10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[ü] Annual report pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the fiscal year ended July 31, 2009, 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 No.)

520 Broad Street, Newark, New Jersey 07102

(Address of principal executive offices, zip code)

(973) 438-1000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Class B common stock, par value $.01 per share Common stock, par value $.01 per share Name of each exchange on which registered New York Stock Exchange New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act: None

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

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

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 [ü]    No [    ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes [    ]    No [    ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    [ü]

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  [    ]	Accelerated filer  [    ]
Non-accelerated filer  [    ]	Smaller reporting company  [ü]

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

The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant, based on the closing price on January 30, 2009 (the last business day of the registrant’s most recently completed second fiscal quarter) of the Class B common stock of $1.05 and of the common stock of $1.05, as reported on the New York Stock Exchange, was approximately $11,809,000.

As of October 23, 2009, the registrant had outstanding 15,607,425 shares of Class B common stock, 3,272,326 shares of Class A common stock, and 3,811,254 shares of common stock. Excluded from these numbers are 7,585,848 shares of Class B common stock and 5,430,241 shares of common stock held in treasury by IDT Corporation.

DOCUMENTS INCORPORATED BY REFERENCE

The definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders, to be held December 17, 2009, is incorporated by reference into Part III of this Form 10-K to the extent described therein.

Index

IDT Corporation

Annual Report on Form 10-K

Part I		1
Item 1.	Business	1
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Submission of Matters to a Vote of Security Holders	34
Part II		35
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Selected Financial Data	37
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures about Market Risks	69
Item 8.	Financial Statements and Supplementary Data	69
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	69
Item 9A(T).	Controls and Procedures	69
Item 9B.	Other Information	70
Part III		71
Item 10.	Directors, Executive Officers and Corporate Governance	71
Item 11.	Executive Compensation	71
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	71
Item 13.	Certain Relationships and Related Transactions, and Director Independence	72
Item 14.	Principal Accounting Fees and Services	72
Part IV		73
Item 15.	Exhibits, Financial Statement Schedules	73
	Signatures	75

Part I

As used in this Annual Report, 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 its subsidiaries, collectively. Each reference to a fiscal year in this Annual Report refers to the fiscal year ending in the calendar year indicated (for example, fiscal 2009 refers to the fiscal year ended July 31, 2009).

Item 1. Business.

OVERVIEW

We are a multinational holding company with subsidiaries spanning several industries. Our principal businesses consist of:

• IDT Telecom, which provides telecommunications services to consumers and businesses, including prepaid and rechargeable calling cards, a range of voice over Internet protocol (VoIP) communications services, wholesale carrier services and local, long distance and wireless phone services;

• IDT Energy, which operates our energy services company, or ESCO, in New York State;

• Alternative Energy, which consists of American Shale Oil Corporation, or AMSO, which manages our 50% interest in American Shale Oil, LLC, or AMSO, LLC, our U.S. oil shale initiative, and Israel Energy Initiatives, Ltd., or IEI, our Israeli alternative energy venture; and

• Zedge, which provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing.

We also hold assets including certain real estate investments and operate other smaller or early-stage initiatives and operations.

We conduct our business through the following three reportable segments: Telecom Platform Services, Consumer Phone Services and IDT Energy. All other operating segments that are not reportable individually are included in All Other. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division. We expect that Alternative Energy, which is included in All Other, will be a reportable business segment beginning in the first quarter of fiscal 2010.

The Telecom Platform Services segment provides various telecommunications services including prepaid and rechargeable calling cards, a range of VoIP communications services, and wholesale carrier services. The Consumer Phone Services segment provides consumer local and long distance services in the United States. The IDT Energy segment operates our ESCO in New York State that resells natural gas and electricity to customers throughout seven utility markets. All Other consists of Zedge, Alternative Energy (which consists of AMSO, which manages our 50% interest in AMSO, LLC, our U.S. oil shale initiative, and Israel Energy Initiatives, Ltd., the Company’s Israeli alternative energy venture), certain real estate investments and other smaller businesses and, up until the September 14, 2009 spin-off of CTM Media Holdings, Inc. (described below), the IDT Local Media businesses (principally CTM Media Group, WMET 1160AM and IDW Publishing).

Financial information by segment is presented below under the heading “Business Segment Information” in the Notes to our Consolidated Financial Statements in this Annual Report.

Our main offices are located at 520 Broad Street, Newark, New Jersey 07102. The telephone number at our headquarters is (973) 438-1000 and our web site is www.idt.net.

We make available free of charge through the investor relations page of our web site (www.idt.net/ir) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to these reports, and all beneficial ownership reports on Forms 3, 4 and 5 filed by directors, officers and beneficial owners of more than 10% of our equity as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. We have adopted a code of business conduct and ethics for all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. Copies of the code of business conduct and ethics are available on our web site.

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Our web site and the information contained therein or incorporated therein are not incorporated into this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission.

KEY EVENTS IN OUR HISTORY

We were incorporated in the state of Delaware in 1995. We entered the telecommunications business in 1990, providing international call re-origination service. In 1993, we began reselling the long distance services of other carriers. In 1995, we began selling access to the favorable international telephone rates we received as a result of our calling volume to other long distance carriers.

We completed an initial public offering of our common stock on March 15, 1996. Our common stock was quoted on the NASDAQ National Market until February 26, 2001, at which time it became listed on the New York Stock Exchange, where it now trades under the symbol “IDT.C.” On May 31, 2001, we distributed a stock dividend of one share of our Class B common stock for each outstanding share of our common stock, Class A common stock and Class B common stock. On June 1, 2001, our Class B common stock was listed on the New York Stock Exchange and now trades under the symbol “IDT.” On September 30, 2008 and October 8, 2008, we received notices from the New York Stock Exchange, or NYSE, that we were no longer in compliance with the NYSE’s $100 million market capitalization threshold and the $1.00 average closing price over a consecutive 30-day trading period requirement, respectively, required for continued listing. We submitted a plan to the NYSE to regain compliance with the market capitalization standard, and that plan was accepted. The NYSE monitors compliance with the plan and may commence delisting procedures if we fail to meet the milestones set forth in our plan. We have until March 2010 to regain compliance with the $100 million market capitalization standard. In addition, according to the rules of the NYSE, the NYSE will promptly initiate suspension and delisting procedures with respect to a listed company that is determined to have average global market capitalization over a consecutive 30 trading-day period of less than $25 million. As of October 26, 2009, we had a 30-day average market capitalization of $71.3 million. We are currently in compliance with this $25 million threshold, but not the $100 million threshold. On April 8, 2009, the NYSE notified us that the stock price for each of our listed equity securities was above the NYSE’s minimum requirement of a $1.00 average share price over the preceding 30 trading days and a $1.00 share price on the close of the last trading day of the six-month cure period (April 8, 2009), thus restoring our compliance with the minimum share price requirement for continued listing on the NYSE.

A one-for-three reverse stock split of all of our outstanding common stock, Class A common stock and Class B common stock was effected on February 24, 2009.

We entered the Internet telephony market in 1996 with our introduction, through our subsidiary Net2Phone, Inc., of PC2Phone, the first commercial service to connect voice calls between personal computers and telephones over the Internet.

We began marketing prepaid calling cards in January 1997.

In November 2004, we launched our retail energy business that provides natural gas and electricity to residential and select small business customers throughout New York State.

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.

In the second quarter of fiscal 2007, we acquired 90% of Norway-based Zedge.net, a social networking community for mobile users and provider of free mobile content. In June 2007, we acquired a controlling interest in IDW Publishing.

On January 30, 2009, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I, LLC sold to Sherman Originator III LLC substantially all of IDT Carmel Portfolio Management LLC’s debt portfolios with an aggregate face value of $951.6 million for cash of $18.0 million. We exited the debt collection business in April 2009.

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In February 2008, we formed our new division, the American Shale Oil Corporation, which manages our 50% interest in AMSO, LLC, our U.S. oil shale initiative. Additionally, in the fourth quarter of fiscal 2008, we were granted a license in Israel to explore oil shale for potential production of shale oil.

RECENT DEVELOPMENTS

Spin-Off of CTM Media Holdings

On September 14, 2009, we completed the CTM Spin-Off, which was a pro rata distribution to our stockholders of the common stock of CTM Media Holdings, Inc., or CTM Holdings, which owns the CTM Media Group, IDT Local Media and WMET 1160AM businesses and a majority interest in IDW Publishing. The record date for the distribution was August 3, 2009. As of September 14, 2009, each of our stockholders received: (i) one share of CTM Holdings Class A common stock for every three shares of our common stock; (ii) one share of CTM Holdings Class B common stock for every three shares of our Class B common stock; (iii) one share of CTM Holdings Class C common stock for every three shares of our Class A common stock; and (iv) cash in lieu of a fractional share of all classes of CTM Holdings’ common stock.

Creation of Genie Energy Division

In August 2009, we organized our energy supply and oil shale development interests into a new division named Genie Energy. Oil and gas entrepreneur Wes Perry is Genie Energy’s Chairman of the Board. Genie Energy is comprised of our interests in IDT Energy, AMSO, LLC, and Israel Energy Initiatives.

Sale of Real Estate Investment

We own a controlling interest in a joint venture, which held a 100% leasehold interest in two leased buildings totaling 120,000 square feet in Palo Alto, California. On July 31, 2009, the joint venture sold the leasehold interest for $62.7 million. Our net proceeds from the sale, after deduction of the mortgage debt secured by the property that was assumed by the buyer or repaid in connection with the sale, transaction expenses and the interests of the other owners of the joint venture, were $3.1 million.

Sale of European Prepaid Payment Services Business

On July 9, 2009, we entered into an agreement for the sale of the capital stock of IDT Financial Services Holding Limited, or IDT Financial Services, our European prepaid payment services business, for approximately $3 million, subject to adjustment based on changes in the net assets of IDT Financial Services. IDT Financial Services provides prepaid MasterCard^® products in the United Kingdom under the “Prime Card” brand. We will retain the approximately $10 million held by IDT Financial Services pursuant to regulatory requirements which is included in “Cash and cash equivalents” of discontinued operations at July 31, 2009. We have obtained the requisite third party consents to close this sale.

IDT Energy Preferred Supplier Agreement

As of June 29, 2009, IDT Energy entered into a Preferred Supplier Agreement with BP Energy Company and BP Corporation North America Inc. (collectively BP), pursuant to which BP became IDT Energy’s preferred provider of electricity and natural gas in New York State during the term of the agreement, which is two years with an optional third year. The agreement allows for purchases of electricity and natural gas for customers in areas where the utilities have purchase of receivable (POR) programs, and includes a one-time inclusion of existing IDT Energy customers not covered by a POR program. IDT Energy will purchase electricity and natural gas from BP and pay a fee based on volumetric loads in accordance with the agreement. In addition to other advantages of this agreement, IDT Energy will benefit from the removal of the requirement to post security with other suppliers.

Purchase of Union Telecard Alliance, LLC

On June 24, 2009, we acquired the 49% interest in Union Telecard Alliance, LLC, or UTA, that we did not own in exchange for (a) $4.9 million in cash, (b) a promissory note in the principal amount of $1.2 million payable in thirty-six equal monthly installments, (c) the forgiveness of a note receivable in the amount of $1.2 million including principal and accrued interest, (d) the assignment of all of the interests in Union Telecard Dominicana, S.A., or UTA DR, held by UTA, (e) the assignment of an 80% ownership interest in Ethnic Grocery Brands LLC, or EGB, held by UTA, and (f) other consideration of $0.4 million. UTA retained a 10% ownership interest in EGB. In addition, the seller may receive up to an additional $1.7 million for post-closing

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contingencies. The aggregate purchase price was $9.7 million, which included the aggregate fair value of the interests in UTA DR and EGB of $2.0 million. UTA is the distributor of our prepaid calling cards in the United States.

American Shale Oil, LLC

In March 2009, pursuant to a Member Interest Purchase Agreement entered into on December 19, 2008, TOTAL E&P Research & Technology USA, or Total, a subsidiary of TOTAL S.A., the world’s fifth largest integrated oil and gas company, acquired a 50% interest in AMSO, LLC, in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration, or RD&D, expenditures. While AMSO will operate the project during the RD&D phase, Total will provide a majority of the funding during this phase of the project, and technical assistance throughout the life of the project. Total will lead the planning of the commercial development and will assume management responsibilities during the subsequent commercial phase.

Reverse Stock Split

On February 24, 2009, we consummated a one-for-three reverse stock split of all of our outstanding common stock, Class A common stock and Class B common stock.

Zedge

On September 23, 2008, we sold a 10% ownership interest, on a fully diluted basis, of Zedge Holdings, Inc. to Shaman II, L.P. for cash of $1.0 million. One of the limited partners in Shaman II, L.P. was a former employee of ours.

IDT TELECOM

Our Telecom business currently provides various telecommunications services including prepaid and rechargeable calling cards, a range of VoIP communications services, wholesale carrier services and consumer local and long distance services in the United States. Our Consumer Phone Services segment provides the consumer local and long distance services in the United States. Our Telecom Platform Services segment provides IDT Telecom’s other telecommunications services.

In fiscal 2009, IDT Telecom had revenues of $1,234.4 million, representing 80.2% of our total consolidated revenues from continuing operations, and an operating loss of $(27.2) million, as compared with revenues of $1,459.7 million and operating loss of $(26.7) million in fiscal 2008. Loss from operations in fiscal 2008 was partially offset by income from an arbitration award of $40.0 million including accrued interest, related to Altice One’s termination of cable telephony license agreements with Net2Phone that were entered into in November 2004.

Telecom Platform Services

During fiscal 2009, our Telecom Platform Services segment worldwide generated $1,180.7 million in revenues and had an operating loss of $(45.8) million, as compared with $1,379.2 million and $(48.5) million in fiscal 2008. Our prepaid products businesses accounted for over 48% of the revenues of our Telecom Platform Services segment in fiscal 2009. During fiscal 2009, we sold 80% of our prepaid products in the United States, as compared to 83% in fiscal 2008.

Prepaid and Rechargeable Calling Cards

We sell prepaid and rechargeable calling cards under the “IDT,” “Entrix,” “DSA,” “LA LEYENDA,” “BOSS,” “Playball,” “GOOOL,” “RED,” “Feliz,” and “PT-1” brand names, among others, providing telephone access to more than 230 countries and territories. We also sell select cards under the Net2Phone brand name, including the “Net2Phone Direct” and “PennyTalk” calling cards. We sell more than 1,000 different prepaid calling cards in the United States and more than 500 different cards abroad, with specific cards featuring favorable rates to specific international destinations.

Our prepaid calling cards are marketed primarily to the ethnic and immigrant communities in the United States, Europe, Asia and Latin America that tend to generate high levels of international volume. Specifically, a large portion of our U.S. calling cards are purchased by the Hispanic community.

We market our prepaid calling cards to retail outlets in the United States through UTA, a joint venture which was owned 51% by us and 49% by the Gomez Family Trust. On June 24, 2009 we acquired the 49% interest

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that we did not previously own. UTA utilizes a network of more than 850 sub-distributors that sell to retail outlets throughout most of the United States. UTA develops marketing and distribution strategies for our prepaid calling card products, including card design, pricing and market expansion opportunities. UTA generated $272 million in revenues from its sale of IDT calling cards, representing 82% of UTA’s total revenues, in fiscal 2009.

Our prepaid calling card business has traditionally been strongest in the northeastern United States because of UTA’s extensive local distribution network and our competitive rates to countries that immigrants in the northeastern United States tend to call.

We also sell prepaid calling cards in Europe, Latin America and Asia, as discussed in detail in the International Operations section below.

Our Telecom Platform Services segment also markets:

• Customized (Private Label) Retail Calling Cards. We market these prepaid calling cards to major national retailers who sell them primarily in high-traffic stores. We print these prepaid calling cards with the retailer’s name and logo and provide them to the retailer who, in turn, sells the cards to its customers. The vast majority of these cards are sold POSA (point of sale activated) or PIN printed on a receipt.

• IDT-Branded Retail Calling Cards. These prepaid calling cards are printed with the IDT logo and design and are sold to small and medium-sized retail chains, such as supermarkets, drug stores and convenience stores, for resale to their customers.

Our rechargeable calling cards, which are marketed to consumers and business customers nationwide, can be used by U.S. callers to call internationally from any phone, including a cell phone. In addition, callers can use the cards to make calls from over 30 countries around the world through international access numbers. At the customer’s request, an account is automatically recharged with a credit card that the customer provides.

Through UTA, we resell a limited amount of calling cards of other providers of telecommunications in the United States. Additionally, we sell “top up” wireless cards, primarily to small and medium-sized retail chains. We also sell gift cards and stored value cards, primarily to major national retailers.

In all of our IDT Telecom businesses, our competitors continue to aggressively price their services. We often notice that many of our competitors, particularly in the U.S. calling card industry, significantly overstate the number of minutes that are actually delivered by their calling cards, thereby hurting our ability to compete effectively. In addition, we also 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 calling card business. 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. All of 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.

Wholesale Carrier Services

Our Telecom Platform Services segment carries our international telecommunications traffic and the international traffic of other telecommunications companies.

By utilizing our proprietary least-cost-routing system and capitalizing on our own high volume of international long distance telephone traffic generated by our calling card business, aggressive purchasing strategies and extensive experience in provisioning circuits, we are able to provide major carriers and niche carriers alike with rates that we believe are often lower than those traditionally available through other carriers.

During fiscal 2009, IDT Telecom terminated approximately 18.1 billion international minutes, making us one of the largest carriers of international minutes worldwide. Since the acquisition of Net2Phone in fiscal 2006, Net2Phone’s network has been fully integrated into IDT Telecom. As a result, we improved our ability to serve the needs of wholesale carrier customers who seek IP products and services.

