   |     |  |      |  



nmnot meaningful

Direct Cost of Revenues. The increase in direct cost of revenues in the three and nine months ended
April 30, 2008 compared to the similar periods in fiscal 2007 was primarily due to the increase in the direct cost of revenues of IDT Internet Mobile Group and in the all other lines of business. The increase in the direct cost of
revenues of IDT Internet Mobile Group, which reflects the increase in revenues, was primarily a result of business acquisitions in December 2006 and June 2007. The increase in the direct cost of revenues in the all other lines of
business in the nine months ended April 30, 2008 compared to the similar period in fiscal 2007 is primarily due to an increase of $1.7 million in IDT Spectrum as the result of a one-time $1.7 million reversal of direct cost of revenues in the
second quarter of fiscal 2007.

IDT Capitals aggregate gross margin decreased from 43.1% and 55.1% in three and nine months ended
April 30, 2007, respectively, to 37.5% and 42.0% in the three and nine months ended April 30, 2008, respectively, primarily due to the declines in the gross margins of IDT Internet Mobile Group and in the all other lines of
business. IDT Internet Mobile Groups gross margin declined because its direct cost of revenues increased at a faster rate than its revenues. The gross margin in the all other lines of business declined because direct costs of
revenues increased while revenues decreased as described above.



|                                                   |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  
|-------------------------------------------------- |  | --------------------------- | ---- | ------ | - | ---- | -------------------------- | - | ------ |  | ----- | - | ---- | - | ---- |  | - | ---- |  | - | ---- |  | ----- | -
|                                                   |  | Three months endedApril 30, |      | Change |   |      | Nine months endedApril 30, |   | Change | 
|                                                   |  | 2008                        |      | 2007   |   | $    |                            | % |        |  | 2008  |   | 2007 |   | $    |  | % |     
|                                                   |  | (in millions)               |     
|Selling, general and administrative expenses       |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  
|Local Media                                        |  | $                           | 4.7  |        | $ | 4.1  |                            | $ | 0.6    |  | 14.0  | % |      | $ | 14.1 |  | $ | 11.9 |  | $ | 2.2  |  | 18.3  | %
|Internet Mobile Group                              |  |                             | 2.4  |        |   | 0.6  |                            |   | 1.8    |  | 281.6 |   |      |   | 6.9  |  |   | 1.9  |  |   | 5.0  |  | 270.7 |  
|Alternative Energy                                 |  |                             |     |        |   |     |                            |   |       |  |      |   |      |   |     |  |   |     |  |   |     |  |      |  
|All other                                          |  |                             | 6.3  |        |   | 5.9  |                            |   | 0.4    |  | 7.3   |   |      |   | 23.4 |  |   | 16.1 |  |   | 7.3  |  | 44.9  |  
|                                                   |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  
|Total selling, general and administrative expenses |  | $                           | 13.4 |        | $ | 10.6 |                            | $ | 2.8    |  | 26.0  | % |      | $ | 44.4 |  | $ | 29.9 |  | $ | 14.5 |  | 48.4  | %
|                                                   |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  

Selling, General and Administrative. Selling, general and administrative expenses increased
in the three and nine months ended April 30, 2008 compared to the similar periods in fiscal 2007 primarily due to increases in the selling, general and administrative expenses of IDT Internet Mobile Group and the all other lines of
business.



37



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##### Table of Contents

IDT Internet Mobile Groups business acquisitions in December 2006 and June 2007 account for its increase in selling, general and administrative
expenses. The all other increase was primarily due to an increase in certain outside legal fees, offset by decreases in the selling, general and administrative expenses of our English as a Second Language and Hispanic insurance
businesses that we decided to stop offering at the end of fiscal 2007. As a percentage of IDT Capitals aggregate revenues, selling, general and administrative expenses increased from 92.1% and 80.2% in the three and nine months ended
April 30, 2007, respectively, to 99.5% and 110.8% in the three and nine months ended April 30, 2008, respectively, as the increase in IDT Capitals selling, general and administrative expenses was greater than the increase in its
aggregate revenues.