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We believe that a direct connection from one of our switches to Tier 1 providers (which are the largest recognized licensed carriers in each country) both increases the quality of a call and reduces cost. We also believe that establishing such connections enables us to generate more traffic with higher margins to that foreign locale. During fiscal 2008, we expanded our existing direct relationships with Tier 1 providers, particularly in Asia and Africa. These expansions continued in Africa and the Middle East in fiscal 2009. Additionally, in fiscal 2009, we continued expanding our direct relationships with mobile network providers, reflecting our belief that the trend of voice traffic transitioning from landline to mobile networks will continue. In fiscal 2010, we plan to continue expanding these direct relationships with mobile network providers.

In addition to offering competitive rates to our carrier customers, we have also emphasized our ability to offer the high quality connections that these providers often require. To that end, we have broadened our wholesale carrier services offerings to include higher-priced, premium services in which we guarantee higher quality connections, based upon a set of predetermined quality-measuring criteria. These services meet a growing need for some of our customers, who are providing services to high-value, quality-conscious retail customers. As of July 31, 2009, our wholesale carrier services business had approximately 550 customers. Including vendors, IDT has over 1,100 carrier relationships globally.

We continue investing in Fabrix.TV LTD., an Israeli company in which we are a majority stake holder that sells a software platform for video content delivery and storage needed by cable, telecommunications and Internet service providers interested in offering unicast television applications.

International Operations

We maintain our European corporate and carrier operations in London, England, and our retail calling card business headquarters in Dublin, Ireland. IDT Europe operates satellite offices in Germany, the Netherlands, Belgium, Spain, Sweden and Greece.

In Europe, we market our prepaid calling cards in the United Kingdom, the Netherlands, Spain, Germany, Belgium, France, Ireland, Italy, Luxemburg, Sweden, Switzerland, Denmark, Norway, Portugal, Austria and Greece, seeking to capitalize on the opportunity presented by immigration from underdeveloped countries to Europe’s developed nations. Because the immigrant market is fragmented, and due to the large number of markets in which we compete, we offer over 500 different prepaid calling cards in Europe. We also market our prepaid calling cards in Israel.

We also provide wholesale carrier services to European telecom companies, including foreign state-owned or state sanctioned post, telephone or telegraph companies and Tier-1 carriers, new and emerging telephone companies, and value-added service providers.

Our European operations generated $317.8 million of revenues in fiscal 2009, an 11.4% decrease from the $358.9 million of revenues generated during fiscal 2008. Our European operations’ revenues constituted 25.7% of IDT Telecom’s revenues from continuing operations in fiscal 2009, as compared to 24.6% in fiscal 2008. During fiscal 2009, prepaid calling cards constituted 24.6% of our European operations’ revenues, while wholesale carrier services represented 73.9%.

We maintain Asia Pacific headquarters in Hong Kong and African headquarters in Johannesburg, South Africa. IDT Asia Pacific operates satellite offices in Singapore and Australia. We began our Asia Pacific regional operations in 2003, offering wholesale carrier services in the region and prepaid calling card distribution in Hong Kong. We have since expanded our prepaid calling card operations into Singapore, Australia, Japan, Korea and Malaysia. We have made significant inroads into key segments in both Hong Kong and Singapore, the markets entered earliest. IDT Asia Pacific is currently one of the top providers to the Filipino segment and the Indonesian segment, the two largest overseas worker segments in Hong Kong. In Singapore, IDT Asia Pacific is a market share leader in the Indian segment, which is the largest ethnic segment in Singapore. IDT’s calling card business in Australia is now expanding as we increase our product line and distribution network. IDT Asia Pacific also sells postpaid international calling services to businesses and consumers in Hong Kong and Singapore. In fiscal 2009, we generated $13.3 million in revenues from the sale of calling cards and postpaid international calling in the Asia Pacific region.

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We maintain Latin American headquarters in Buenos Aires, Argentina. IDT Latin America currently sells cards in Argentina, Brazil, Peru, Chile, and Uruguay.

We have extended our customer and distribution network in Brazil. Through calling cards, VoIP and consumer phone services, we are providing long distance services to Brazilian consumers and enterprises.

In fiscal 2009, we generated $12.7 million in revenues from the sale of calling cards in Latin America.

Sales, Marketing and Distribution

We market our prepaid calling cards primarily to retail outlets in the United States through our UTA subsidiary. In addition, our customized retail calling cards and our IDT-branded retail calling cards are also marketed to retail chains and outlets primarily through our own internal sales force, although from time to time we may utilize third-party agents or brokers to acquire accounts. In Europe, we sell our prepaid calling cards and our customized retail and IDT-branded retail calling cards through independent distributors and our own internal sales force. Wholesale carrier services are sold through IDT’s internal wholesale sales team.

Telecommunications Network Infrastructure

We maintain a global telecommunications switching and transmission infrastructure as well as many eCommerce and B2B web sites and services that enable us to provide an array of telecommunications services to our customers worldwide. Our network is continuously monitored by our Network Operations Centers in the United States, Europe and Asia.

We have historically made significant investments designed to expand and optimize our global telecommunications network. Following the acquisition of Net2Phone in March 2006, we have greatly expanded the VoIP capabilities of our network by integrating the Net2Phone network into the IDT Telecom network. Consistent with the expansion of the VoIP capabilities of our network and in the alignment of our network capacity and demand, we have migrated the network to an all-softswitch architecture and have decommissioned all of our older switches. The network utilizes our soft-switching capacity which is located in the United States, United Kingdom, Argentina, Peru, Brazil and Hong Kong. We also maintain a host of points of presence, or POPs, providing interconnect capabilities in numerous countries. Our global network is interconnected through leased and owned fiber connections, as well as through the public IP network.

We continue to focus on reducing costs by streamlining our global network by expanding our soft-switching capacity and expanding our VoIP traffic.

Consumer Phone Services

We currently provide our bundled local/long distance phone service in 11 states, marketed under the brand name IDT America. Our bundled local/long distance service, offered primarily to residential customers, includes unlimited local, regional toll and domestic long distance calling and popular calling features. A second plan is available, providing unlimited local service with IDT long distance included for as low as 3.9 cents per minute. With either plan, competitive international rates and/or additional features can be added for additional monthly fees. We also offer stand-alone long distance service throughout the United States. Due to changes in the U.S. regulatory environment in 2005 that adversely affected our cost of providing bundled local/long distance phone services and increased competition, we significantly curtailed marketing activities for the service, and as a result, the revenues and number of customers have declined significantly.

As of July 31, 2009, we had approximately 29,000 active customers for our bundled local/long distance plans and approximately 99,400 customers for our long distance-only plans. Our highest customer concentrations are in large urban areas, with the greatest number of customers located in New York, New Jersey, Pennsylvania and California.

The Consumer Phone Services segment generated revenues of $53.7 million and operating income of $18.6 million in fiscal 2009, as compared to revenues of $80.5 million and operating income of $21.8 million in fiscal 2008.

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IDT ENERGY

In November 2004, we launched a retail energy business, IDT Energy, which has since experienced significant growth in meters served. Today, IDT Energy operates as an energy service company, or ESCO, that resells natural gas and electricity to customers throughout seven utility markets in New York State, including those currently served by Consolidated Edison Company of New York, Inc., Orange and Rockland Utilities, Inc., Central Hudson Gas & Electric Corporation, National Fuel Gas Company, National Grid USA, National Grid dba Keyspan and Rochester Gas and Electric Corporation.

The ESCO business, particularly the natural gas segment, is a seasonal business. In fiscal 2009, approximately 83% of our annual natural gas revenues were generated during IDT Energy’s second and third fiscal quarters when demand for heating is highest. The demand curve for electricity is not as seasonal as natural gas, but is higher during IDT Energy’s first and fourth fiscal quarters when air conditioning usage peaks. Revenues from sales of electricity in the first and fourth quarters of fiscal 2009 represented approximately 55% of annual revenues from electricity sales. Commodity prices are generally higher during these peak demand seasons and, therefore, contribute to the seasonal fluctuation in revenues. After peaking in the first month of the fiscal year, commodity costs declined sharply and steadily throughout the remainder of the fiscal year. Consequently our rates were higher in the first and second fiscal quarters for both our natural gas and electric segments.

In fiscal 2009, IDT Energy generated revenues of $264.7 million comprised of $157.2 million electric revenues and $107.5 million in natural gas revenues. This represents 17.2% of our total consolidated revenues from continuing operations. In fiscal 2009, IDT Energy had operating income of $45.4 million, as compared with revenues of $248.9 million and operating income of $6.0 million in fiscal 2008. As of July 31, 2009, IDT Energy serviced approximately 397,000 meters in New York State (228,000 electric and 169,000 gas), as compared to approximately 376,000 meters serviced at the end of fiscal 2008 (216,000 electric and 160,000 gas).

Customers

IDT Energy’s customer contracts are primarily variable rate contracts which enable it to recover its costs for electricity and natural gas through rate adjustments. The frequency and degree of these adjustments are determined by IDT Energy, and are not subject to regulation. The electricity and natural gas IDT Energy sells are generally metered and delivered to IDT Energy customers by the local utilities. As such, IDT Energy does not have a maintenance or service staff for customer locations. These utilities also provide billing and collection services for the majority of IDT Energy’s customers on its behalf. Additionally, IDT Energy’s receivables are generally purchased by the utilities in whose areas IDT Energy operates for a percentage of their face value (as of today, approximately 98%) in exchange for the utility receiving a first priority lien in the customer receivable without recourse against IDT Energy.

IDT Energy markets its energy services primarily through direct marketing methods, including door-to-door sales, outbound telemarketing, and Internet signup. The substantial customer growth since inception can be attributed to IDT Energy’s successful expansion into many of the local distribution companies, or LDCs, territories in New York State. Additionally, the outsourced vendors that are relied upon for customer acquisition have significantly expanded their sales and support staff. The New York State Public Service Commission, or NYPSC, as published on its website in October 2009, indicates that approximately 18.3% (electric) and 15.3% (gas) of eligible New York customers participated in the deregulation of the market by migrating from a utility to an ESCO. According to these statistics, IDT Energy captured approximately 24% (gas) and 18% (electric) of the migrated customers. Many of IDT Energy’s customers reside in Con Edison territory with IDT Energy capturing approximately 30% of the territory’s migrated electric customers and 26% of the territory’s migrated gas customers.

IDT Energy continues to acquire customers opportunistically in New York State with the goal of acquiring profitable customers in low-risk markets, more specifically in regions where the utilities have adopted a portfolio of ESCO-friendly, regulatory-driven programs. Key among these is where utilities are contractually obligated to purchase customer receivables at a pre-determined fixed discount under purchase of receivables (POR) programs. Under POR programs, utilities offer consolidated billing, where the utilities have the responsibility of billing the individual customer. Additionally, IDT Energy targets markets in which it can

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effectuate commodity procurement on a real-time market basis. This, coupled with IDT Energy’s strategy to primarily sell a variable-rate product, allows IDT Energy to reflect a true market cost base and opportunistically vary its rates to its customers taking into account its competitors who are purchasing their commodity at longer intervals.

IDT Energy also regularly monitors other deregulated or deregulating markets to determine if they are appropriate for entry, and may initiate the licensing process in a selected region should deregulated conditions develop favorably.

Acquisition and Management of Gas and Electric Supply

As an ESCO, IDT Energy does not own electrical power generation, transmission, or distribution facilities, or natural gas production, pipeline or distribution facilities. During fiscal 2009, IDT Energy purchased natural gas through wholesale bilateral contracts with suppliers such as Sempra Energy Trading and Nexen and various utility companies. IDT Energy also has contracts with Dominion Transmission, Inc., National Fuel Supply, Williams Gas Pipeline and Texas Eastern Transmission for pipeline, storage and transportation services. IDT Energy bought electric capacity, energy and ancillary services through the wholesale markets administrated by the New York Independent System Operator, Inc., or NYISO. NYISO ensures that the amount of electricity each supplier purchases is equal to the amount necessary to meet the demand of that supplier’s customers, a process known as load balancing, for each of the electrical power grids in which IDT Energy operates. Similarly, load balancing is performed by the utilities, or LDCs, for each of the natural gas markets in which IDT Energy operates. IDT Energy is charged or credited by NYISO or LDCs for balancing the electricity and natural gas purchased and sold for its account.

IDT Energy entered into a preferred supplier agreement with BP Energy Company and BP Corporation North America, Inc. (collectively BP) during the fourth quarter of fiscal 2009. IDT Energy will purchase the majority of its commodity supply from BP during the term of the agreement, which is two years with an optional third year, and pay a fee based on volumetric loads in accordance with the agreement. IDT Energy will continue to contract independently for pipeline capacity and other ancillary natural gas costs. BP will provide a majority of the security requirements on behalf of IDT Energy, in exchange for granting BP a first priority security position in all receipts from IDT Energy customers.

IDT Energy manages the differences between the actual electricity and natural gas demands of its customers and its bulk or block purchases by buying and selling any shortfall or excess in the spot market, and through monthly cash settlements and/or adjustments to future deliveries in accordance with the load balancing performed by the LDCs and NYISO.

ALL OTHER

All other operating segments that are not reportable individually are collectively included in All Other. All Other consists of Zedge (which provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing), Alternative Energy (which consists of AMSO, which manages our 50% interest in AMSO, LLC, our U.S. oil shale initiative, and Israel Energy Initiatives, Ltd., our Israeli alternative energy venture), certain real estate investments and other smaller businesses and, up until the September 14, 2009 spin-off, the IDT Local Media businesses (principally CTM Media Group, WMET 1160 AM and IDW Publishing). We expect that Alternative Energy, which is included in All Other, will be a reportable business segment beginning in the first quarter of fiscal 2010.

During fiscal 2009, All Other generated $39.5 million in revenues, representing 2.6% of our total consolidated revenues from continuing operations, and an operating loss of $(58.4) million, as compared with revenues of $47.0 million and an operating loss of $(71.5) million in fiscal 2008. During fiscal 2009, IDT Local Media generated $33.7 million in revenues and an operating loss of $(33.0) million, as compared with revenues of $32.6 million and an operating loss of $(7.9) million in fiscal 2008.

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Alternative Energy

American Shale Oil, LLC

American Shale Oil Corporation, or AMSO, was formed as a wholly-owned subsidiary of ours in February 2008. AMSO’s initial foray into the oil shale business occurred in April 2008, when AMSO acquired a 75% equity interest in American Shale Oil, LLC, or AMSO, LLC, in exchange for cash of $2.5 million and certain commitments for future funding of AMSO, LLC’s operations. In a separate transaction in April 2008, we acquired an additional 14.9% equity interest in AMSO, LLC in exchange for cash of $3.0 million, bringing our total interest in AMSO, LLC to approximately 90%.

In March 2009, pursuant to a Member Interest Purchase Agreement entered into on December 19, 2008, a subsidiary of TOTAL S.A., the world’s fifth largest integrated oil and gas company, acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s RD&D expenditures. According to the terms of the transaction, AMSO will operate the project during the RD&D phase. Total will provide a majority of the funding during this phase of the project, and technical assistance throughout the life of the project. Total will lead the planning of the commercial development and will assume management responsibilities during the subsequent commercial phase. After the consummation of the Total transaction, AMSO owned 50% of AMSO, LLC.

Oil shale is an organic-rich fine-grained sedimentary rock and contains significant amounts of kerogen (a solid mixture of organic chemical compounds) from which liquid hydrocarbons can be extracted. Generally, oil shale can be mined and processed to generate oil similar to oil produced from conventional oil wells. However, extracting oil from oil shale is more complex than conventional oil recovery and is more expensive. Rather than pumping it directly out of the ground like liquid oil, the oil shale can be mined and then heated to a high temperature through a process called surface retorting, with the resultant liquid separated and collected. An alternative is the process AMSO, LLC and others are researching and developing, in situ retorting, which involves heating the oil shale while it is still underground, and then pumping the resulting liquid and or gases to the surface. In situ retorting is considered to be less environmentally invasive than surface retorting and can offer economic advantages.

According to reports from the United States Department of Energy, oil shale resources in the United States are estimated at over 2 trillion barrels, and could potentially supply the U.S.’s demand for liquid fuel over the next 100 years. In March 2009, the U.S. Geological Survey reported that the total “in-place” oil in the Colorado’s Piceance Basin is approximately 1.525 trillion barrels. The majority of those deposits are found in the Green River Formation of Colorado (Piceance Creek Basin), Utah (Uinta Basin) and Wyoming (Green River and Washakie Basins). Colorado’s Piceance Basin, where AMSO, LLC’s RD&D lease is located as described below, contains some of the richest oil shale resources in the world (as reported by the United States Geological Survey), in some cases each acre is estimated to hold up to 2.5 million barrels of oil equivalent.

In 2005, the U.S. Bureau of Land Management, or the BLM, began implementation of the Energy Policy Act passed by Congress, seeking proposals from the private sector to develop the oil shale resources in economically and environmentally responsible ways. In June 2005, nominations were solicited and twenty proposals were submitted, including the proposal of AMSO, LLC (which was then known as E.G.L. Oil Shale LLC). The proposals, which included technical operational plans, were evaluated by an inter-disciplinary team including representatives from the affected states, as well as the Department of Energy and the Department of Defense. A central feature of AMSO, LLC’s proposal was its patent pending in-situ shale oil extraction process, Conduction, Convection, Reflux (CCR). Further, proposals were subjected to environmental analysis under the terms of the National Environmental Policy Act and brought before public meetings in Colorado and Utah. The BLM issued a Finding of No Significant Impact for AMSO, LLC’s proposed plan of operations, and effective January 1, 2007, AMSO, LLC received a lease for research, development and demonstration in western Colorado. Out of twenty applications for RD&D Leases submitted, three companies were awarded leases in Colorado to test in-situ technologies (Shell, Chevron and AMSO, LLC), and one company in Utah (OSEC) was awarded a lease for testing above ground retorting processes.

The RD&D lease awarded to AMSO, LLC by the BLM covers an area of 160 acres. The lease runs for a ten-year period beginning on January 1, 2007, and is subject to an extension of up to five years if AMSO, LLC can demonstrate that a process leading to the production of commercial quantities of shale oil is diligently being pursued. Once AMSO, LLC demonstrates the economic and environmental viability of its technology, it

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will have the opportunity to submit a one-time payment pursuant to the applicable regulations and convert its RD&D lease to a commercial lease on 5,120 acres which overlap and are contiguous with the 160 acres covered by its RD&D lease. The area covered by the potential commercial lease is estimated to hold up to 10 billion barrels of oil shale. AMSO, LLC’s initial plan is to target the “illite” mining interval (where the “illite” rich oil shale is located), which could potentially yield production levels of up to 100 thousand barrels per day for twenty-five years, beginning in the fourth year of commercial production. As technologies are developed to facilitate environmentally sound extraction processes from additional areas of the shale formation, we expect to pursue the remaining reserves within our commercial lease.

AMSO, LLC is utilizing a team of experienced experts in various fields to conduct research, development and demonstration activities. The project is currently focused on performing site characterization, which includes exploration and ground water monitoring wells, coring, logging, and other analysis to further explore, understand and characterize the shale oil resources in its RD&D lease area. At the conclusion of the site characterization work, AMSO, LLC intends to conduct a pilot test to confirm the accuracy of several of the key underlying assumptions of the proposed heating and retorting process, as described above. We currently plan to initiate the Pilot test late in 2010. In parallel, AMSO, LLC will be developing other technologies to address carbon management and advanced heating techniques. Upon successful completion of the pilot heating test, AMSO, LLC expects to design and implement a larger scale demonstration to further test its process and operations under commercial conditions, and assess scalability to commercial levels. Upon completion of a successful demonstration, AMSO, LLC intends to submit an application to convert the RD&D lease into a commercial lease.

Through the development of its technology and implementation of its plan of operations, AMSO, LLC hopes to provide a significant domestic supply of liquid fuels at a competitive price and with acceptable environmental impacts. AMSO, LLC believes that its technical and operating approaches could minimize the potential for adverse environmental impacts. AMSO, LLC’s patent pending CCR heating process and well layout plan have been, and continue to be, designed to maximize energy efficiency and minimize the number of wells needed and the impact on the surface of the lease area. By targeting the deep illite-rich oil shale under the known aquifers, AMSO, LLC expects to maintain the geologic barriers between retorts and protected water sources, and to minimize the amount of clean water needed for its operations. AMSO, LLC is also working diligently to meet emission standards, reduce carbon dioxide generation through thermal efficiency, and develop methods to sequester carbon dioxide generated during heating operations.

Israel Energy Initiatives, Ltd.

In March 2008, we formed Israel Energy Initiatives, Ltd., an Israeli company. IEI holds an exclusive Shale Oil Exploration and Production License awarded in July 2008 by the Israeli Ministry of National Infrastructure. The three-year License (which can be extended to a total of seven years) covers approximately 238 square kilometers in the South of the Shfela region in Israel, which is estimated to hold approximately 40 billion barrels of oil equivalent in the form of oil shale, and grants IEI an exclusive right to demonstrate in-situ technologies for potential commercial shale oil production. Under the terms of the License, IEI is to conduct a geological appraisal study across the License area, characterize the resource and select a location for a pilot plant in which it will demonstrate its in-situ technology. Assuming IEI successfully demonstrates a commercially viable technology, IEI intends to apply for a long-term commercial lease from the Israeli government and build a commercial facility. Under the Israeli petroleum law, long term leases are typically for a term of 30 years, with a possible extension for an additional 20 years.

IEI believes that Israel presents a unique opportunity for the development of a commercial scale shale oil industry. The country is almost 100% dependent on imported oil for its transportation needs, and energy security is therefore a significant strategic issue, as well as a material burden on the Israeli economy. Compared with other oil shale resources worldwide, IEI believes that the Shfela basin resource is relatively thick, shallow and dry. Short distances in Israel significantly reduce infrastructure and operating costs. Israel has existing complex refining capacity, an existing pipeline infrastructure and the License area is a very short distance from the Mediterranean Sea, a potential water source. IEI believes that environmental concerns are materially mitigated by the fact that the local aquifer is located well below the oil shale target layer and thus is unlikely to be contaminated in the proposed process being developed. Further, IEI believes that no direct competition currently exists in Israel.

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IEI began the resource appraisal and characterization study in the third quarter of calendar 2009, and it is estimated that this phase will be finalized in approximately one year. The subsequent pilot stage is projected to be conducted during 2010 and 2011, and commercial viability will be determined based on the results from the pilot as well as the process to obtain a commercial lease and all relevant environmental and other approvals.

Zedge

In December 2006, we acquired 90% of the Norway-based Zedge.net. Zedge provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing. As of July 31, 2009, there were approximately 14.25 million registered users of Zedge.net who had downloaded more than half a billion lifestyle and entertainment pieces of content. Zedge has an average of 10,000 new subscribers per day. In September 2008, a ten percent interest in Zedge was sold to Shaman II, L.P. for $1 million. One of the limited partners in Shaman II, L.P. was a former employee of ours. We currently own approximately 82% of Zedge.

CTM Holdings

On September 14, 2009, we completed the CTM Spin-Off, which was a pro rata distribution to our stockholders of the common stock of CTM Holdings, which owns the CTM Media Group, IDT Local Media and WMET 1160AM businesses and a majority interest in IDW Publishing. CTM Holdings’ businesses include: CTM Media Group, which is a distributor of print and online advertising and information in targeted North American tourist markets; IDW Publishing, which is a comic and book publisher with a diverse catalog of licensed and independent titles including classic collections; and WMET 1160AM, which is a paid programming radio station in the Washington, D.C. metropolitan area.

COMPETITION

IDT Telecom

In all of 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. The continued growth of the use of wireless services, largely due to lower pricing of such services, may have adversely affected the sales of our calling cards as customers migrate from using calling cards to wireless services. We expect pricing of wireless services to continue to decrease, which may result in increased substitution of calling cards by wireless services and increased pricing pressure on our calling cards. 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 volumes, thereby reducing revenues.

Calling Card Services

We believe success in providing our calling card services is dependent on our ability to provide low rates and reliable service to our customers, while efficiently distributing our calling cards to a geographically and culturally diverse customer base. The calling card industry is notable for its relative lack of regulation compared to the rest of the telecommunications industry, and for its ease of market entry. As calling rates continue to decline and competition increases, thereby reducing the influence of pricing as a differentiating competitive factor, we will increasingly compete on the basis of our call quality, customer service and distribution capabilities.

We compete with other providers of calling cards as well as established carriers and numerous small or regional operators, and with providers of alternative telecommunications services. Many of the largest telecommunications providers, including at&t, Verizon, Ibasis and STi Prepaid, currently market prepaid calling cards, which in certain cases compete with our cards. Our largest competitors in the national retail chain store market are InComm, Blackhawk Network and Coinstar. In marketing prepaid calling cards to customers outside the United States, we compete with large foreign state-owned or state sanctioned post, telephone or telegraph companies. We believe that our interconnect and termination agreements, network infrastructure and least-cost-routing system provide us with the ability to offer low-cost, high quality services, while our distribution network provides us with access to customers, and that these factors represent competitive advan-

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tages. However, as some of our competitors have significantly greater financial resources and name recognition, and are capable of providing comparable call quality and service levels, our ability to maintain and/or to capture additional market share will remain dependent upon our ability to continue to provide competitively priced services.

In addition, we often notice that many of our competitors, particularly in the United States, significantly overstate the number of minutes that are actually delivered by their cards. These competitors have been misleading calling card customers, and as a result, negatively impacting our market share, resulting in a reduction of our revenues and profits. See Item 3. Legal Proceedings, for the details of a case related to these unfair practices. We are uncertain, even with the potential of fair competition, whether we will be able to regain revenues lost over the past number of quarters.

Wholesale Carrier Business

The wholesale carrier business has numerous entities competing for the same customers, primarily on the basis of price, products and quality of service.

In the wholesale carrier services business, we compete with:

• interexchange carriers and other long distance resellers and providers, including large carriers such as at&t, Verizon and Qwest;

• foreign state-owned or state-sanctioned post, telephone or telegraph companies such as Telefonica, France Telecom and KDD;

• on-line, spot-market trading exchanges for voice minutes, such as Arbinet;

• other VoIP providers;

• other providers of international long distance services; and

• alliances between large multinational carriers that provide wholesale carrier services.

We believe that our extensive network of interconnect and termination agreements, as well as the significant volume of traffic to specific locations generated by our wholesale and calling card businesses, provide us with a competitive advantage and the ability to offer quality services at competitive prices. However, we have generally had to pass along portions of our per-minute cost savings to our customers in the form of lower prices.

Consumer Phone Services

We offer consumer long distance phone services to residential and business customers in the United States. In 11 states we also offer local and long distance phone services bundled at a flat monthly rate. The U.S. consumer phone services industry is characterized by intense competition, with numerous providers competing for a relatively static number of customers, leading to a high churn rate because customers frequently change providers in response to offers of lower rates or promotional incentives.

The regional bell operating companies, or RBOCs, remain our primary competitors in the local exchange market. We are also competing with providers offering communications service over broadband connections using VoIP technology, such as the cable companies and independent VoIP providers. Companies also provide voice telephone services over broadband Internet connections, allowing users of these Internet services, such as Skype, to obtain communications services without subscribing to a conventional telephone line. Mobile wireless companies are deploying wireless technology as a substitute for traditional wireline local telephones. Electric utilities have existing assets (in the form of “last mile” connections to the customer’s premises), very large back-office support organizations and access to low-cost capital that could allow them to enter a telecommunications market rapidly and accelerate network development.

Due to changes in the U.S. regulatory environment that affected our cost of provisioning bundled local/long distance phone services and increased competition, we significantly curtailed marketing activities for the service, and as a result, our business has declined significantly. We expect this trend to continue in fiscal 2010.

IDT Energy

IDT Energy competes with the local utility companies in the areas where it provides service, including Con Edison, Orange and Rockland, Central Hudson, National Fuel, National Grid USA, National Grid dba Key-

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span and Rochester Gas and Electric. In addition to the local utilities and their ESCO affiliates, IDT Energy also competes with several large vertically integrated energy companies as well as many smaller independent ESCOs. The fierce competition with the utilities and ESCOs exposes IDT Energy to the risk of losing customers, but also allows IDT Energy to potentially gain customers at the same time.

There are approximately 40 licensed ESCOs in New York State. In each major utility service territory there are several ESCOs serving residential natural gas customers and residential electric customers. While it is unclear whether there will be new entrants in these markets, IDT Energy believes ESCO competition in the residential market (which represents the principal market focus for IDT Energy) is not as intense as in the enterprise and commercial markets because the majority of ESCOs, unlike IDT Energy, have focused their activities on the enterprise and commercial markets, which are comprised of larger customers who prefer to enter into longer term contracts.

AMSO, LLC AND IEI

If AMSO, LLC and/or IEI are successful developing and producing commercial quantities of shale oil in an environmentally acceptable fashion and receive all the necessary regulatory approvals, then, in the commercial production phases of operations, AMSO, LLC and/or IEI will likely face competition from conventional oil, other fossil fuels and other alternative energy providers in marketing and selling refined products and natural gas. Many of the potential competitors, including national oil companies, are larger and have substantially greater resources to be able to withstand the vagaries of the oil and gas market (i.e. price, availability, refining capacity, etc.).

REGULATION

The following summary of regulatory developments and legislation is intended to describe what we believe to be the most important, but not all, current and proposed international, federal, state and local laws, regulations, orders and legislation that are likely to materially affect us.

Regulation of Telecom in the United States

Telecommunications services are subject to extensive government regulation at both the federal and state levels in the United States. Any violations of the regulations may subject us to enforcement actions, including interest and penalties. The FCC has jurisdiction over all telecommunications common carriers to the extent they provide interstate or international communications services. Each state regulatory commission has jurisdiction over the same carriers with respect to their provision of local and intrastate communications services. Local governments often indirectly regulate aspects of our communications business by imposing zoning requirements, taxes, permit or right-of-way procedures or franchise fees. Significant changes to the applicable laws or regulations imposed by any of these regulators could have a material adverse effect on our business, operating results and financial condition.

Regulation of Telecom by the Federal Communications Commission

The FCC has jurisdiction over all U.S. telecommunications service providers to the extent they provide interstate or international communications services, including the use of local networks to originate or terminate such services.

Universal Service and Other Regulatory Fees and Charges

In 1997, the FCC issued an order, referred to as the Universal Service Order, that requires all telecommunications carriers providing interstate telecommunications services to contribute to universal service support programs administered by the FCC (known as the Universal Service Fund). These periodic contributions are currently assessed based on a percentage of each contributor’s interstate and international end user telecommunications revenues reported to the FCC. We also contribute to several other regulatory funds and programs, most notably Telecommunications Relay Service, FCC Regulatory Fees, and Local Number Portability (collectively, the Other Funds). We and most of our competitors pass through Universal Service Fund and Other Funds contributions as part of the price of our services, either as part of the base rate or, to the extent allowed, as a separate surcharge on customer bills. Due to the manner in which these contributions are calculated, we cannot be assured that we fully recover all of our contributions from our customers. In addition, based on the nature of our current business, we receive certain exemptions from federal Universal Service Fund and Other Funds contributions. Changes in our business could eliminate our ability to qualify for some or all of these exemptions. As a result, our ability to pursue certain new business opportunities in the

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future may be constrained in order to maintain these exemptions, the elimination of which could materially affect the rates we would need to charge for existing services. Changes in regulation may also have an impact on the availability of some or all of these exemptions. If these exemptions become unavailable, it could materially increase our federal Universal Service Fund or Other Funds contributions and have a material adverse effect on the cost of our operations and therefore development and growth of our business.

Interconnection and Unbundled Network Elements

FCC rule changes relating to unbundling have resulted in increased costs to purchase services and increased uncertainty regarding the financial viability of providing service using unbundled network elements. As a result, we placed our Consumer Phone Services business in “harvest mode,” wherein we seek to retain existing customers but do not actively market to new customers.

We continue to negotiate interconnection arrangements with each Incumbent Local Exchange Carrier, or ILEC, generally on a state-by-state basis, for our Consumer Phone Services business as well as other businesses. These agreements typically have terms of two or three years and need to be periodically renewed and renegotiated. While current FCC rules and regulations require the incumbent provider to provide certain network elements necessary for us to provision end-user services on an individual and combined basis, we cannot assure that the ILECs will provide these components in a manner and at a price that will support competitive operations.

Access Charges

As a provider of long distance, we remit access fees directly to local exchange carriers or indirectly to our underlying long distance carriers for the origination and termination of our long distance telecommunications traffic. Generally, intrastate access charges are higher than interstate access charges. Therefore, to the degree access charges increase or a greater percentage of our long distance traffic is intrastate, our costs of providing long distance services will increase. As a local exchange provider, we bill access charges to long distance providers for the origination and termination of those providers’ long distance calls. Accordingly, as opposed to our long distance business, our local exchange business benefits from the receipt of intrastate and interstate long distance traffic. Under FCC rules, our interstate access rates must be set at levels no higher than those of the ILEC in each area we serve, which limits our ability to seek increased revenue from these services. Some, but not all, states have similar restrictions on our intrastate access charges.

In April 2001, the FCC released a Notice of Proposed Rulemaking in which it proposed a “fundamental re-examination of all currently regulated forms of intercarrier compensation.” The FCC proposed that carriers transport and terminate local traffic on a bill-and-keep basis, rather than per minute reciprocal compensation charges. Several different industry groups have submitted access charge reform proposals to the FCC since the issuance of the Notice of Proposed Rulemaking. While the FCC has not yet acted on any of these proposals, and it is not yet known when it will act, these proposals would result in substantial reductions in access charge payments, and some would eliminate these payments entirely over a period of time. Since we both make payments to and receive payments from other carriers for exchange of local and long distance calls, at this time we cannot predict the effect that the FCC’s determination may have upon our business.

Customer Proprietary Network Information

In 2007, the FCC increased its regulatory oversight of Customer Proprietary Network Information, or CPNI. The Commission took this increased role in response to several high-profile cases of “pretexting,” which occurs when an individual secures, through deception, from a communications provider the private phone records of another person. IDT has a CPNI compliance policy in place and we believe we currently meet or exceed all FCC requirements for the protection of CPNI. However, we cannot be assured that we are in full compliance and if the FCC were to conclude that we were not in compliance, we could be subject to fines or other forms of sanction.

FCC Notice of Apparent Liability

On July 10, 2008, the FCC released a Notice of Apparent Liability, or NAL, of $1.3 million related to one of our international telecommunications service agreements. The NAL claimed that we violated section 220 of the Telecom Act, and section 43.51 of the FCC’s rules by willfully and repeatedly failing to file with the FCC, within thirty days of execution, a copy of an agreement with Telecommunications D’Haiti S.A.M. and each of four amendments thereto governing, among other things, the exchange of services, routing of traffic,

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accounting rates, and division of tolls on the U.S.-Haiti route. On October 29, 2008, the FCC released an order adopting an October 29, 2008 Consent Decree entered into between us and the FCC’s Enforcement Bureau resolving the matter. As part of the Consent Decree, in November 2008 we made a voluntary contribution to the United States Treasury in the amount of $0.4 million and, in fiscal 2009, we implemented a revised FCC compliance plan.