Research and Development.Research and development expenses incurred by Alternative Energy were $6.2 million in
the three and nine months ended April 30, 2008. In connection with the acquisition of EGL, we charged an aggregate of $5.5 million to research and development expense at the acquisition date, which includes the amounts assigned to EGLs
tangible and intangible assets to be used in its research and development project that have no alternative future use. In addition, Alternative Energy incurred research and development expense of $0.7 million in the three months ended April 30,
2008.



|                           |  |                             |       |   |        |   |      |                            |  |   |        |   |  |        |    |  |      |       |   |   |   |       |   |  |   |       |   |  |        |   
|-------------------------- |  | --------------------------- | ----- | - | ------ | - | ---- | -------------------------- |  | - | ------ | - |  | ------ | -- |  | ---- | ----- | - | - | - | ----- | - |  | - | ----- | - |  | ------ | --
|                           |  | Three months endedApril 30, |       |   | Change |   |      | Nine months endedApril 30, |  |   | Change |  
|                           |  | 2008                        |       |   | 2007   |   |      | $                          |  |   | %      |   |  | 2008   |    |  | 2007 |       |   | $ |   |       | % | 
|                           |  | (in millions)               |      
|Loss from operations       |  |                             |       |   |        |   |      |                            |  |   |        |   |  |        |    |  |      |       |   |   |   |       |   |  |   |       |   |  |        |   
|Local Media                |  | $                           | (1.4  | ) |        | $ | (1.4 | )                          |  | $ |       |   |  | (1.7   | )% |  | $    | (4.3  | ) |   | $ | (1.7  | ) |  | $ | (2.6  | ) |  | (154.1 | )%
|Internet Mobile Group      |  |                             | (1.5  | ) |        |   | (0.7 | )                          |  |   | (0.8   | ) |  | (104.5 | )  |  |      | (4.6  | ) |   |   | (1.9  | ) |  |   | (2.7  | ) |  | (138.0 | ) 
|Alternative Energy         |  |                             | (6.2  | ) |        |   |     |                            |  |   | (6.2   | ) |  | nm     |    |  |      | (6.2  | ) |   |   |      |   |  |   | (6.2  | ) |  | nm     |   
|All other                  |  |                             | (7.9  | ) |        |   | (6.7 | )                          |  |   | (1.2   | ) |  | (17.3  | )  |  |      | (26.0 | ) |   |   | (12.4 | ) |  |   | (13.6 | ) |  | (109.6 | ) 
|                           |  |                             |       |   |        |   |      |                            |  |   |        |   |  |        |    |  |      |       |   |   |   |       |   |  |   |       |   |  |        |   
|Total loss from operations |  | $                           | (17.0 | ) |        | $ | (8.8 | )                          |  | $ | (8.2   | ) |  | (92.4  | )% |  | $    | (41.1 | ) |   | $ | (16.0 | ) |  | $ | (25.1 | ) |  | (156.4 | )%
|                           |  |                             |       |   |        |   |      |                            |  |   |        |   |  |        |    |  |      |       |   |   |   |       |   |  |   |       |   |  |        |   



nmnot meaningful

Corporate



|                                    |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  
|----------------------------------- |  | --------------------------- | ---- | ------ | - | ---- | -------------------------- | - | ------ |  | ----- | - | ---- | - | ---- |  | - | ---- |  | - | ---- |  | ----- | -
|                                    |  | Three months endedApril 30, |      | Change |   |      | Nine months endedApril 30, |   | Change | 
|                                    |  | 2008                        |      | 2007   |   | $    |                            | % |        |  | 2008  |   | 2007 |   | $    |  | % |     
|                                    |  | (in millions)               |     
|General and administrative expenses |  | $                           | 23.7 |        | $ | 18.1 |                            | $ | 5.6    |  | 31.0  | % |      | $ | 61.5 |  | $ | 44.2 |  | $ | 17.3 |  | 39.1  | %
|Depreciation and amortization       |  |                             | 0.7  |        |   | 0.6  |                            |   | 0.1    |  | 33.6  |   |      |   | 1.9  |  |   | 1.7  |  |   | 0.2  |  | 12.8  |  
|Restructuring and severance charges |  |                             | 4.5  |        |   | 0.4  |                            |   | 4.1    |  | 965.4 |   |      |   | 5.5  |  |   | 0.6  |  |   | 4.9  |  | 761.0 |  
|                                    |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  
|Loss from operations                |  | $                           | 28.9 |        | $ | 19.1 |                            | $ | 9.8    |  | 51.8  | % |      | $ | 68.9 |  | $ | 46.5 |  | $ | 22.4 |  | 48.0  | %
|                                    |  |                             |      |        |   |      |                            |   |        |  |       |   |      |   |      |  |   |      |  |   |      |  |       |  

Corporate costs include certain services, such as corporate executive compensation, treasury, tax
and accounting services, corporate governance including Board of Directors fees, internal and external audit, public and investor relations, corporate insurance, corporate legal, and business development, and other corporate-related general
and administrative expenses including, among others, facilities costs, charitable contributions and travel and entertainment, as well as depreciation expense on corporate assets. Corporate does not generate any revenues, nor does it incur any direct
cost of revenues.

General and Administrative. Corporate general and administrative expenses increased in the three and nine
months ended April 30, 2008 as compared to the similar periods in fiscal 2007 primarily due to an accrual of



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##### Table of Contents

$10.5 million in April 2008 related to a jury award for an employment matter, higher legal fees on litigation matters where we are the plaintiff and
charitable contributions, offset by decreases in payroll and related expenses, stock-based compensation and insurance expense. In addition, we received a $1.7 million tax credit from the New Jersey State Business Employment Incentive Program in the
second quarter of fiscal 2007 that reduced the corporate general and administrative expenses in the nine months ended April 30, 2007. The increase in corporate general and administrative expenses in the nine months ended April 30, 2008 as
compared to the similar period in fiscal 2007 also includes an increase in rent and facilities expense of our headquarters office building allocated to corporate due to the reduction in rent allocated to other segments. This is a result of the
smaller employee workforce in the other segments. Rent expense related to our headquarters office building decreased in the three months ended April 30, 2008 as compared to the similar period in fiscal 2007 due to the purchase of the building
in February 2008. As a percentage of our total consolidated revenues from continuing operations, corporate general and administrative expenses increased from 3.7% and 2.9% in the three and nine months ended April 30, 2007, respectively, to 5.2%
and 4.4% in the three and nine months ended April 30, 2008, respectively, as corporate general and administrative expenses increased while our consolidated revenues decreased.

Restructuring and Severance Charges. Restructuring and severance charges in the three and nine months ended April 30, 2008 and 2007
consist primarily of severance charges under the company-wide cost savings program initiated towards the end of the third quarter of fiscal 2006.

Liquidity and Capital Resources

General

Historically, we have satisfied our cash requirements through a combination of our existing cash, cash equivalents, cash flow from operating activities, proceeds from the sales and maturities of marketable securities
and investments, arbitration awards and litigation settlements, sales of our equity securities including the exercise of stock options and sales under our employee stock purchase plan, borrowings from third parties, and the sales of businesses (e.g.
Corbina Telecom, IDT Entertainment and U.K.-based Toucan business).

As of April 30, 2008, we had cash, cash equivalents, marketable
securities and investments of $393.9 million and working capital (current assets less current liabilities) of $149.0 million. Investments include $116.9 million in holdings of pooled investment vehicles, including hedge funds.



|                                                                            |  |                            |        |   |      |   |       |  
|--------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ---- | - | ----- | -
|                                                                            |  | Nine months endedApril 30, |       
|                                                                            |  | 2008                       |        |   | 2007 |  
|                                                                            |  | (in millions)              |       
|Cash flows (used in) provided by                                            |  |                            |        |   |      |   |       |  
|Operating activities                                                        |  | $                          | (108.3 | ) |      | $ | (83.7 | )
|Investing activities                                                        |  |                            | 153.1  |   |      |   | 243.6 |  
|Financing activities                                                        |  |                            | (73.6  | ) |      |   | (33.2 | )
|Effect of exchange rate changes on cash and cash equivalents                |  |                            | 3.9    |   |      |   | 5.6   |  
|                                                                            |  |                            |        |   |      |   |       |  
|(Decrease) increase in cash and cash equivalents from continuing operations |  |                            | (24.9  | ) |      |   | 132.3 |  
|                                                                            |  |                            |        |   |      |   |       |  
|Net cash used in discontinued operations                                    |  |                            |       |   |      |   | (8.9  | )
|                                                                            |  |                            |        |   |      |   |       |  
|(Decrease) increase in cash and cash equivalents                            |  | $                          | (24.9  | ) |      | $ | 123.4 |  
|                                                                            |  |                            |        |   |      |   |       |  

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts
receivable and trade accounts payable.



39



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##### Table of Contents

Towards the end of the third quarter of fiscal 2006, we initiated a company-wide cost savings program to
better align our infrastructure to our current business needs. As of April 30, 2008, this program resulted in the termination of approximately 1,110 employees. Severance and other payments related to this cost savings program were $23.6 million
in the nine months ended April 30, 2008. As of April 30, 2008, $14.3 million remained accrued for the ultimate payment of severance and other costs related to this cost savings initiative.