Regulation of Telecom by State Public Utility Commissions

Our telecommunications services that originate and terminate within the same state, including both local service and in-state long distance toll calls, are subject to the jurisdiction of that state’s public utility commission. The Communications Act of 1934, as amended, generally preempts state statutes and regulations that prevent the provision of competitive services, but permits state public utility commissions to regulate the rates, terms and conditions of intrastate services, so long as such regulation is not inconsistent with the requirements of federal law. We are certified to provide facilities-based and/or resold long distance service in all 50 states and facilities-based and resold local exchange service in 45 states. In addition to requiring certification, state regulatory authorities may impose tariff and filing requirements, consumer protection measures, and obligations to contribute to universal service and other funds. Rates for intrastate switched access services, which we both pay to local exchange companies and collect from long-distance companies for originating and terminating in-state toll calls, are subject to the jurisdiction of the state commissions. State commissions also have jurisdiction to approve negotiated rates, or establish rates through arbitration, for interconnection, including rates for unbundled network elements. Changes in those access charges or rates for unbundled network elements could have a substantial and material impact on our business.

Regulation of Telecom—International

In connection with our international operations, we have obtained licenses or are otherwise authorized to provide telecommunications services in various foreign countries. We have obtained licenses or authorizations in Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Denmark, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Mexico, the Netherlands, Peru, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland, the United Kingdom and Uruguay. In numerous countries where we operate or plan to operate, we are subject to many local laws and regulations that, among other things, may restrict or limit the ability of telecommunications companies to provide telecommunications services in competition with state-owned or state-sanctioned dominant carriers.

Regulation of Internet Telephony

The use of the Internet and private IP networks to provide voice communications services is a relatively recent market development. Although the provision of such services is currently permitted by United States law and largely unregulated within the United States, several foreign governments have adopted laws and/or regulations that could restrict or prohibit the provision of voice communications services over the Internet or private IP networks. More aggressive regulation of the Internet in general, and Internet telephony providers and services specifically, may materially and adversely affect our business.

In June 2006, the FCC announced that interconnected VoIP providers, such as Net2Phone, would be required to contribute to the federal Universal Service Fund, or USF, beginning October 2006. As a result of the FCC’s action, we contribute to the USF for our interconnected VoIP revenue. If we fail to report our revenue and remit contributions to the USF on that revenue accurately, we may be subject to late fees, penalties or other actions, which could negatively affect our business.

The action by the FCC also expanded the possibility that our interconnected VoIP services may become subject to state regulation and/or additional regulation by the FCC, which will likely lead to higher costs and reduce or eliminate the competitive advantage interconnected VoIP holds, by virtue of its lesser regulatory oversight, over traditional telecommunications services.

Regulation of IDT Spectrum

The FCC regulates the grant, administration, and renewal of spectrum licenses in the United States. The FCC and the ITU also regulate a variety of spectrum interference, coordination, and power emission standards and authorizations. Our subsidiary IDT Spectrum holds certain fixed wireless spectrum licenses and provides service over that spectrum.

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Secondary Spectrum Markets: Spectrum Leasing

On May 15, 2003, the FCC adopted rules designed, in part, to assist in creating a secondary market in spectrum leasing. These rules established two categories of leases—known as de facto transfer and spectrum manager leases—by which licensees, like IDT Spectrum, can make their spectrum available to third parties upon application to the FCC. On July 8, 2004, the FCC amended its rules to streamline approval of leases and, in the case of spectrum manager leases and short-term leases, permit leasing following notification to the FCC. The FCC generally approves de facto transfer leasing arrangements within 30 days of application to the FCC. Licensees can lease spectrum according to specific point-to-point links, identified geographic areas and/or a subset of the licensed spectrum.

Renewal of 39 GHz and 28 GHz Local Multipoint Distribution Service (LMDS) Licenses and Extension of “Substantial Service” Deadline

IDT Spectrum is the license holder of 931 FCC 39GHz Licenses that will expire on October 18, 2010. IDT Spectrum expects to renew its licenses by the October 18, 2010 deadline with a new expiration date to be set for October, 2020. On August 8, 2008, the FCC adopted an order extending the substantial service deadline of all 931 39 GHz licenses until June 1, 2012. IDT Spectrum will need to satisfy the FCC’s substantial service performance obligations for those licenses by June 1, 2012 in order to maintain the expected renewal status of those licenses until 2020.

IDT Spectrum also holds 16 LMDS FCC Licenses which expire on August 10, 2018 (except for the New York LMDS License which expires on February 1, 2016). On April 11, 2008, the FCC adopted an order extending the substantial service deadline for all 16 LMDS licenses until June 1, 2012. IDT Spectrum will need to meet the FCC’s substantial service test for its LMDS Licenses in order to continue to hold those licenses until the above referenced expiration dates. The failure of IDT Spectrum to satisfy the FCC’s substantial service test for its 39GHz and LMDS licenses would result in the loss of those licenses (assuming no FCC waiver or extension of the build-out deadlines), which would have a material adverse impact upon the business of IDT Spectrum.

We are currently in the process of trying to sell certain of the licenses referred to above.

Regulation of IDT Energy

IDT Energy currently operates exclusively in New York, and is affected by the actions of governmental agencies, mostly on the state level (such as the NYPSC), and other organizations (such as NYISO) and indirectly the Federal Energy Regulatory Commission, or FERC. ESCOs are regulated primarily pursuant to retail access-related orders of the NYPSC as implemented by the retail access plans, programs, operating procedures and tariffs and rate schedules of the utilities in New York, but IDT Energy is not subject to NYPSC regulations as a public utility under the New York Public Services Law. In addition, IDT Energy is affected by, and must comply with, the applicable NYISO tariff terms and conditions related to Load Serving Entities that purchase electricity in NYISO markets. ESCOs must also comply with certain limited provisions of the Home Energy Fair Practices Act, within the New York Public Service Law, and regulations promulgated thereunder. While New York is considered a leader in the restructuring of the energy industry from regulated vertically-integrated monopolies to competitive markets, IDT Energy may be subject to new laws, orders or regulations or the revision or interpretation of existing laws, orders or regulations. Further, if IDT Energy were to enter markets outside of New York, it would need to be licensed and would be subject to the rules and regulations of such state or municipalities.

Regulation of AMSO, LLC AND IEI

AMSO, LLC was granted an RD&D Lease by the BLM for 10 years with up to a 5-year extension upon demonstration that a process leading up to the production of commercial quantities of shale oil is diligently pursued. The terms of the RD&D Lease do not guarantee that the BLM will grant an application to convert the lease to a commercial lease. In order for the RD&D Lease to be converted into a commercial lease, the BLM must determine, following an analysis based on the National Environmental Policy Act, that commercial scale operations can be conducted without unacceptable environmental consequences. The BLM will have a fair amount of discretion in making this determination. In order to convert over to a commercial lease AMSO, LLC will have to demonstrate the production of oil shale in commercial quantities, which is defined to mean production of shale oil where there is a reasonable expectation that the expanded operation would provide a positive return after all costs of production have been met, including the amortized costs of the capital investment. AMSO, LLC will also have to (a) demonstrate that it consulted with state and local officials to develop a

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plan for mitigating the socioeconomic impacts of commercial development on communities and infrastructure; (b) submit a nonrecurring conversion payment, which pursuant to applicable rules and regulations, will be equivalent to the greater of $1,000 per acre or the Fair Market Value (to be determined) of the commercial lease; (c) provide adequate bonding; and (d) conduct commercial operations in accordance with all applicable laws, rules, regulations or stipulations provided for.

IEI holds an exclusive Shale Oil Exploration and Production License that expires in July 2011. While the license may be extended for an additional four years and IEI may also apply for a new license, there is no guarantee the license will be extended or that a new license would be granted. In addition, the license is subject to certain conditions and milestones and the failure to reach those milestones may result in the termination, revocation, suspension or limitation of the license.

In order to execute its long term commercial plan, IEI must obtain a Lease under the Petroleum Law. A Lease is granted for an initial period of up to 30 years, with possible extension for an additional 20 years. Such a Lease can be granted if a “Discovery” under the Law is declared by the Petroleum Commissioner during the License period. However, we are unaware of any clear guidelines, criteria or precedent of how that term applies to shale oil.

Regulation of Other Businesses

We operate other smaller or early-stage initiatives and operations which may be subject to federal, state, or local laws and regulations.

Intellectual Property

We rely on a combination of patents, copyrights, trademarks, domain name registrations and trade secret laws in the United States and other jurisdictions and contractual restrictions to protect our intellectual property rights and our brand names. All of our employees sign confidentiality agreements. These agreements provide that the employee may not use or disclose our confidential information except as expressly permitted in connection with the performance of his or her duties for the Company, or in other limited circumstances. These agreements also state that, to the extent rights in any invention conceived of by the employee while employed by us do not vest in the Company automatically by operation of law, the employee is required to assign his or her rights to us.

We own more than 230 trademark and service mark registrations and pending applications in the United States and 185 pending applications and registrations abroad. We protect our brands in the marketplace including the IDT and Net2Phone Brands. Where deemed appropriate, we have filed trademark applications throughout the world in an effort to protect our trademarks. Where deemed appropriate, we have also filed patent applications in an effort to protect our patentable intellectual property. Excluding those issued to Net2Phone, discussed below, we own 6 issued patents and 16 patent applications in the United States and 14 patents issued abroad with 11 patent applications pending abroad.

In fiscal 2009, IDT’s businesses filed for new Intellectual Property rights and also modified or pruned their portfolios based on strategic initiatives, cost effectiveness and other factors.

IDT maintains a global telecommunications switching and transmission infrastructure that enables us to provide an array of telecommunications, Internet access and Internet telephony services to our customers worldwide. Our network is continuously monitored by our Network Operations Center based in Piscataway, New Jersey. IDT has domestic and foreign patents and patent applications regarding its infrastructure and or global telecommunication network for its international telecommunications traffic and the international traffic of other telecommunications companies.

Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in every country in which our products and services are distributed. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results.

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Companies in the telecommunications industry and other industries in which we compete own large numbers of patents, copyrights and trademarks and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition, the possibility of intellectual property claims against us grows. Our technologies may not be able to withstand any third-party claims or rights against their use.

IDT Telecom

IDT Telecom currently owns 2 issued patents and has 5 pending patent applications in the United States.

Net2Phone currently owns 38 issued patents and has 13 pending patent applications in the United States. Net2Phone has 2 foreign issued patents, and 4 patent applications pending abroad. Many of these patents relate to VoIP communications.

See Item 3. Legal Proceedings for a description of our patent infringement lawsuit against eBay, Inc., Skype Technologies SA, Skype, Inc. and several as of yet unidentified business entities.

Net2Phone owns 30 trademark and service mark registrations and pending applications in the United States. Net2Phone owns 135 trademark and service mark registrations and pending applications in various foreign countries. Net2Phone’s most important mark is “NET2PHONE.” Net2Phone has made a significant investment in protecting this mark, and Net2Phone believes it has achieved recognition in the United States and abroad. Net2Phone is currently engaged in an international filing program to file trademark applications for trademark registrations of the mark NET2PHONE in a number of foreign countries.

American Shale Oil, LLC

In connection with the RD&D process, AMSO, LLC has filed a patent application and three provisional patent applications with the U.S. Patent and Trademark Office.

Other

We also currently own 1 pending patent application and 3 registrations in the United States as well as 14 foreign issued patents and 5 patent applications pending abroad that relate to business operations we oversee or businesses-in-development. We also own or license certain trademark and service mark registrations and pending applications in the United States and additional registrations abroad.

EMPLOYEES

As of October 1, 2009, we had a total of approximately 1,400 employees.

Item 1A. Risk Factors.

RISK FACTORS

Our business, operating results or financial condition could be materially adversely affected by any of the following risks as well as the other risks highlighted elsewhere in this document, particularly the discussions about regulation, competition and intellectual property. The trading price of our Class B common stock and common stock could decline due to any of these risks.

Risks Related to Our Telecommunications Businesses

Each of our telecommunications business lines is highly sensitive to declining prices, which may adversely affect our revenues and margins.

The worldwide telecommunications industry has been characterized in recent years by intense price competition, which has resulted in declines in both our average per-minute price realizations and our average per-minute termination costs, as well as decreases in our revenue. Many of our competitors continue to aggressively price their services. We often notice that many of our competitors, particularly in the U.S. calling card industry, significantly overstate the number of minutes that are actually delivered by their calling cards, thereby hurting our ability to compete effectively. The intense competition has led to continued erosion in our pricing power, both in our retail and wholesale markets, and we have generally had to pass along any savings we achieve on our per-minute costs to our customers in the form of lower prices. Any increase by us in pricing may result in our prices not being as attractive, which may result in a reduction of revenue. If these trends in pricing continue or increase, it could have a material adverse effect on the revenues generated by our telecommunications businesses or our ability to maintain our margins.

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Because our calling cards generate a significant portion of our revenue, our growth and our results of operations are substantially dependent upon growth in this business, and we continue to face significant competition and other operational challenges in our calling card business which have adversely affected our revenue and profitability in recent years and may continue to adversely affect our revenue and profitability.

During fiscal 2009, our Telecom Platform Services segment generated $1,180.7 million in revenues, which accounted for 95.6% of IDT Telecom’s revenues and 76.7% of our total consolidated revenues from continuing operations. Our prepaid products businesses accounted for over 48% of the revenues of our Telecom Platform Services segment in fiscal 2009. Accordingly, our results of operations and future growth depend on the performance of this business. We compete in the prepaid calling card market with many of the established facilities-based carriers, such as at&t and Verizon. These companies are substantially larger and have greater financial, technical, engineering, personnel and marketing resources, longer operating histories, greater name recognition and larger customer bases than we do. The use by these competitors of their resources in the prepaid calling card market could significantly impact our ability to compete against them successfully.

In addition to these larger competitors, we face significant competition from smaller calling card providers, who from time-to-time offer rates that are substantially below our rates, and in some instances below what we believe to be the cost to provide the service, in order to gain market share. This type of pricing by one or more competitors can adversely affect our revenues, as they gain market share at our expense, and our gross margins, if we lower rates in order to better compete. We believe one of the reasons that certain of our competitors are able to offer lower pricing is because their cards do not deliver all the minutes they claim to sell. Accordingly, on March 8, 2007, we filed a civil anti-fraud action in the federal district court in Newark, New Jersey, claiming that these competitors have been misleading calling card customers, and as a result, negatively impacting our market share, resulting in a reduction of our revenues and profits. Although the judge in this case chose not to grant the preliminary injunction we requested, a decision which was affirmed on appeal, we are continuing with this lawsuit. We are uncertain, even with the potential of fair competition, whether we will be able to regain revenues lost over the past number of quarters. Additionally, we cannot be assured that our actions will adjust the market so that we can better compete.

The continued growth of the use of wireless services, largely due to lower pricing of such services, has adversely affected the sales of our prepaid calling cards as customers migrate from using prepaid calling cards to wireless services. We expect pricing of wireless services to continue to decrease, resulting in increased substitution of prepaid calling cards by wireless services and increased pricing pressure on our prepaid calling cards.

We believe that recent immigration trends in the United States may be decreasing our potential customer base. Since immigrants are a target customer base for our prepaid calling card business, their reduced number may have adversely affected our revenues and profitability in that business. If these immigration trends continue or accelerate, our calling card revenues and profitability may continue to be adversely affected.

If we are not able to increase or maintain our revenue generated by prepaid calling cards and the associated margins of such revenue, our overall results of operations could continue to materially suffer. Further, if our competitors continue to utilize their greater resources or operate at lower levels of profitability in order to more aggressively market their products and services, or continue to mislead calling card customers, this significant portion of our business could continue to be adversely affected and could continue to generate losses.

We may not be able to obtain sufficient or cost-effective termination capacity to particular destinations.

Most of our telecommunications traffic is terminated through third-party providers. In order to support our minutes-of-use demands and geographic expansion, we may need to obtain additional termination capacity or destinations. We may not be able to obtain sufficient termination capacity from high-quality carriers to particular destinations or may have to pay significant amounts to obtain such capacity. This could result in our not being able to support our minutes-of-use demands or in a higher cost-per-minute to particular destinations, which could adversely affect our revenues and margins.

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The termination of our carrier agreements with foreign partners or our inability to enter into carrier agreements in the future could materially and adversely affect our ability to compete, which could reduce our revenues and profits.

We rely upon our carrier agreements with foreign partners in order to provide our telecommunications services to our customers. These carrier agreements are for finite terms and, therefore, there can be no guarantee that these agreements will be renewed at all or on favorable terms to us. Our ability to compete would be adversely affected if our carrier agreements were terminated or we were unable to enter into carrier agreements in the future to provide our telecommunications services to our customers, which could result in a reduction of our revenues and profits.

Our customers, particularly our wholesale carrier customers, could experience financial difficulties, which could adversely affect our revenues and profitability if we experience difficulties in collecting our receivables.

As a provider of international long distance services, we depend upon sales of transmission and termination of traffic to other long distance providers and the collection of receivables from these customers. The wholesale market continues to feature many smaller, less financially stable companies. If continued weakness in the telecommunications industry reduces our ability to collect our accounts receivable from our major customers, particularly our wholesale carrier customers, our profitability may be substantially reduced. Moreover, the after effects of the collapse of the mortgage-backed credit markets may affect our customers’ access to liquidity and impair our ability to collect on receivables. While our most significant customers vary from quarter to quarter, our five largest wholesale carrier customers accounted for 5.4% of our total consolidated revenues from continuing operations in fiscal 2009 compared with 6.0% in fiscal 2008. This concentration of revenues increases our exposure to non-payment by our larger customers, and we may experience significant write-offs related to the provision of wholesale carrier services if any of our large customers fail to pay their outstanding balances, which could adversely affect our revenues and profitability.

Our revenues will continue to suffer if our distributors and sales representatives fail to effectively market and distribute our prepaid calling card products and other services.

We currently rely on our distributors and representatives for marketing and distribution of our prepaid calling card products and other services. Our UTA subsidiary utilizes a network of more than 1,000 sub-distributors (ranging from large companies to sole proprietors) that sell our prepaid calling cards to retail outlets throughout the United States.

In foreign countries, we are dependent upon our distributors and independent sales representatives, many of which also sell services or products of other companies. As a result, we cannot control whether these foreign distributors and sales representatives will devote sufficient efforts to selling our services. In addition, we may not succeed in finding capable retailers and sales representatives in new markets that we may enter. If our distributors or sales representatives fail to effectively market or distribute our prepaid calling card products and other services, our ability to generate revenues and grow our customer base could be substantially impaired.

Increased competition in the consumer and business telephone market, particularly from the regional bell operating companies, or RBOCs, and cable operators, could accelerate our customer churn rate, revenue declines and profit declines in that business.

We offer stand-alone long distance phone service to residential and business subscribers throughout the United States and we offer local service, bundled with long distance service, to residential subscribers in 11 states. The U.S. consumer phone services industry is characterized by numerous entities competing for a relatively static number of customers, leading to a high customer turnover rate because customers frequently change service providers in response to offers of lower rates or promotional incentives. Competition in the United States to provide phone services is intense. Our primary competitors in the long distance market include major long distance carriers and the RBOCs. The three RBOCs are (i) at&t, (ii) Qwest and (iii) Verizon. Each of the RBOCs continues to enjoy a virtual monopoly as the Incumbent Local Exchange Carrier, or ILEC, in its respective territory and the RBOCs are well funded. In a battle for market share, the RBOCs have considerable resources and we expect the RBOCs to continue to increase their share of the long distance market. Some of our competitors offer products and services available as part of their bundled service offerings, such as wireless services, high speed Internet access and television that we do not presently offer as a bundled service offering.

We also compete in the consumer phone services market with cable operators. Many cable operators market their cable telephony product as a VoIP service, so they do not charge certain fees, such as the Subscriber Line Charge and the Federal Excise Tax, to subscribers, thus permitting the cable operators to provide their service

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at highly competitive rates. Cable operators also offer television and high-speed Internet access along with their telephony product, providing a “triple play” service. In addition, we are at a disadvantage vis-à-vis cable operators because cable operators have their own network and are not reliant on ILEC facilities to provide service and are not affected by regulatory uncertainty facing access to and the cost of ILEC facilities. In particular, we face an additional competitive challenge because Cablevision and Time Warner—two cable operators that have been particularly aggressive in rolling out a cable telephony product—have clusters of cable franchises that overlap areas where a high percentage of our local telephony subscribers are located.

In the consumer phone services market, we also compete with “stand-alone” VoIP operators such as Vonage and Skype, who provide service over a customer’s existing broadband Internet connection. While these operators have captured a relatively small portion of the overall market to date, their share is growing.

This increased competition could accelerate our customer churn rate, revenue declines and profit declines in the consumer and business telephone markets, thereby reducing the duration that we can “harvest” the business.

We rely on the RBOCs for access to our consumer customers’ premises, and if that access is not maintained, or if the cost to us to gain such access becomes more expensive, our ability to offer local telephone service will be constrained.

We rely on utilizing the RBOCs’ networks to gain access to our customers’ premises to provide the local portion of our bundled local and long distance services. We have entered into agreements with Verizon, at&t and BellSouth (acquired by at&t in December 2006) granting us access to their respective networks, albeit at higher rates than we paid under the UNE-P system. This has impaired our overall ability to offer our bundled service at competitive rates and has led to a decline in our consumer phone services business and our overall revenues. Further, as the consumer bundled service has higher margins than does most of our other telecom offerings, the decrease in the proportions of our overall revenues from that source has negatively affected our overall profit margins.

Risks Related to IDT Energy

The ESCO business and our participation in the market are relatively new, and evolving factors could adversely impact the market and our performance.

The ESCO business grew out of the deregulation of the energy market in the State of New York, which only began in 2000. Further, we entered the market in 2004. Accordingly, the entire market is still evolving, and we are continuing to hone our operations and strategy. We cannot predict how the market will develop or if our focus on customer acquisition and growth will prove to be the proper strategy. If our assumptions prove to be incorrect, the results of operations of this business could be adversely affected.

The ESCO business is highly competitive, so we may be forced to cut prices or incur additional costs.

IDT Energy faces substantial competition in its market both from the traditional incumbent utilities as well as from other ESCOs. As a result, we may be forced to reduce prices, incur increased costs or lose market share. We compete on the basis of provision of services, customer service and price. Present or future competitors may have greater financial, technical or other resources which could put us at a disadvantage.

Unfair business practices by competitors may adversely affect us.

Competitors in the highly competitive ESCO market often engage in unfair business practices to sign up new customers. Competitors engaging in unfair business practices unfortunately create an unfavorable impression about our industry on consumers, especially in a focused and relatively new market like the one in which we operate. Such unfair practices by other companies can adversely affect our ability to grow or maintain our customer base.

Demand for ESCO services and consumption by customers are significantly related to weather conditions.

Typically, colder winters and hotter summers create higher demand and consumption for natural gas and electricity, respectively. Milder than expected winters and/or summers may reduce the demand for our energy services.

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Our current strategy is based on current regulatory conditions and assumptions, which could change or prove to be incorrect.

Regulation over the electricity and natural gas markets has been in flux at the state and Federal levels. In particular, any NYISO market changes adopted by the FERC or changes in state or Federal laws or regulations (including greenhouse gas laws) may affect the prices at which IDT Energy purchases electricity for its customers. While we seek to pass along increases in energy costs to our customers pursuant to our variable rate customer contracts, we may not always be able to do so due to competitive market forces and the risk of losing our customer base. Any changes in these factors, or any significant changes in industry development, could have an adverse effect on our revenues, profitability and growth or threaten the viability of our current growth strategy.

Our ability to provide energy delivery and commodity services depends on the operations and facilities of third parties, including the NYISO, electric generators from whom we purchase electricity and natural gas suppliers from whom we purchase natural gas.

The loss of use or destruction of the facilities of third parties that are used in providing our services due to extreme weather conditions, breakdowns, war, acts of terrorism or other occurrences could greatly reduce our potential earnings and cash flows.

A revision to certain best practices and programs in which we participate and with which we comply could disrupt our operations and adversely affect our results and operations.

Certain retail access “best practices” and programs proposed and/or required by the NYPSC have been implemented by utilities in most of the service territories in which we operate. One such practice is participation in purchase of receivables programs under which certain utilities purchase customer receivables for approximately 98% of their face value in exchange for a first priority lien in the customer receivables without recourse against the ESCO. This program is a key component of our control of bad debt risk in our ESCO business. In the event that any of these best practices or programs was to be revised or eliminated by the NYPSC or the individual utilities, we would need to adjust our current strategy regarding customer acquisition and our focus on the growth of our customer base. We would also need to adjust our current business plan to reduce our exposure to existing customers who may pose a bad debt risk. Any failure to properly respond to changing conditions could adversely affect our results of operations and profitability.

In 2008, the NYPSC initiated a proceeding in order to generically examine the utility programs and practices it directed in recent years to advance the development of the competitive retail market for electricity and natural gas in New York. According to the NYPSC’s Notice in this proceeding, the NYPSC stated that it may be appropriate to review these programs and practices given the existence of numerous ESCOs providing competitive retail services and the current condition of the market. Recently, the NYPSC also initiated a proceeding to examine potential revisions to the Uniform Business Practices applicable to all ESCOs operating in New York. This proceeding plans to address ESCO marketing activities by providing standard and acceptable ESCO marketing practices and appropriate customer protections and remedies. The NYPSC has yet to issue an order in either proceeding. It is unclear when and how the NYPSC may rule on the utility programs and practices currently in place or may revise the Uniform Business Practices, and whether we may be adversely affected by any related rulings or rate proceedings of the specific utility.

In addition, the NYPSC recently adopted an Energy Efficiency Portfolio Standard, or EEPS, for New York, setting a goal of gradually reducing electricity usage by 15% statewide by 2015 and requiring the utilities to file energy efficiency programs consistent with the policies and cost/benefit factors adopted by the NYPSC. We cannot predict the impact of the EEPS on the electricity usage of our customers. There could be an adverse effect on the result of operations of our ESCO business if the EEPS results in a reduction in the aggregate amount of customer load we serve.

The ESCO business, including our relationship with our suppliers, is dependent on access to capital and liquidity, which may be limited under current circumstances.

Our business involves entering into contracts to purchase large quantities of electricity or natural gas. Because of seasonal fluctuations, we generally are required to purchase electricity or natural gas in advance and finance that purchase until we can recover such amounts from revenues. IDT Energy has a Preferred Supplier Agreement with BP pursuant to which BP became our preferred provider of electricity and natural gas in New York State. In addition to other advantages of this agreement, we will benefit from the removal of the requirement to post security with other suppliers. There can be no assurance that we will be able to maintain the required

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covenants or that the agreement will be renewed upon its expiration. Difficulty in obtaining adequate liquidity on commercially reasonable terms may adversely affect our business, prospects and financial conditions.

Risks Related to Alternative Energy

We have no current production and we may never have any.

We do not have any current production of shale oil. We cannot assure you that we will produce shale oil at all or in commercially profitable quantities. Our ability to produce shale oil may depend upon our ability to develop and operate our planned projects and facilities, which may be affected by events or conditions that impact the advancement, operation, cost or results of such projects or facilities, including:

• The outcome of negotiations with potential partners, governments, suppliers, customers or others;

• Changes in operating conditions and costs, including costs of third party equipment or services such as drilling and processing and access to power sources;

• Security concerns or acts of terrorism that threaten or disrupt the safe operation of company facilities; and

• The occurrence of unforeseen technical difficulties.

Operating hazards and uninsured risks with respect to the oil and gas operations may have material adverse effects on our operations.

Our exploration and, if successful, development and production operations are subject to all of the risks normally incident to the exploration for and the development and production of oil and gas, including blowouts, cratering, uncontrollable flows of oil, gas or well fluids, fires, pollution and other environmental and operating risks. These hazards could result in substantial losses due to injury or loss of life, severe damage to or destruction of property and equipment, pollution and other environmental damage and suspension of operations. While as a matter of practice we take out insurance against some or all of these risks, such insurance may not cover the particular hazard and may not be sufficient to cover all losses. The occurrence of a significant event adversely affecting any of our operations could have a material adverse effect on us, could materially affect our continued operation and could expose us to material liability.

AMSO, LLC’s and IEI’s dependence on the limited contractors, equipment and professional services available could result in increased costs and possibly material delays in their respective work schedules.

Due to the lack of available technical resources with in-situ extraction experience, the costs for our operations may be more expensive than planned or there could be delays in our operating plans. We are also more likely to incur delays in our drilling schedule and be subject to a greater risk of failure in meeting our required work schedule. Similarly, some of the professional personnel we need to undertake our planned operations are not available in Israel or available on short notice for work in Israel, and, therefore, we may need to use overseas contractors for various projects. Any or all of the factors specified above may result in increased costs and delays in the work schedule.

AMSO, LLC and IEI will require substantial funds and will need to raise additional capital in the future.

We will need substantial funds to fully execute our anticipated operations. Failure to secure adequate funding could adversely affect our ability to advance our strategic plans as currently contemplated and require us to delay, scale back, or shut down our operations. Furthermore, the current conditions in the global capital markets due to the credit crisis which began in the second half of 2008 and the current volatility in the financial markets may make it difficult for us to obtain such financing.

AMSO, LLC’s and IEI’s success depends on the continuing efforts of key personnel and our efforts may be severely disrupted if we lose their services.

Our future success depends, to a significant extent, on our ability to attract and retain qualified technical personnel particularly those with expertise in in-situ shale oil production. There is substantial competition for qualified technical personnel, and there can be no assurance that we will be able to attract or retain our qualified technical personnel. The unexpected loss of the services of one or more of these people, and the ability to find suitable replacements within a reasonable period of time thereafter, could have a material adverse effect on our operations.

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There are uncertainties associated with AMSO, LLC’s RD&D lease and IEI’s license.

AMSO, LLC was granted an RD&D Lease by the BLM for 10 years with up to a 5-year extension upon demonstration that a process leading up to the production of commercial quantities of shale oil is diligently pursued. The terms of the RD&D Lease do not guarantee that the BLM will grant a commercial lease. Further, there is significant environmental opposition to the commercial production of shale oil. There are numerous conditions and requirements that AMSO, LLC will have to meet to convert its RD&D Lease into a commercial lease, and there can be no assurance that all of the conditions and requirements will be met before the expiration of the RD&D Lease.

IEI holds an exclusive Shale Oil Exploration and Production License that expires in July 2011. While the license may be extended for an additional four years and IEI may also apply for a new license, there is no guarantee the license will be extended or that a new license would be granted. In addition, the license is subject to certain conditions and milestones and the failure to reach those milestones may result in the termination, revocation, suspension or limitation of the license.

In-situ technology for the extraction of shale oil is in its early stages of development, has not been deployed commercially and AMSO, LLC and IEI may not be able to develop environmentally acceptable and economically viable technology in connection therewith.

Our strategy is predicated on the production and extraction of shale oil using unconventional methodologies, defined as any method other than the traditional oil well. Unconventional oil production is typically more costly and has a more significant environmental impact than traditional production. Our unconventional production methods are less established than traditional methods and therefore carry a higher degree of technology risk. The increased costs increase the risks that we will not be profitable given commodity price fluctuations, assuming we enter into commercial production.

AMSO, LLC and IEI are subject to regulatory, legal and political risks that may limit their operations.

Our operations and potential earnings may be affected from time to time in varying degree by regulatory, legal and political factors including:

• Laws and regulations related to environmental or energy security matters, including those addressing alternative energy sources and the risks of global climate change. Such laws and regulations continue to increase in both number and complexity and affect our operations with respect to, among other things:

Ÿ The discharge of pollutants into the environment;

Ÿ The handling, use, storage, transportation, disposal and cleanup of hazardous materials and hazardous and nonhazardous wastes; and

Ÿ The dismantlement, abandonment and restoration of our properties and facilities at the end of their useful lives;

• Restrictions on exploration and production;

• Loss of petroleum rights including key leases, licenses or permits;

• Tax or royalty increases, including retroactive claims;

• Intellectual property challenges that would limit our ability to use in-situ extraction technology;

• Political instability in areas where we operate; and

• War or other international conflicts in Israel.

Regulation of greenhouse gas emissions could increase AMSO, LLC and IEI’s operational costs.

AMSO, LLC’s and IEI’s potential future production and processing of oil shale will result in emission of greenhouse gases. International agreements and national or regional legislation and regulatory measures to limit greenhouse emissions are currently in various phases of discussion or implementation. The Kyoto Protocol and other actual or pending federal, state and local regulations, envision a reduction of greenhouse gas emissions through market-based trading schemes. As a result of these and other environmental regulations, we can expect to incur additional capital, compliance, operating, maintenance and remediation costs. To the extent these costs are not ultimately reflected in the price of the products we sell, our operating results will be adversely affected.

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Our industry is subject to the same general inherent industry and economic risks of the oil and gas business.

The oil business is fundamentally a commodity business. This means that potential future commercial operations and earnings may be significantly affected by changes in oil and gas prices and by changes in margins on gasoline and other refined products.

We may be exposed to infringement or misappropriation claims by third parties, which, if determined adversely to us, could cause us to lose significant rights and pay significant damage awards.

Our success also depends largely on our ability to use and develop our technology and know-how without infringing the intellectual property rights of third parties. The validity and scope of claims relating to our technology involve complex scientific, legal and factual questions and analysis. It is therefore difficult to accurately predict whether or not a third party will assert that we are infringing on its intellectual property or whether it would prevail. Although we are not currently aware of any infringement or of any parties pursuing or intending to pursue infringement claims against us, we cannot assure you that we will not be subject to such claims in the future. Also, in many jurisdictions, patent applications remain confidential and are not published for about 5 to 6 months after filing. Thus, we may be unaware of other persons’ pending patent applications that relate to our processes. While at present we are unaware of competing patent applications, competing applications could potentially surface.

The defense and prosecution of intellectual property suits, patent opposition proceedings and related legal and administrative proceedings can be both costly and time consuming and may significantly divert the efforts and resources of our technical and management personnel. An adverse determination in any such litigation or proceedings to which we may become a party could subject us to significant liability to third parties, require us to seek licenses from third parties, to pay ongoing royalties, to redesign our products, or subject us to injunctions prohibiting the manufacture and sale of our products or the use of our technologies.

Risks Related to Our Financial Performance

We have incurred significant losses since our inception, and continued losses in the future could cause the trading price of our stock to decline further or have a material adverse effect on our results of operations, financial condition, our ability to pay our debts as they become due and cash flows.

We have incurred significant losses since inception. During fiscal 2009, we had a consolidated net loss of $(155.4) million. If we are not able to achieve overall profitability or maintain any profitability that we do achieve, the trading price of our stock could continue to decline and our financial condition could worsen as we could, among other things, continue to deplete our cash, cash equivalents and marketable securities.

We incurred a loss from continuing operations in each of the five years in the period ended July 31, 2009. We incurred a net loss in fiscal 2009, fiscal 2008, fiscal 2006 and fiscal 2005, and we would have incurred a net loss in fiscal 2007 except for a gain on the sale of a discontinued operation. We also had negative cash flow from operating activities in each of the three years in the period ended July 31, 2009. We had an accumulated deficit at July 31, 2009 of $251.9 million. Historically, we satisfied our cash requirements primarily through a combination of our existing cash and cash equivalents, proceeds from the sale of businesses, proceeds from the sales and maturities of marketable securities and investments, arbitration awards and litigation settlements, and borrowings from third parties. We currently expect our operations in the next twelve months and the balance of cash, cash equivalents, marketable securities and pooled investment vehicles including hedge funds that we held as of July 31, 2009 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. The foregoing is based on a number of assumptions, including that we will collect our receivables, effectively manage our working capital requirements, prevail in legal actions and other claims initiated against us, and maintain our revenue levels and liquidity. Predicting these matters is particularly difficult in the current worldwide economic situation and overall decline in consumer demand. Failure to generate sufficient revenue and operating income could have a material adverse effect on our results of operations, financial condition and cash flows. The recoverability of assets is highly dependent on the ability of management to execute our business plan.