Investing Activities

In the nine months ended
April 30, 2008 and 2007, proceeds from sales and maturities of marketable securities net of purchases of marketable securities was $231.2 million and $6.7 million, respectively.

Our capital expenditures were $15.1 million in the nine months ended April 30, 2008 compared to $26.4 million in the nine months ended
April 30, 2007. We currently anticipate that total capital expenditures for all of our divisions in the fourth quarter of fiscal 2008 will be in the $3.5 million to $5.5 million range. We expect to fund our capital expenditures with our
cash, cash equivalents and marketable securities on hand. From time to time, we may also finance a portion of our capital expenditures through capital leases.

We purchased our headquarters office building in February 2008 for $24.8 million in cash plus the assumption of the remainder of the existing mortgage on the building in the amount of $26.9 million. In addition, an
affiliate of the seller repaid its $16.9 million note payable to us that was secured by an interest in the building. The mortgage secures a promissory note that bears interest at the rate of 8.9% per annum and is payable in monthly installments
of $0.3 million consisting of principal and interest. The maturity date of the note is April 1, 2020.

In the nine months ended
April 30, 2008 and 2007, cash used for investments and acquisitions was $21.8 million and $4.1 million, respectively. Cash used for investments and acquisitions in the nine months ended April 30, 2008 included cash used for our investment
in E.G.L. Oil Shale, L.L.C. of $5.5 million. We have committed to a minimum total investment of $11.0 million in EGL, which includes $2.5 million used for our original purchase of the 75% interest in EGL. Cash used for investments and acquisitions
in the nine months ended April 30, 2008 also included cash used for additional investments in pooled investment vehicles including hedge funds of $15.9 million.

We sold certain of our investments in the nine months ended April 30, 2008 for $10.9 million and recorded an aggregate gain of $3.0 million from the sales.

We sold a building in Newark, New Jersey in the first quarter of fiscal 2008 and received cash of $4.9 million from the sale. We recorded a $4.1 million
gain on the sale of the building in the nine months ended April 30, 2008.

In the nine months ended April 30, 2008 and 2007, IDT
Carmel Portfolio Management purchased debt portfolios for $67.3 million and $47.3 million, respectively, and IDT Carmels principal collections and proceeds from resale of debt portfolios totaled $20.4 million and $14.4 million, respectively.
Also, IDT Carmel did not add to its debt portfolio this quarter to wait out the market uncertainty that is currently impacting this industry.

In the first quarter of fiscal 2007, we completed the sale of IDT Entertainment to Liberty Media Corporation for (i) 14.9 million shares of our Class B common stock and Liberty Medias approximate 4.8% interest in IDT
Telecom, (ii) $220.0 million in cash, net of certain working capital adjustments, (iii) the repayment of $58.7 million of IDT Entertainments intercompany indebtedness payable to us and (iv) the assumption of all of IDT
Entertainments existing indebtedness. In addition, we would have to pay Liberty Media up to $3.5 million if the net equity value of IDT Entertainment over the five-year period following the closing of the transaction or a shorter period under
specified circumstances does not exceed $439 million. We recognized a gain of $205.2 million in fiscal 2007 in connection with the sale, of which $198.2 million was recognized in the first quarter of fiscal 2007.



40



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##### Table of Contents

In the first quarter of fiscal 2007, we sold our U.K.-based consumer phone services business, Toucan, to
Pipex Communications plc for $38.4 million in cash (including the assumption of intercompany obligations owed to IDT and its subsidiaries) and 43.2 million Pipex ordinary shares, which were subsequently sold for $7.9 million. We recognized a
gain of $44.7 million in fiscal 2007 in connection with the sale.

Financing Activities

On March 14, 2007, our Board of Directors authorized a cash dividend of $0.25 per share of our common stock, Class A common stock and Class B
common stock. The $0.25 per share dividend in the aggregate amount of $20.6 million was paid on April 24, 2007 to shareholders of record at the close of business on March 27, 2007. No dividend was authorized or paid in the nine months
ended April 30, 2008.

We distributed cash of $3.9 million and $9.9 million in the nine months ended April 30, 2008 and 2007,
respectively to the minority equity holders of subsidiaries. Repayments of borrowings were $3.0 million and $2.9 million in the nine months ended April 30, 2008 and 2007, respectively. We also repaid capital lease obligations of $22.3 million
and $15.6 million in the nine months ended April 30, 2008 and 2007, respectively. In the nine months ended April 30, 2008 and 2007, we received proceeds of $0.1 million and $5.2 million, respectively, from the exercise of our stock
options, and $0.8 million and $1.1 million, respectively, from purchases under our employee stock purchase plan. In the nine months ended April 30, 2007, proceeds from sale leaseback transactions were $13.3 million.