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We hold significant cash, cash equivalents, marketable securities and investments that are subject to various market risks.

As of July 31, 2009, we had cash, cash equivalents, restricted cash and cash equivalents, marketable securities and investments of $196.7 million. In addition, as of July 31, 2009, our assets of discontinued operations included cash and cash equivalents of $13.1 million, of which we will retain approximately $10 million held by IDT Financial Services pursuant to regulatory requirements upon completion of the proposed sale, in addition to the $3 million that we expect to receive from the buyer. We incurred losses in fiscal 2009 and fiscal 2008 upon the disposal of unprofitable investments. In addition, we hold auction rate securities with a cost of $14.3 million that are not currently liquid and have declined in value. As of July 31, 2009, the estimated fair value of our auction rate securities was $0.6 million. Furthermore, we hold a portion of our total asset portfolio in holdings of pooled investment vehicles including hedge funds; as of July 31, 2009, the carrying value of our investments in such pooled investment vehicles was approximately $12.4 million, of which $0.6 million is included in “Investments-short term” and $11.8 million is included in “Investments-long-term” in our consolidated balance sheet. These pooled investment vehicles carry a degree of risk, as there can be no assurance that we can redeem these investments at any time and that the managers of the hedge funds in which we have invested will be able to accurately predict the course of price movements of securities and other instruments and, in general, the securities markets have in recent years been characterized by great volatility and unpredictability. As a result of these different market risks, our holdings of cash, cash equivalents, marketable securities and investments could be materially and adversely affected.

Intellectual Property, Tax, Regulatory and Litigation Risks

We may be adversely affected if we fail to protect our proprietary technology.

We depend on proprietary technology and other intellectual property rights in conducting our various business operations. We rely on a combination of patents, copyrights, trademarks and trade secret protection and contractual rights to establish and protect our proprietary rights. Failure of our patents, copyrights, trademarks and trade secret protection, non-disclosure agreements and other measures to provide protection of our technology and our intellectual property rights could enable our competitors to more effectively compete with us and have an adverse effect on our business, financial condition and results of operations.

In addition, we may be required to litigate in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition or results of operations, and there can be no assurances that we will be successful in any such litigation. To date, we have not obtained a recovery from litigation claiming infringement of certain patents owned by our Net2Phone subsidiary relating to VoIP technology.

We may be subject to claims of infringement of intellectual property rights of others.

From time to time we may be subject to claims and legal proceedings from third parties regarding alleged infringement by us of trademarks, copyrights, patents and other intellectual property rights. Such suits can be expensive and time consuming and could distract us and our management from focusing on our businesses. Further, loss of such suits could result in financial burdens and the requirement to modify our modes of operation, which could materially adversely affect our business.

We are subject to tax and regulatory audits which could result in the imposition of liabilities that may or may not have been reserved.

We are subject to audit by taxing and regulatory authorities with respect to certain of our income and operations. These audits can cover periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if our positions are not accepted by the auditing entity. Our financial statements contain reserves for certain of such liabilities, but we do not reserve for liabilities that we do not reasonably expect to be imposed.

On February 10, 2006, Universal Service Administrative Company, or USAC, notified us that it issued an Audit Report from its Internal Audit Division, or IAD. In calendar year 2005, the IAD audited our FCC Form 499-A filings for calendar years 2000 through 2004 related to the payments to the Universal Service Fund, and concluded that we incorrectly reported certain revenues on Forms 499-A. USAC directed us to refile our Forms

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499-A for calendar years 2002 through 2004 in a manner consistent with the IAD’s findings. We did not refile the Forms 499-A, as we believed the IAD is mistaken in certain conclusions regarding the treatment of our revenues. USAC, however, filed the forms on our behalf, which we believe to be impermissible under the FCC’s rules and regulations.

On June 5, 2007, we were notified by USAC that it intended to audit our FCC Form 499-A filings for calendar years 2005 and 2006. This audit took place over the subsequent months and on April 30, 2008 USAC issued an Audit Report from its IAD finding, as it found in its prior Audit Report, that we incorrectly reported certain revenues on Forms 499-A. USAC directed us to refile our Forms 499-A for calendar year 2005 in a manner consistent with the IAD’s findings. We did not refile the Forms 499-A, as we believed the IAD is mistaken in certain conclusions regarding the treatment of our revenues. Whereas USAC filed certain Forms 499-A on our behalf over our objection in the first audit, USAC has not yet filed any Forms 499-A on our behalf as a result of the second audit. However, we think it is likely they will do so in the future. It remains IDT’s position that it would be impermissible under the FCC’s rules and regulations for USAC to file on IDT’s behalf. We filed with the FCC a “Request for Review” of the Audit Report, which remains pending as of the date we are filing this Annual Report.

USAC’s revisions in both audits to our filing methodology resulted in additional regulatory payments for the years covered by the audit. Because we believe in the accuracy of our filing methodology and our Request remains pending, we have not revised our methodology for post-audit Form 499-A filings. We have accrued for all regulatory fees we believe may be incurred under IAD’s methodology from 2002 through the present, in the event our Request is denied and/or our methodology is not upheld on appeal, and we have made payments on amounts that have been invoiced to us by USAC and/or other agencies. We anticipate receiving additional invoices in the near future for our more recent audit. If we receive such invoices, we will remit payment for those invoices while our Requests for Review remain pending. The accrual amount for the years covered by the audit and subsequent years, as of July 31, 2009, was $19.8 million. Until a final decision has been reached in our disputes, we will continue to accrue in accordance with IAD’s methodology. If we do not properly calculate, or have not properly calculated, the amount payable by us to the Universal Service Fund, we may be subject to interest and penalties.

The Internal Revenue Service, in the ordinary course of business, may audit some or all of our tax filings. In fiscal 2006, the IRS commenced an audit of our U.S. federal tax returns for fiscal years 2001, 2002, 2003 and 2004. As a result of this audit, we owed approximately $75 million in taxes for fiscal 2001 and approximately $1 million for adjustments carried forward to fiscal 2005 and $39.5 million in interest. In connection therewith, we paid $10.0 million of the amount owed in July 2008 and paid the remaining amount owed to the IRS, an aggregate of $108.4 million, in monthly installments from October 2008 through June 2009. In December 2008, the IRS commenced an audit of our federal tax returns for fiscal years 2005, 2006 and 2007. In May 2009, the IRS assessed a liability of $1.2 million for fiscal year 2005 which represents the approximately $1 million previously agreed to plus interest. The IRS granted our request for abatement of a portion of the interest and penalties that were incurred while we were making installment payments, and the IRS applied these payments to the amount owed for fiscal 2005. The fiscal 2006 and fiscal 2007 audits are ongoing.

We are subject to value added tax, or VAT, audits from time-to-time in various jurisdictions. In the conduct of such audits, we may be required to disclose information of a sensitive nature and, in general, to modify the way we have conducted business with our distributors until the present, which may affect our business in an adverse manner.

On September 4, 2008, a Swedish court granted an application made by the Swedish Tax Agency to seize SEK 100 million ($13.4 million) of assets owned by one of our subsidiaries, Inter Direct Tel Ltd., as security for payment of VAT. Inter Direct Tel appealed the seizure order and on October 6, 2008, the appellate court reversed the lower court’s seizure order. On December 17, 2008, the Swedish Tax Agency sent Inter Direct Tel an Audit Memo describing its reasoning for a VAT assessment of approximately SEK 112 million ($15.1 million) and SEK 22 million ($3.0 million) in penalties. On March 27, 2009, Inter Direct Tel responded to the comments in the Audit Memo. On June 5, 2009, Inter Direct Tel received a re-assessment from the Swedish Tax Agency in the same amounts assessed in the Audit Memo with the payment due on July 13, 2009. Inter Direct Tel received a suspension of the payment obligation until the matter is addressed by the appro-

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priate court. On September 30, 2009, Inter Direct Tel filed an appeal of the re-assessment. We cannot be certain of the ultimate outcome of this matter at this time.

We are also subject to audits in various jurisdictions for various other taxes, including sales and use tax, gross receipts tax, payroll tax and property tax. Two of the more significant audits relate to sales and use tax in New Jersey and payroll tax in Newark, New Jersey, for which we have accrued an aggregate of $5.6 million as of July 31, 2009. We believe that we have adequately provided for all of the obligations for these taxes, however amounts asserted by taxing authorities could be greater than the accrued amounts. Accordingly, additional provisions may be recorded in the future as revised estimates are made or underlying matters are settled or resolved.

Imposition of assessments as a result of tax and regulatory audits could have an adverse affect on our results of operations, cash flows and financial condition.

Federal and state regulations may be passed that could harm Net2Phone’s business.

Net2Phone’s ability to provide VoIP communications services at attractive rates arises in large part from the fact that VoIP services are not currently subject to the same level of regulation as traditional, switch-based telephony. As such, VoIP providers can currently avoid paying some of the charges that traditional telephone companies must pay. Local exchange carriers are lobbying the FCC and the states to regulate VoIP on the same basis as traditional telephone services. Congress, the FCC and several states are examining this issue. If these regulators decide to increase VoIP regulations, they may impose surcharges, taxes or additional regulations upon providers of Internet telephony. These surcharges could include access charges payable to local exchange carriers to carry and terminate traffic or other charges and fees. The imposition of any such additional fees, charges, taxes and regulations on IP communications services could materially increase our costs and may limit or eliminate our competitive pricing advantages. In addition, we expect that regulations requiring compliance with federal Truth in Billing requirements could place a significant financial burden on us depending on the technical changes required to accommodate the requirements. Also, pending FCC and/or judicial actions regarding interconnected VoIP may result in the application of new or additional regulatory obligations, such as contributing to state universal service funds, thereby requiring us to pay additional charges and taxes. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Our ability to offer services outside the United States is subject to the local regulatory environment, which may be unfavorable, complicated and often uncertain.

Regulatory treatment outside the United States varies from country to country. We distribute our products and services through resellers that may be subject to telecommunications regulations in their home countries. The failure of these resellers to comply with these laws and regulations could reduce our revenue and profitability, or expose us to audits and other regulatory proceedings. Regulatory developments such as these could have a material adverse effect on our operating results.

In many countries in which we operate or our services are sold, the status of the laws that may relate to our services is unclear. We cannot be certain that our customers, resellers, or other affiliates are currently in compliance with regulatory or other legal requirements in their respective countries, that they or we will be able to comply with existing or future requirements, and/or that they or we will continue in compliance with any requirements. Our failure or the failure of those with whom we transact business to comply with these requirements could materially adversely affect our business, financial condition and results of operations.

While we expect additional regulation of our industry in some or all of these areas, and we expect continuing changes in the regulatory environment as new and proposed regulations are reviewed, revised and amended, we cannot predict with certainty what impact new laws in these areas will have on us, if any. For a complete discussion of what we believe are the most material regulations impacting our business, see “Business—Regulation” included elsewhere in this Annual Report on Form 10-K.

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We are subject to legal proceedings in the ordinary course of business that may have a material adverse effect on our results of operations, cash flows or financial condition.

Various legal proceedings that have arisen or may arise in the ordinary course of business have not been finally adjudicated, which may have a material adverse effect on our results of operations, cash flows or financial condition. See, for example, the T-Mobile USA, Inc. matter as set forth in detail in Item 3 below.

Risks Related to Our Capital Structure

Holders of our Class B common stock have significantly less voting power than holders of our Class A common stock and our common stock.

Holders of our Class B common stock are entitled to one-tenth of a vote per share on all matters on which our stockholders are entitled to vote, while holders of our Class A common stock are entitled to three votes per share and holders of our common stock are entitled to one vote per share. As a result, the ability of holders of our Class B common stock to influence our management is limited.

We are controlled by our principal stockholder, which limits the ability of other stockholders to affect our management.

Howard S. Jonas, our Chairman of the Board, Chief Executive Officer and founder, has voting power over 4,764,039 shares of our common stock (which includes 3,272,326 shares of our Class A common stock, which are convertible into shares of our common stock on a 1-for-1 basis) and 1,827,650 shares of our Class B common stock, representing approximately 75.7% of the combined voting power of our outstanding capital stock, as of October 9, 2009. Mr. Jonas is able to control matters requiring approval by our stockholders, including the election of all of the directors and the approval of significant corporate matters, including any merger, consolidation or sale of all or substantially all of our assets. As a result, the ability of any of our other stockholders to influence our management is limited.

Risks Related to Our Publicly Traded Equity

The price of our common and Class B common stock has decreased significantly, and may continue to decrease and be subject to volatility.

The price of our common stock and our Class B common stock have depreciated significantly during the past two fiscal years, and have been subject to substantial volatility. As of the close of business on October 26, 2009, the price of our common stock and Class B common stock were $3.48 and $3.83, respectively. See Part II, Item 5 (Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities) of this annual report for more information on the history of the closing prices of our common stock and our Class B common stock. The prices of our common stock and our Class B common stock may continue to decrease and may continue to be subject to substantial volatility.

Our common stock is deemed to be a “Penny Stock,” which may make it more difficult for investors to sell their shares due to suitability requirements.

The SEC has adopted regulations that define a “penny stock,” generally, to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. This designation requires any broker or dealer selling our securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of shareholders to sell their shares.

The New York Stock Exchange has notified us that we are not in compliance with its continued listing criteria. If we are delisted by the NYSE, the price and liquidity of our common stock and Class B common stock will be negatively affected.

On September 30, 2008 and October 8, 2008, we received notices from the NYSE that we were no longer in compliance with the NYSE’s $100 million market capitalization threshold and the $1.00 average closing price over a consecutive 30-day trading period requirement, respectively, required for continued listing. We submitted a plan to the NYSE to regain compliance with the market capitalization standard, and that plan was accepted. The NYSE monitors compliance with the plan and may commence delisting procedures if we fail to meet the milestones set forth in our plan. We have until March 2010 to regain compliance with the $100 million market capitalization standard. In addition, according to the rules of the NYSE, the NYSE will promptly initiate suspension and delisting procedures with respect to a listed company that is determined to

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have average global market capitalization over a consecutive 30 trading-day period of less than $25 million. As of October 26, 2009, we had a 30-day average market capitalization of $71.3 million. We are currently in compliance with this $25 million threshold, but not the $100 million threshold. On April 8, 2009, the NYSE notified us that the stock price for each of our listed equity securities was above the NYSE’s minimum requirement of a $1.00 average share price over the preceding 30 trading days and a $1.00 share price on the close of the last trading day of the six-month cure period (April 8, 2009), thus restoring our compliance with the minimum share price requirement for continued listing on the NYSE.

We cannot assure you that the NYSE will maintain our listing in the future. In the event that our common stock and Class B common stock are delisted by the NYSE, or if it becomes apparent to us that we will be unable to meet the NYSE’s continued listing criteria in the foreseeable future, we may seek to have our stock listed or quoted on another national securities exchange or quotation system. However, we cannot assure you that, if our common stock and Class B common stock are listed or quoted on such other exchange or system, the market for our common stock and Class B common stock will be as liquid as it has been on the NYSE. As a result, if we are delisted by the NYSE or transfer our listing to another exchange or quotation system, the market price for our common stock and Class B common stock may become more volatile than it has been historically.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our headquarters are located in Newark, N.J. in a building that contains approximately 500,000 square feet along with an 800 car parking garage that we acquired in the third quarter of fiscal 2008 and is subject to a mortgage. We also lease a 75,000 square foot space in Newark, New Jersey. Collectively, these two buildings currently serve as the base for each of our operating segments.

We also occupy space in both leased and owned properties in New Jersey, Los Angeles, California, Washington, D.C. and other locations in metropolitan areas primarily to house telecommunications equipment.

We previously owned a 45,000 square foot building in Puerto Rico. The building was sold during the first quarter of fiscal 2010.

In June 2009, the Company completed the sale of the majority of its 102,000 square foot building in Jerusalem, Israel. The Company retained ownership of a 12,400 square foot condominium interest in the building.

AMSO, LLC is one of three holders of research, development and demonstration leases granted by the U.S. Bureau of Land Management in Colorado. The lease provides AMSO, LLC with the ability to research, test and demonstrate the potential for commercial shale oil production on 160 acres in western Colorado. The lease includes the right to convert over to a commercial lease for up to 5,120 contiguous acres if AMSO, LLC can demonstrate viable production of commercial quantities of shale oil without unacceptable environmental consequences. AMSO, LLC has 10 years (the term of the research, development and demonstration lease) to convert over to the commercial lease; however, the 10 year period can be extended for an additional five years if AMSO, LLC is in compliance with the terms of the lease.

We maintain our European headquarters in London, England (corporate and carrier operations) and Dublin, Ireland (retail operations). We also maintain various international office locations and telecommunications facilities in portions of Europe, South America, Central America, the Middle East, Asia and Africa where we conduct operations.

Item 3. Legal Proceedings.

On July 2, 2009, Southwestern Bell Telephone Company and nine of its affiliates, all local exchange carriers (collectively, Plaintiffs), filed a complaint in the United States District Court for the Northern District of Texas seeking an accounting as well as declaratory, injunctive and monetary relief from our subsidiaries IDT Telecom, Inc., Entrix Telecom Inc. and several as of yet unidentified entities affiliated with us. The complaint

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alleges that our subsidiaries failed to pay hundreds of thousands, and potentially millions of dollars of “switched access service” charges for calls made by consumers using our subsidiaries’ prepaid calling cards. The complaint alleges causes of action for (i) violation of federal tariffs, (ii) violation of state tariffs, and (iii) unjust enrichment. On October 9, 2009, we filed a motion to stay or in the alternative to dismiss the complaint. At this stage of the proceedings, we are unable to estimate our potential liability for Plaintiffs’ claim.

On May 15, 2009, a complaint (which was subsequently amended) was filed by T-Mobile USA, Inc. (T-Mobile) against a subsidiary of ours, IDT Domestic Telecom, Inc., or Domestic Telecom, in the Superior Court of the State of Washington, King County. The complaint alleges that Domestic Telecom breached a Wholesale Supply Agreement entered into between T-Mobile and Domestic Telecom in February 2005, as amended, by failing to purchase at least $75 million in services from T-Mobile (T-Mobile claims that Domestic Telecom purchased only approximately $31 million of services). T-Mobile is seeking monetary damages, including interest and costs, in an amount to be determined at trial. We answered the complaint and asserted various counterclaims arising from T-Mobile’s interference with the sales efforts of our prepaid wireless unit, TúYo Mobile. T-Mobile answered the counterclaims. T-Mobile filed a motion for judgment on the pleadings, seeking an order awarding T-Mobile damages in the amount of approximately $44 million or in the alternative an order granting partial summary judgment on the issue of liability. We filed our opposition to the motion on October 21, 2009 and a hearing is scheduled for November 24, 2009. We believe that we have valid defenses to T-Mobile’s allegations and intend to conduct a vigorous legal defense. This matter is in its early stages and therefore we are unable to form an estimate of any potential liabilities to us related to this matter.

On August 27, 2003, Aerotel, Ltd., Aerotel U.S.A., and Aerotel U.S.A., LLC (Aerotel) filed a complaint against us in the United States District Court, Southern District of New York, seeking damages for alleged infringement of a patent. The parties reached a settlement and pursuant to a stipulation of dismissal, all claims and counterclaims have been dismissed. The settlement provided for a payment of $15 million in cash to Aerotel, which we paid in the first quarter of fiscal 2008. The settlement also required us to make available to Aerotel calling cards or PINs over time with potential termination costs of up to $15 million, subject to certain other conditions. In connection with this settlement, we accrued an expense of $24 million in the fourth quarter of fiscal 2007. On May 13, 2008, Aerotel, Ltd. filed a complaint against us in the United States District Court Southern District of New York related to a dispute concerning the settlement agreement between us and Aerotel. The complaint alleged Breach of Contract, Anticipatory Breach, and Breach of Covenant of Good Faith and Fair Dealing. The parties reached a settlement and on June 26, 2009 finalized a Settlement Agreement, the terms of which are subject to a confidentiality provision. The lawsuit was dismissed. In connection with this matter, we accrued an additional expense of $6 million in the fourth quarter of fiscal 2008.

On May 5, 2004, we 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. We alleged that the defendants breached a settlement agreement that they had entered into with us to resolve certain disputes and civil actions among the parties. We alleged that the defendants did not provide us, as required under the settlement agreement, free of charge and for our exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the settlement agreement) 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 us, alleging that we breached the settlement agreement and are 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 us 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 our 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 our 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. On August 19, 2008, the Appellate Division issued a decision and order reversing the trial court’s grant of partial summary judgment on the issue of liability to us and granted the portion of defendants’ cross motion seeking summary judgment dismissing the complaint and remanded the

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matter to the Supreme Court for further proceedings. On September 18, 2008, we filed our request for reargument, or in the alternative, for leave to appeal to the Court of Appeals. On December 30, 2008, the Appellate Division granted our request for leave to appeal to the Court of Appeals. On May 18, 2009, the parties submitted the briefs on that appeal and oral argument was held on September 15, 2009. On October 22, 2009, the Court of Appeals issued an Order affirming the Appellate Division’s order.

On March 29, 2004, D. Michael Jewett, a former employee whose employment we terminated less than seven months after he was first hired, filed a complaint against us 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, or CEPA; (iii) violations of the New Jersey Law Against Discrimination, or LAD; (iv) common law defamation; and (v) New Jersey common law intentional infliction of emotional distress, or 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. We deny liability for the remaining claims. On January 25, 2006, Jewett filed an amended supplemental pleading which we moved to dismiss. Plaintiff opposed our 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 our 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 participated in non-binding mediation on December 15, 2008, which was not successful. Fact discovery is complete and the parties are now engaged in expert discovery.

On 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, or DOJ, the SEC and the United States Attorney in Newark, New Jersey conducted an investigation of this matter. We and the Audit Committee of our Board of Directors initiated independent investigations, by outside counsel, regarding certain of the matters raised in the Jewett complaint and in these investigations. Neither of our or the Audit Committee’s investigations have found any evidence that we made any such improper payments to foreign officials. We continue to cooperate with these investigations, which the SEC and DOJ have confirmed are still ongoing.

On June 1, 2006, we 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 (Skype) infringed patents owned by us. Our complaint was amended to include claims for Skype’s alleged infringement of additional patents, all owned by us. 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 our claims and asserted counterclaims. The parties have exchanged expert reports, are completing pre-trial discovery and submitted a final pre-trial order to the Court in December 2008. A request has been filed with the United States Patent and Trademark Office, or USPTO, to reexamine the patents in question. Subsequently, Skype filed a motion to stay the New Jersey litigation pending the USPTO’s decision on the request for reexamination. The motion to stay was denied. Efforts to reach a settlement of this matter are ongoing. 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 we, Net2Phone, Inc., IDT Telecom, Inc. and UTA infringed U.S. Patent No. 6,067,350 that is owned by eBay, Inc. The lawsuit seeks, among other things, an injunction enjoining us from infringing the patent and an undetermined amount of monetary damages in connection with our alleged infringement. On April 23, 2008, we answered eBay’s complaint and denied all wrongdoing. We also filed counterclaims against eBay for infringement of Net2Phone patents: U.S. Patents numbers 6,275,490, 5,974,414 and 6,631,399. We 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, denied all wrongdoing and

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asserted counterclaims. The Court held a claim construction hearing on February 24-25, 2009. Fact discovery closed on September 25, 2009. The Parties have mutually agreed to continue all prior noticed depositions and reserve the right to supplement discovery in accordance with the Federal Rules of Procedure. On October 22, 2009, the parties filed a Joint Motion to Continue the Case Deadlines by 120 days in both the New Jersey litigation and the Arkansas litigation, and the trial date of March 15, 2010 has been vacated.

On March 8, 2007, IDT Telecom, Inc. and UTA 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. We 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. On May 9, 2007, the judge denied our 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. In 2007, we settled with five of the defendant groups. The litigation is continuing against the non-settling STi defendants. On February 11, 2009, the STi defendants filed motions for summary judgment, which we opposed. These motions are pending with the Court. The parties are scheduled to participate in non-binding mediation on November 10, 2009. The trial is expected to begin on March 1, 2010.

In addition to the foregoing, we are 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 other legal proceedings to which the Company is a party will have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

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

None.

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Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

Our Class B common stock trades on the New York Stock Exchange under the symbol “IDT” and our common stock trades on the New York Stock Exchange under the symbol “IDT.C.,” but both have been assigned a “.BC” indicator by the New York Stock Exchange to signify that we are not currently in compliance with their listing standards.

The table below sets forth the high and low sales prices for our Class B common stock as reported by the New York Stock Exchange for the fiscal periods indicated. A one-for-three reverse stock split of all of the Company’s outstanding common stock, Class A common stock and Class B common stock was effective on February 24, 2009. All share prices in the tables below have been retroactively adjusted to reflect the one-for-three reverse stock split.

	High		Low
Fiscal year ended July 31, 2008
First Quarter	$	37.74	$	23.01
Second Quarter	$	28.62	$	17.82
Third Quarter	$	21.21	$	10.14
Fourth Quarter	$	12.06	$	4.23
Fiscal year ended July 31, 2009
First Quarter	$	5.70	$	1.53
Second Quarter	$	3.24	$	.72
Third Quarter	$	1.69	$	.76
Fourth Quarter	$	2.64	$	1.29

The table below sets forth the high and low sales prices for our common stock as reported by the New York Stock Exchange for the fiscal periods indicated.

	High		Low
Fiscal year ended July 31, 2008
First Quarter	$	35.55	$	20.67
Second Quarter	$	25.95	$	18.00
Third Quarter	$	19.68	$	8.94
Fourth Quarter	$	10.41	$	3.30
Fiscal year ended July 31, 2008
First Quarter	$	4.98	$	1.02
Second Quarter	$	4.32	$	.45
Third Quarter	$	1.47	$	.70
Fourth Quarter	$	2.44	$	1.03

On October 9, 2009, there were 124 holders of record of our Class B common stock and 57 holders of record of our common stock. These numbers do not include the number of persons whose shares are in nominee or in “street name” accounts through brokers. On October 9, 2009, the last sales price reported on the New York Stock Exchange for the Class B common stock was $3.49 per share and for the common stock was $3.29 per share.

The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our Annual Stockholders Meeting, which we will file with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

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Issuer Purchases of Equity Securities

The following table provides information with respect to purchases by the Company of its shares during the fourth quarter of fiscal 2009.

	Total Number of Shares Purchased		Average Price per Share		Total Number of Shares Purchased as part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs(1)
May 1 – 31, 2009	0		$	0	0		6,952,983
June 1 – 30, 2009	0		$	0	0		6,952,983
July 1 – 31, 2009	897,586	(2)	$	1.97	891,100	(3)	6,061,883
Total	897,586		$	1.97	891,100

(1) Under our stock repurchase program, approved by our Board of Directors on June 13, 2006, we were authorized to repurchase up to an aggregate of 8.3 million shares of our Class B common stock and our common stock, without regard to class. On December 17, 2008, our Board of Directors amended the stock repurchase program to increase the aggregate number of shares of our Class B common stock and common stock, without regard to class, that we are authorized to repurchase from the approximately 3.3 million shares that remained available to repurchase to 8.3 million shares.

(2) Includes 91,800 shares of common stock and 799,300 shares of Class B common stock purchased pursuant to the stock repurchase program, as well as 6,486 shares of Class B common stock that were tendered by employees of ours to satisfy the employees’ tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares are repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.

(3) Consists of 91,800 shares of common stock and 799,300 shares of Class B common stock purchased pursuant to the stock repurchase program, resulting in an aggregate of 6,061,883 shares that may yet be purchased under the stock repurchase program.

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Item 6. Selected Financial Data.

Smaller reporting companies are not required to provide the information required by this item. In accordance with Item 10(f)(2)(iii) of Regulation S-K, we qualify as a “smaller reporting company” because our public float was below $50 million as of January 30, 2009, the last business day of our second fiscal quarter. We therefore followed the disclosure requirements of Regulation S-K applicable to smaller reporting companies in this Annual Report on Form 10-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Annual Report 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 I “Risk Factors” in this Annual Report. The forward-looking statements are made as of the date of this Annual 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 in this report and the other information set forth from time to time in our reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.

OVERVIEW

We are a multinational holding company with subsidiaries spanning several industries. Our principal businesses consist of:

• IDT Telecom, which provides telecommunications services to consumers and businesses, including prepaid and rechargeable calling cards, a range of voice over Internet protocol, or VoIP, communications services, wholesale carrier services and local, long distance and wireless phone services;

• IDT Energy, which operates our ESCO in New York State;

• Alternative Energy, which consists of AMSO, which manages our 50% interest in AMSO, LLC, our U.S. oil shale initiative, and IEI, our Israeli alternative energy venture; and

• Zedge, which provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing.

We also hold assets including certain real estate investments and operate other smaller or early-stage initiatives and operations.

On September 14, 2009, we completed the CTM Spin-Off, which was a pro rata distribution to our stockholders of the common stock of CTM Holdings. CTM Holdings’ businesses include: CTM Media Group, which is a distributor of print and online advertising and information in targeted North American tourist markets; IDW Publishing, which is a comic and book publisher with a diverse catalog of licensed and independent titles including classic collections; and WMET 1160AM, which is a paid programming radio station in the Washington, D.C. metropolitan area. Since CTM Holdings did not meet the criteria to be reported as discontinued operations until September 14, 2009, the assets, liabilities, results of operations and cash flows of CTM Holdings and its subsidiaries are included in our continuing operations for all periods presented.

Prior to completing the CTM Spin-Off, the following subsidiaries of ours were transferred to CTM Holdings: (i) CTM Media Group, Inc.; (ii) IDT Local Media, Inc.; (iii) IDT Internet Mobile Group, which holds a

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majority interest in Idea and Design Works, LLC (IDW Publishing); and (iv) Beltway Acquisition Corporation, which holds the broadcast license of the WMET-AM radio station. The record date for the distribution to our stockholders was August 3, 2009. As of September 14, 2009, each of our stockholders received: (i) one share of CTM Holdings Class A common stock for every three shares of our common stock; (ii) one share of CTM Holdings Class B common stock for every three shares of our Class B common stock; (iii) one share of CTM Holdings Class C common stock for every three shares of our Class A common stock; and (iv) cash in lieu of a fractional share of all classes of CTM Holdings’ common stock. CTM Holdings met the criteria to be reported as a discontinued operation on September 14, 2009, therefore the assets, liabilities, results of operations and cash flows of CTM Holdings and its subsidiaries will be classified in discontinued operations in the first quarter of fiscal 2010.

We conduct our business through the following three reportable segments: Telecom Platform Services, Consumer Phone Services and IDT Energy. All other operating segments that are not reportable individually are included in All Other. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division. We expect that Alternative Energy, which is included in All Other, will be a reportable business segment beginning in the first quarter of fiscal 2010.

Discontinued Operations and Other Dispositions

Hillview Avenue Realty, LLC

On July 31, 2009, Hillview Avenue Realty, LLC, or Hillview, a majority owned subsidiary of ours, closed on the sale of its property located at 3373 and 3375 Hillview Avenue in Palo Alto, California. We have a 69.27% ownership interest in Hillview. The property consisted of two interconnected office buildings located on 6.68 acres. The sales price was $62.7 million. Our net proceeds from the sale, after deduction of the mortgage debt secured by the property that was assumed by the buyer or repaid in connection with the sale, transaction expenses and the interests of the other owners of Hillview, were $3.1 million, which was received in August 2009. This sale met the criteria to be reported as discontinued operations as of July 31, 2009 and accordingly, the assets, liabilities, results of operations and cash flows of the property are classified as discontinued operations for all periods presented. We recognized a gain of $0.2 million in the fourth quarter of fiscal 2009 in connection with the sale of Hillview’s property.

As a result of our conclusion that an interim impairment test of goodwill was required during the second quarter of fiscal 2009, we also assessed the recoverability of certain of our long-lived assets in accordance with Statement of Financial Accounting Standards, or SFAS, No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As a result of our assessment, in the third quarter of fiscal 2009, we recorded impairment of $2.0 million related to the Hillview property.

European Prepaid Payment Services Business

On July 9, 2009, we entered into an agreement for the sale of the capital stock of IDT Financial Services, our European prepaid payment services business, for approximately $3 million, subject to adjustment based on changes in the net assets of IDT Financial Services. IDT Financial Services provides prepaid MasterCard^® products in the United Kingdom under the “Prime Card” brand. In addition, we will retain the approximately $10 million held by IDT Financial Services pursuant to regulatory requirements which is included in “Cash and cash equivalents” of discontinued operations at July 31, 2009. As of July 31, 2009, IDT Financial Services met the criteria to be classified as held for sale and reported as discontinued operations. Accordingly, the assets, liabilities, results of operations and cash flows of IDT Financial Services are classified as discontinued operations for all periods presented.

Union Telecard Dominicana, S.A and Ethnic Grocery Brands LLC

On June 24, 2009, we acquired the 49% interest in UTA that we did not own in exchange for (a) $4.9 million in cash, (b) a promissory note in the principal amount of $1.2 million payable in thirty-six equal monthly installments, (c) the forgiveness of a note receivable in the amount of $1.2 million including principal and accrued interest, (d) the assignment of all of the interests in UTA DR held by UTA, (e) the assignment of an 80% ownership interest in EGB held by UTA, and (f) other consideration of $0.4 million. UTA retained a 10% ownership interest in EGB. In addition, the seller may receive up to an additional $1.7 million for post-closing contingencies. The aggregate purchase price was $9.7 million, which included the aggregate estimated fair value of the interests in UTA DR and EGB of $2.0 million. UTA is the distributor of our prepaid calling cards

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in the United States. UTA DR and EGB met the criteria to be reported as discontinued operations and accordingly, the assets, liabilities, results of operations and cash flows of UTA DR and EGB are classified as discontinued operations for all periods presented. We recognized a loss in connection with the assignments of UTA DR and EGB of $2.5 million in the fourth quarter of fiscal 2009, which is included in “Loss on disposal/sale of discontinued operations” in the accompanying consolidated statement of operations.

IDT Carmel

On January 30, 2009, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I LLC (all of which are subsidiaries of ours and are collectively IDT Carmel) and Sherman Originator III LLC consummated the sale, pursuant to a Purchase and Sale Contract, of substantially all of IDT Carmel Portfolio Management LLC’s debt portfolios with an aggregate face value of $951.6 million for cash of $18.0 million. We exited the debt collection business in April 2009. IDT Carmel met the criteria to be reported as a discontinued operation and accordingly, IDT Carmel’s assets, liabilities, results of operations and cash flows are classified as discontinued operations for all periods presented. IDT Carmel recognized a loss of $34.3 million in the second quarter of fiscal 2009 in connection with the sale of its debt portfolios.

IDT Entertainment

In the first quarter of fiscal 2007, the Company completed the sale of IDT Entertainment to Liberty Media Corporation. Loss on disposal/sale of discontinued operations in fiscal 2009 and fiscal 2008 of $0.3 million and $4.9 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.