In June 2006, our Board of Directors authorized a stock repurchase program for the repurchase of up to an aggregate of 25 million shares of our
Class B common stock and common stock, without regard to class. In the nine months ended April 30, 2008, we repurchased an aggregate of 5.8 million shares of our common stock and Class B common stock for an aggregate purchase price of
$44.5 million. As of April 30, 2008, 17.1 million shares remained available for repurchase under our stock repurchase program.

In the nine months ended April 30, 2008 and 2007, we acquired an aggregate of 0.1 million and 0.3 million shares, respectively, of our Class B common stock held by certain of our employees for $0.8 million and $3.9 million,
respectively, to satisfy the employees tax withholding obligations in connection with the vesting of restricted stock awards.

Contractual
Obligations and Other Commercial Commitments

The following tables quantify our future contractual obligations and commercial
commitments as of April 30, 2008:

Contractual Obligations

Payments Due by Period



|                                               |  |       |       |                 |   |           |  |           |      |               |   |      |  |   |      
|---------------------------------------------- |  | ----- | ----- | --------------- | - | --------- |  | --------- | ---- | ------------- | - | ---- |  | - | -----
|                                               |  | Total |       | Less than1 year |   | 13 years |  | 45 years |      | After 5 years
|(in millions)                                  |  |       |       |                 |   |           |  |           |      |              
|Capital lease obligations (including interest) |  | $     | 25.1  |                 | $ | 12.4      |  | $         | 12.5 |               | $ | 0.2  |  | $ |     
|Operating leases                               |  |       | 115.5 |                 |   | 7.6       |  |           | 9.7  |               |   | 7.1  |  |   | 91.1 
|Purchase commitments and other obligations     |  |       | 4.3   |                 |   | 4.3       |  |           |     |               |   |     |  |   |     
|Notes payable (including interest)             |  |       | 172.4 |                 |   | 9.5       |  |           | 22.0 |               |   | 23.3 |  |   | 117.6
|                                               |  |       |       |                 |   |           |  |           |      |               |   |      |  |   |      
|Total contractual obligations (1)              |  | $     | 317.3 |                 | $ | 33.8      |  | $         | 44.2 |               | $ | 30.6 |  | $ | 208.7
|                                               |  |       |       |                 |   |           |  |           |      |               |   |      |  |   |      



|(1) | The following financial obligations are not included in the above table due to the uncertainty of the timing and amounts of any such payments:
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In February 2005, we entered into a multi-year agreement to grant a telecommunications service provider the right to service certain of our domestic and
international wireless traffic. Terms of the
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



41



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##### Table of Contents

| | agreement are based on a minimum purchase of $75 million of services from the telecommunications service provider through October 2009. As of April 30,
2008, telecommunications services of approximately $20 million have been purchased.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | As of April 30, 2008, we were committed to invest up to an additional $7.5 million in a hedge fund when required by the General Partner of the fund.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | On April 16, 2008, we entered into a retention agreement with Yona Katz, the Chief Operating Officer of our Telecom division pursuant to which Mr. Katz
agreed to continue his employment until at least September 30, 2008, unless terminated earlier. Under certain circumstances, Mr. Katz may be eligible to receive severance compensation upon a termination of his employment during a period of
eighteen months from April 1, 2008. The total amount of the severance payment would be $2.2 million, provided that Mr. Katz executes and delivers a separation and general release agreement. We are recording this compensation as an expense
ratably over the period from April 1, 2008 to September 30, 2008. Also in April 2008, we entered into similar agreements with three other IDT Telecom executive employees. These employees are eligible to receive aggregate severance
compensation of $3.5 million upon termination of their employment under certain circumstances. Two of these employees agreed to continue their employment, one until at least July 31, 2008 and the other until at least September 30, 2008. We
are recording this compensation as an expense ratably over the respective service periods.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are currently under audit by the IRS for our Federal tax returns for fiscal 2001, 2002, 2003, and 2004. Should an assessment by the IRS result from the audit,
the Company may be liable for income taxes, interest and penalties, which could have an adverse effect on our results of operations, cash flows and financial condition.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other Commercial Commitments

Payments Due By Period



|                          |  |       |      |                 |   |           |  |           |     |               |   |     |  |   |    
|------------------------- |  | ----- | ---- | --------------- | - | --------- |  | --------- | --- | ------------- | - | --- |  | - | ---
|                          |  | Total |      | Less than1 year |   | 13 years |  | 45 years |     | After 5 years
|(in millions)             |  |       |      |                 |   |           |  |           |     |              
|Standby letters of credit |  | $     | 55.0 |                 | $ | 47.9      |  | $         | 1.8 |               | $ | 0.1 |  | $ | 5.2
|                          |  |       |      |                 |   |           |  |           |     |               |   |     |  |   |    

Changes in Trade Accounts Receivable and Allowance for Doubtful Accounts

Gross trade accounts receivable increased $0.5 million from $184.5 million at July 31, 2007 to $185.0 million at April 30, 2008 mostly due to an
increase in IDT Energys receivables as a result of an increase in revenues, partially offset by write-offs of accounts receivable by IDT Telecom and IDT Capital. The allowance for doubtful accounts as a percentage of gross trade accounts
receivable increased from 10.7% at July 31, 2007 to 11.6% at April 30, 2008 mainly because the allowance balance in IDT Telecom increased while the gross trade accounts receivable balance was substantially unchanged.

Other Sources and Uses of Resources

We intend to,
where appropriate, make strategic investments and acquisitions to complement, expand and/or enter into new businesses. In considering acquisitions and investments, we search for opportunities to profitably grow our existing businesses, to add
qualitatively to the range of businesses in our portfolio and to achieve operational synergies. At this time, we cannot guarantee that we will be presented with acquisition opportunities that meet our return on investment criteria, or that our
efforts to make acquisitions that meet our criteria will be successful. In addition, from time to time, we have made strategic dispositions of certain businesses (such as Corbina Telecom, IDT Entertainment and Toucan). We continually evaluate our
portfolio for opportunities to monetize select businesses where we deem appropriate.



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We believe that, based upon our present business plan, and due to the balance of cash, cash equivalents,
marketable securities and pooled investment vehicles including hedge funds that we held as of April 30, 2008, our existing cash resources will be sufficient to meet our currently anticipated working capital and capital expenditure requirements,
and to fund any potential operating cash flow deficits within any of our segments for at least the next twelve months. If our results differ from our current expectations, or if we acquire the business or assets of another company, we might need to
raise additional capital from equity or debt sources. We have initiated discussions with several financial institutions regarding financing possibilities in order to supplement our existing capital resources. There can be no assurance that we will
be able to raise additional capital on favorable terms or at all.

Foreign Currency Risk

Revenues from our international operations represented 35.5% and 29.9% of our consolidated revenues from continuing operations for the nine months ended
April 30, 2008 and 2007, respectively. A significant portion of these revenues is in currencies other than the U.S. Dollar. Our foreign currency exchange risk is somewhat mitigated by our ability to offset the majority of these non
dollar-denominated revenues with operating expenses that are paid in the same currencies. As such, the net amount of our exposure to foreign currency exchange rate changes is generally not material. In addition, we have entered into foreign exchange
hedges beginning in the second quarter of fiscal 2008.

Recently Issued Accounting Standards and Standards Not Yet Adopted

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position (FSP) No. FAS 157-2, Effective Date of FASB Statement No. 157. This FSP
delays the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (that is, at least annually). We are
required to adopt SFAS 157 effective August 1, 2008, except for the items within the scope of FSP 157-2, for which we are required to adopt SFAS 157 effective August 1, 2009. SFAS 157 does not require any new fair value measurements,
however, our application of this statement will change current practice for some of our fair value measurements.

In February 2007, the
FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. SFAS 159 also establishes
presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 does not eliminate disclosure requirements included in
other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS 107, Disclosures about Fair Value of Financial Instruments. We are required to adopt SFAS 159 effective
August 1, 2008. We do not currently expect to elect the fair value option for the valuation of any of our eligible assets or liabilities.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. SFAS 141(R) establishes principles and requirements for how the acquirer: (a) recognizes and measures the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in the acquiree, (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (c) determines what information to disclose to
enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS 141 (R) requires the acquiring entity in a business combination to recognize the full fair value of the assets acquired and
liabilities assumed in the transaction at the acquisition date; in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; the immediate expense recognition of transaction
costs; changes in deferred tax asset valuation allowances



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and income tax uncertainties after the acquisition date generally will affect income tax expense; and restructuring plans will be accounted for separately
from the business combination, among other things. We are required to apply SFAS 141(R) to business combinations with an acquisition date on or after August 1, 2009. SFAS 141 (R) fundamentally changes many aspects of existing accounting
requirements for business combinations. As such, if we enter into any business combinations after the adoption of SFAS 141 (R), a transaction may significantly impact our financial position and results of operations, but not our cash flows, when
compared to acquisitions accounted for under current U.S. generally accepted accounting principles.

In December 2007, the FASB issued SFAS
No.160, Noncontrolling Interests in Consolidated Financial Statementsan amendment of ARB No. 51. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. Also, SFAS 160 requires consolidated net income (loss) to include the amounts attributable to both the parent and the noncontrolling interest, and it requires disclosure of the amounts of
net income (loss) attributable to the parent and to the noncontrolling interest. Finally, SFAS 160 requires increases and decreases in the noncontrolling ownership interest amount to be accounted for as equity transactions, and the gain or loss on
the deconsolidation of a subsidiary will be measured using the fair value of any noncontrolling equity investment rather than the carrying amount of the retained investment. We are required to adopt SFAS 160 on August 1, 2009. Upon the adoption
of SFAS 160, we must reclassify historical minority interests included in our consolidated balance sheet to stockholders equity, and reverse historical minority interests in our consolidated results of operations.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement
No. 133. SFAS 161 is intended to enhance the current disclosure framework of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS 161 requires enhanced disclosure about (a) how and why an entity
uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entitys
financial position, results of operations and cash flows. We are required to adopt SFAS 161 on August 1, 2009. We are currently evaluating the impact of SFAS 161 on the disclosures in our consolidated financial statements.

In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP 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 SFAS No. 142, Goodwill and Other Intangible Assets. We are required to adopt FSP 142-3 on
August 1, 2009. The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired afteradoption, and the disclosure requirements shall be applied
prospectively to all intangible assets recognized as of,and subsequent to, adoption. We are currently evaluating the impact of FSP 142-3 on our consolidated financial statements.



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Item 3. Quantitative and Qualitative Disclosures About Market Risks

We are exposed to various types of
market risks in the normal course of business, including the impact of changes in commodity prices, interest rates and foreign currency exchange rates. We may hedge market price fluctuations associated with physical purchases and sales of
electricity and natural gas by using derivative instruments including futures, forwards, basis swaps, transmission congestion contracts and financial transmission rights contracts. We are exposed to changes in interest rates primarily from our
investments in cash equivalents and marketable debt securities. On occasion, we use interest rate derivative instruments and investment strategies to manage our exposure to interest rate changes, such as short sale strategies and repurchase and
reverse repurchase agreements. In addition, fluctuations in market interest rates may lead to significant fluctuations in the fair value of our notes payable and capital lease obligations. If necessary, we may take appropriate actions to limit the
negative effect of interest rate fluctuations on our obligations. Our market risk exposure relating to foreign currency exchange is generally not material, as we have cash outflows denominated in foreign currencies to partially offset the cash
inflows denominated in the same currencies, thereby creating a natural hedge. In order to mitigate the risk associated with any remaining net foreign exchange exposure, which we experience from time to time, we have entered into foreign exchange
hedges beginning in the second quarter of fiscal 2008.

In addition to, but separate from our primary business, we hold a portion of our
total asset portfolio in pooled investment vehicles including hedge funds for strategic and speculative purposes. As of April 30, 2008, the carrying value of such investments was $116.9 million out of a total of cash, cash equivalents,
marketable securities and investments of $393.9 million. In the third quarter of fiscal 2008, we instructed three of these hedge funds to liquidate our investments. We expect to receive an aggregate of approximately $43.4 million in the fourth
quarter of fiscal 2008 for these investments. Investments in hedge funds carry a degree of risk, and depend to a great extent on correct assessments of the future course of price movements of securities and other instruments. There can be no
assurance that the managers of the hedge funds in which we have invested will be able to accurately predict these price movements. In order to minimize our exposure to such risk, we attempt to ensure that our hedge fund portfolio remains
diversified, and it is managed by our management under the supervision of the Audit Committee of our Board of Directors, with the assistance of professional investment advisers utilized by the Company. Nevertheless, the securities markets have in
recent years been characterized by great volatility and unpredictability. Accordingly, the value of our interests in these funds may go down as well as up and we may not receive, upon redemption, the amounts originally invested.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief
Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, such officers have concluded that as of such date, our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the
quarter ended April 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Legal proceedings in which we are involved are more fully described in Note 14
to the Condensed Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

We are
subject to other legal proceedings, which have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurances in this regard, in the opinion of management, none of the legal proceedings to which
we are a party will have a material adverse effect on our results of operations, cash flows, or our financial condition.

Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in
Item 1A to Part I of our Annual Report on Form 10-K for the year ended July 31, 2007.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides
information with respect to purchases by the Company of its shares during the third quarter of fiscal 2008:



|                        |  |                                |  |                        |      |                                                                              |         |                                                                                 |           
|----------------------- |  | ------------------------------ |  | ---------------------- | ---- | ---------------------------------------------------------------------------- | ------- | ------------------------------------------------------------------------------- | ----------
|                        |  | Total Numberof SharesPurchased |  | Average Priceper Share |      | Total Number ofShares Purchased aspart of PubliclyAnnounced Plans orPrograms |         | Maximum Numberof Shares thatMay Yet Be Purchased Under thePlans or Programs
(1)
|February 129, 2008 (2) |  | 107,354                        |  | $                      | 6.89 |                                                                              | 0       |                                                                                 | 17,269,850
|March 131, 2008        |  | 0                              |  | $                      | 0    |                                                                              | 0       |                                                                                 | 17,269,850
|April 130, 2008 (3)    |  | 135,601                        |  | $                      | 3.69 |                                                                              | 132,500 |                                                                                 | 17,137,350
|                        |  |                                |  |                        |      |                                                                              |         |                                                                                 |           
|Total                   |  | 242,955                        |  | $                      | 5.10 |                                                                              | 132,500 |                                                                                 |           
|                        |  |                                |  |                        |      |                                                                              |         |                                                                                 |           



|(1) | Under our existing stock repurchase program, approved by our Board of Directors on June 13, 2006, we are authorized to repurchase up to an aggregate of 25 million shares
of our Class B common stock and our common stock, without regard to class.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of shares of Class B common stock that were tendered by employees of the Company to satisfy the employees tax withholding obligations in connection with the vesting
of awards of restricted stock. Such shares are repurchased by the Company based on their fair market value on the trading day immediately prior to the vesting date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of 90,000 shares of common stock and 42,500 shares of Class B common stock purchased pursuant to the stock repurchase program, resulting in an aggregate of 17,137,350
shares that may yet be purchased under the stock repurchase program, and 3,101 shares of Class B common stock that were tendered by employees of the Company to satisfy the employees tax withholding obligations in connection with the vesting of
awards of restricted stock. Such shares are repurchased by the Company based on their fair market value on the trading day immediately prior to the vesting date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None



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Item 5. Other Information

None

Item 6. Exhibits



|              |  |                                                                                                                                                                                   
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                       
|10.01*        |  | Separation Agreement and General Release between Elyahu Tendler and the Registrant, dated as of April 10, 2008.                                                                   
|              | 
|10.02*        |  | Retention Agreement between Yona Katz and the Registrant, dated as of April 1, 2008.                                                                                              
|              | 
|10.03         |  | Separation Agreement and General Release between Morris Lichtenstein and the Registrant, dated as of April 8, 2008. Incorporated by reference to Form 8-K/A, filed April 14,
2008.
|              | 
|10.04         |  | Consulting Agreement between Morris Lichtenstein and the Registrant, dated as of April 8, 2008. Incorporated by reference to Form 8-K, filed April 14, 2008.                      
|              | 
|10.05         |  | Separation Agreement and General Release between Marc Oppenheimer and the Registrant, dated as of April 30, 2008. Incorporated by reference to Form 8-K/A, filed May 29,
2008.    
|              | 
|31.1*         |  | Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.                                         
|              | 
|31.2*         |  | Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.                                         
|              | 
|32.1*         |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.                                       
|              | 
|32.2*         |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.                                       



|* | Filed herewith.
|- | ---------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|             |  |                 |  |                                                                                         
|------------ |  | --------------- |  | ----------------------------------------------------------------------------------------
|             | 
|             |  | IDT CORPORATION
|             |  |                
|June 6, 2008 |  | By:             |  | /s/    JAMES A.
COURTER                                                                 
|             |  |                 |  | James A. Courter Chief Executive Officer and Vice-Chairman (Principal Executive Officer)
|             |  |                
|June 6, 2008 |  | By:             |  | /s/    STEPHEN R.
BROWN                                                                 
|             |  |                 |  | Stephen R. Brown Chief Financial Officer and Treasurer (Principal Financial Officer)    



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