Summary Financial Data of Discontinued Operations

Revenues, loss before income taxes and net loss of Hillview, IDT Financial Services, UTA DR, EGB and IDT Carmel, which are included in discontinued operations, were as follows:

Year ended July 31 (in thousands)	2009			2008
REVENUES:
Hillview	$	6,630		$	6,552
IDT Financial Services		2,732			2,833
UTA DR		59,416			41,080
EGB		23,242			26,348
IDT Carmel		16,535			45,651
TOTAL	$	108,555		$	122,464
LOSS BEFORE INCOME TAXES:
Hillview	$	(2,396	)	$	(1,507	)
IDT Financial Services		(1,821	)		(6,996	)
UTA DR		(257	)		(967	)
EGB		(2,514	)		(4,765	)
IDT Carmel		(38,867	)		(25,297	)
TOTAL	$	(45,855	)	$	(39,532	)
NET LOSS:
Hillview	$	(2,396	)	$	(1,507	)
IDT Financial Services		(1,821	)		(6,997	)
UTA DR		(262	)		(967	)
EGB		(2,514	)		(4,768	)
IDT Carmel		(38,867	)		(25,347	)
TOTAL	$	(45,860	)	$	(39,586	)

IDT Global Israel

In the fourth quarter of fiscal 2008, we disposed of 80% of the issued and outstanding shares of IDT Global Israel, Ltd., our call center operations in Israel, in a transaction with the Chief Executive Officer of IDT Global Israel for a nominal amount and recorded a loss of $8.8 million. In fiscal 2009, we disposed of the remaining 20% of the issued and outstanding shares of IDT Global Israel. We retained exclusive control over the sale of IDT Global Israel’s building. We agreed to use a certain amount of IDT Global Israel’s call center services for one year after the disposal. The disposal did not meet the criteria to be reported as a discontinued operation; therefore IDT Global Israel’s historical results of operations are included in continuing operations.

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At July 31, 2008, the estimated sales price of the building net of costs to sell of $18.2 million was included in “Other current assets” and the balance of the obligations secured by the building of $7.1 million was included in “Other current liabilities”. In fiscal 2009, we recorded an impairment of $3.5 million, which reduced the carrying value of the building to its estimated fair value at the time. In June 2009, the building was sold for $12.7 million of which $6.4 million was used to repay the obligations secured by the building and $0.8 million was held in escrow. We retained a floor in the building and reclassified $1.6 million from “Other current assets” to “Property, plant and equipment”. We received the net proceeds of $5.4 million from the sale and recognized a loss of $0.5 million on the sale.

Our results of operations for fiscal 2009 and fiscal 2008 included revenues generated by IDT Global Israel’s operations of nil and $5.2 million, respectively, and loss from operations of nil and $10.3 million, respectively.

Investment in American Shale Oil, LLC

In April 2008, our wholly owned subsidiary AMSO acquired a 75% equity interest in AMSO, LLC in exchange for cash of $2.5 million and certain commitments for future funding of AMSO, LLC’s operations. In a separate transaction in April 2008, we acquired an additional 14.9% equity interest in AMSO, LLC in exchange for cash of $3.0 million.

AMSO, LLC is one of three holders of leases granted by the U.S. BLM to research, develop and demonstrate in-situ technologies for potential commercial shale oil production in western Colorado. The RD&D Lease awarded to AMSO, LLC by the BLM covers an area of 160 acres. The lease runs for a ten year period beginning on January 1, 2007, and is subject to an extension of up to five years if AMSO, LLC can demonstrate that a process leading to the production of commercial quantities of shale oil is diligently being pursued. Once AMSO, LLC demonstrates the economic and environmental viability of its technology, it will have the opportunity to submit a one time payment pursuant to the Oil Shale Management Regulations and convert its RD&D Lease to a commercial lease on 5,120 acres which overlap and are contiguous with the 160 acres in its RD&D Lease. The acquisition of AMSO, LLC 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. We charged an aggregate of $5.5 million to research and development expense at the acquisition date, which included the amounts assigned to AMSO, LLC’s tangible and intangible assets to be used in its research and development project that have no alternative future use.

In March 2009, pursuant to a Member Interest Purchase Agreement entered into on December 19, 2008, a subsidiary of TOTAL S.A., the world’s fifth largest integrated oil and gas company, acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. We recognized a gain of $2.6 million in the third quarter of fiscal 2009 in connection with the sale. While AMSO will operate the project during the RD&D phase, Total will provide a majority of the funding during the RD&D phase, and technical assistance throughout the life of the project. Total will lead the planning of the commercial development and will assume management responsibilities during the subsequent commercial phase.

We consolidated AMSO, LLC prior to the closing of the transaction with Total. Beginning with the closing, we account for our 50% ownership interest in AMSO, LLC using the equity method since we have the ability to exercise significant influence over its operating and financial matters, although we no longer control AMSO, LLC. Pursuant to Financial Accounting Standards Board, or FASB, Interpretation 46(R), Consolidation of Variable Interest Entities, AMSO, LLC is a variable interest entity, however, we are not the primary beneficiary because we will not absorb a majority of the expected losses or receive a majority of the expected residual returns.

In accordance with the agreement between the parties, AMSO has committed to a total investment of $10.0 million in AMSO, LLC, subject to certain exceptions described below where the amount could be greater or lesser. Total has the option of withdrawing from AMSO, LLC and terminating its obligation to make capital contributions at the end of the first phase, and in that case AMSO’s commitment would be reduced to $5.3 million.

Although, subject to certain exceptions, AMSO and Total are not obligated to make additional contributions beyond their respective shares (which for AMSO is $10.0 million), they could dilute or forfeit their ownership interests in AMSO, LLC if they fail to contribute their respective shares for additional funding.

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Total can increase AMSO’s initial required funding commitment of $10.0 million up to an additional $8.75 million if Total wishes to continue to fund the pilot test up to an agreed upon commitment level.

At July 31, 2009, our estimated maximum exposure to additional loss as a result of its required investment in AMSO, LLC was $8.1 million. Our estimated maximum exposure to additional loss will increase as AMSO’s commitment to fund AMSO, LLC increases. The estimated maximum exposure at July 31, 2009 was determined as follows:

(in thousands)
AMSO’s total committed investment in AMSO, LLC	$	10,000
Less: 20% of capital contributions to AMSO, LLC prior to March 2, 2009		(807	)
Less: cumulative capital contributions to AMSO, LLC on and after March 2, 2009		(1,074	)
Estimated maximum exposure to additional loss	$	8,119

AMSO’s total committed investment in AMSO, LLC and its estimated maximum exposure to additional loss is subject to certain exceptions where the amounts could be greater. One exception is the additional funding that may be necessary to fund the pilot test as described above. The other significant exception is additional capital contributions that may be required to fund unexpected liabilities outside the purview of the traditional research, development and demonstration operations incorporated in AMSO, LLC’s budgeting and planning. However, any additional capital contributions for such liabilities would have to be authorized by both AMSO and Total.

IDT Telecom

Since our inception, we have derived the majority of our revenues and operating expenses from IDT Telecom’s businesses. IDT Telecom’s revenues represented 80.2% and 83.1% of our total revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively.

Our Telecom Platform Services segment markets and sells primarily prepaid and rechargeable calling cards in the United States and abroad. We sell prepaid and rechargeable calling cards under the “IDT,” “Entrix,” “DSA”, “LA LEYENDA”, “BOSS”, “Playball”, “GOOOL”, “RED”, “Feliz” and “PT-1” brand names, among others, providing telephone access to more than 230 countries and territories. We also sell select cards under the Net2Phone brand name, including the “Net2Phone Direct” and “Penny Talk” calling cards. Our calling card business worldwide sells the great majority of its prepaid calling cards to distributors at a discount to their face values of different denominations, and records the sales as deferred revenues. These deferred revenues are recognized into revenues when telecommunications services are provided and/or administrative fees are imposed. Calling cards are also sold to national retailers, as well as private label cards that are specially branded for a specific retail chain of stores. In addition, cards are branded for companies seeking to use them as promotional items. We also offer rechargeable calling cards, marketed primarily to consumers and business customers nationwide. These cards can be automatically recharged using a credit card number provided by the customer at the time of initial card activation.

Our Telecom Platform Services segment also carries our international traffic and the telecommunication traffic of other telecommunications companies. Telecom Platform Services also includes our cable telephony services. Our wholesale carrier services business continues to expand our direct relationships with mobile network providers, reflecting our belief that the trend of voice traffic transitioning from landline to mobile networks will continue. In fiscal 2010, we plan to continue expanding these direct relationships with mobile network providers.

Our Consumer Phone Services segment provides consumer local and long distance services in the United States. Since calendar 2005, this business has been in “harvest mode,” wherein we seek to retain existing customers but do not actively market to new customers, and we attempt to maximize profits by optimally managing both the life-cycle of our customer base as well as the costs associated with operating this business.

Direct costs related to our telecom businesses consist primarily of three major categories: termination and origination costs, toll-free costs and network costs.

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Termination costs represent costs associated with the transmission and termination of international and domestic long distance services. We terminate our traffic via the arbitrage market or through direct interconnections with other carriers. This cost is primarily variable, with a price paid on a per-minute basis. Origination costs relating to our retail consumer phone services business consists primarily of leased lines from the RBOCs, which are billed to us as a monthly fee. Toll-free costs are variable costs paid to providers of toll-free services.

Network costs, which are also called connectivity costs, are fixed for a range of minutes of use, and include customer/carrier interconnect charges and leased fiber circuit charges. In May 2009, we completed the migration of our global network from dedicated capacity time-division multiplexing (TDM) circuits to burstable Internet protocol circuits, which utilize connectivity capacity more efficiently and results in lower overall cost. Local circuits are generally leased for a 12 to 24 month term, while long haul circuits generally are leased for longer terms. Although these are not purely variable costs, where the cost increases for each additional minute carried on our suppliers’ networks, a general growth in minutes will often likely result in incrementally higher network costs.

During any given fiscal quarter, our calling card business, particularly in the United States, may experience gross margin fluctuations. Historically, the fluctuations were significantly dependent on whether the business was in “investment” mode—where we introduce new, aggressively-priced, lower-margin cards in an attempt to enter into new markets or to increase market share in existing markets—or in “harvest” mode, where we raise rates on many cards even at the expense of minutes volumes in order to improve margins. Calling card revenues, although largely driven by whether the business is in investment or harvest mode and other competitive factors, also tend to be somewhat seasonal, with the second fiscal quarter (which contains Christmas and New Year’s Day) and the fourth fiscal quarter (which contains Mother’s Day and Father’s Day) typically showing higher minutes volumes.

Selling expenses in IDT Telecom consist primarily of sales commissions paid to internal salespersons and independent agents, and advertising costs, which are the primary costs associated with the acquisition of customers. General and administrative expenses include salaries, benefits, professional fees, rent and other administrative costs. IDT Telecom’s calling cards and consumer phone services generally have higher selling, general and administrative expenses associated with them than does its wholesale carrier services business.

Telecom Competition

In all of our IDT Telecom businesses, our competitors continue to aggressively price their services. In addition, we often notice that many of our competitors, particularly in the U.S., significantly overstate the number of minutes that are actually delivered by their calling cards. These competitors have been misleading calling card customers, and as a result, negatively impacting our market share, resulting in a reduction in our gross revenues and profits. We also 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. The continued growth of the use of wireless services, largely due to lower pricing of such services, may have adversely affected the sales of our calling cards as customers migrate from using calling cards to wireless services. We expect pricing of wireless services to continue to decrease, which may result in increased substitution of calling cards by wireless services and increased pricing pressure on our calling cards. 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 volumes, thereby reducing revenues. Minutes-of-use in our global calling card business has generally declined each quarter beginning in the third quarter of fiscal 2006, from 4.23 billion in the second quarter of fiscal 2006 to 1.75 billion in the fourth quarter of fiscal 2009.

We believe that recent immigration trends in the United States may be decreasing our potential customer base. Since immigrants are a target customer base for our prepaid calling card business, their reduced number may have adversely affected our revenues and profitability in that business. If these immigration trends continue or accelerate, our calling card revenues and profitability may continue to be adversely affected.

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UTA Acquisition

On June 24, 2009, we acquired the 49% interest in UTA that we did not own. Our consolidated financial statements included the results of operations, financial position and cash flows of UTA prior to the acquisition of the 49% interest since UTA was one of our controlled subsidiaries prior to the acquisition. The primary reasons for the acquisition of the 49% interest in UTA that we did not own were (1) to streamline our operations in the domestic prepaid calling card business, (2) to enhance our capacity to develop marketing and distribution strategies for prepaid calling card products to deliver high-quality, competitively priced products to our customers, and (3) to increase revenues from the network of sub-distributors that sell our calling cards to retail outlets throughout most of the United States.

IDT Energy

Through our retail energy business, we operate an Energy Service Company, or ESCO, that resells both natural gas and electricity to customers throughout seven utility markets in New York State, including those currently served by Con Edison, Orange and Rockland, Central Hudson, National Fuel, National Grid (including Keyspan), and Rochester Gas and Electric. IDT Energy’s revenues represented 17.2% and 14.2% of our total revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively.

We sell electricity and natural gas at contracted prices based on the real-time demand or usage of our customers. Direct costs for our retail energy business consist primarily of gas and electricity we purchase for resale. We do not own electrical power generation, transmission, or distribution facilities, or natural gas production, pipeline or distribution facilities. We purchase gas through wholesale suppliers and various utility companies. We buy electric capacity, energy and ancillary services through the wholesale markets administrated by the New York Independent System Operator, Inc., or NYISO. The NYISO performs real-time load balancing for each of the electrical power grids in which we operate. Similarly, load balancing is performed by the utilities or LDC for each of the natural gas markets in which we operate. Load balancing ensures that the amount of electricity and natural gas we purchase is equal to the amount necessary to service our customers’ demands at any specific point in time. We are charged or credited by the NYISO or the LDCs for balancing the electricity and natural gas purchased and sold for our account. We manage the differences between the actual electricity and natural gas demands of our customers and our bulk or block purchases by buying and selling any shortfall or excess in the spot market, and through monthly cash settlements and/or adjustments to future deliveries in accordance with the load balancing performed by utilities, LDCs and the NYISO. Also included in direct energy costs are scheduling costs, ISO fees, pipeline costs and utility service charges.

As of June 29, 2009, IDT Energy entered into a Preferred Supplier Agreement with BP pursuant to which BP will be IDT Energy’s preferred provider of electricity and natural gas in New York State. The agreement allows for purchases of electricity and natural gas for customers in areas where the utilities have purchase of receivable, or POR, programs, and includes a one-time inclusion of existing IDT Energy customers not covered by a POR program. IDT Energy will purchase electricity and natural gas from BP and pay a fee based on volumetric loads in accordance with the agreement. IDT Energy’s obligations to BP are secured by its receivables from its customers and under certain circumstances the posting of letters of credit. The term of this agreement is two years, with an automatic renewal for an additional year unless either party objects. IDT Energy’s ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants.

The electricity and natural gas we sell is generally metered and delivered to our customers by the local utilities. The local utilities also provide billing and collection services for most of our customers on our behalf. The positive difference between the sales price of energy to our customers and the sum of the wholesale cost of our energy supplies, transmission costs and ancillary services costs provides us with a gross profit margin.

Selling expenses in our energy business consist primarily of sales commissions paid to independent agents and advertising costs, which are the primary costs associated with the acquisition of customers. General and administrative expenses include salaries, benefits, utility fees for billing and collection, professional fees, rent and other administrative costs.

Concentration of Customers

Our most significant customers consist of either distributors of IDT Telecom’s calling cards or long distance carriers to whom IDT Telecom provides wholesale telecommunications services. While they may vary from

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quarter to quarter, our five largest customers collectively accounted for 6.7% and 7.6% of total consolidated revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively. Our customers with the five largest receivables balances collectively accounted for 24.6% and 15.9% of the consolidated gross trade accounts receivable at July 31, 2009 and 2008, respectively. This concentration of customers increases our risk associated with nonpayment by those customers. In an effort to reduce our risk, we perform ongoing credit evaluations of our significant retail telecom, wholesale carrier and cable telephony customers, and in some cases, do not offer credit terms to customers, choosing instead to demand prepayment. Historically, when we have issued credit, we have not required collateral to support trade accounts receivable from our customers. However, when necessary, IDT Telecom has imposed stricter credit restrictions on its customers. In some cases, this has resulted in IDT Telecom sharply curtailing, or ceasing completely, sales to certain customers. IDT Telecom attempts to mitigate its credit risk related to specific wholesale carrier customers by offsetting trade accounts receivable from these wholesale customers with trade accounts payable due to them for purchases of telecommunications services (including both termination and connectivity). In this way, IDT Telecom can continue to sell services to these wholesale customers, and reduce its risk position, through the offset of receivables and payables. In addition, when it is practical to do so, IDT Telecom will increase its purchases from wholesale customers with trade accounts receivable balances that exceed IDT Telecom’s trade accounts payable in order to maximize the offset and reduce its credit risk.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. 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 and other taxes and regulatory agency fees, and contingent liabilities. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See Note 1 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our significant accounting policies.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses that result from the inability or unwillingness of our customers to make required payments. We base our allowances on our determination of the likelihood of recoverability of trade accounts receivable based on past experience and current collection trends that are expected to continue. Our estimates of recoverability of customer accounts may change due to new developments, changes in assumptions or changes in our strategy, which may impact our allowance for doubtful accounts balances. We continually assess the likelihood of potential amounts or ranges of recoverability and adjust our allowances accordingly, however actual collections and write-offs of trade accounts receivables may materially differ from our estimates.

Goodwill and Intangible Assets with Indefinite Useful Lives

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and other intangible assets deemed to have indefinite lives are not amortized. These assets are reviewed annually (or more frequently under various conditions) for impairment using a fair value approach. Other intangible assets with definite lives are amortized over their estimated useful lives.

The goodwill impairment assessment involves estimating the fair value of the reporting unit and comparing it to its carrying amount (which is known as Step 1). If the carrying value of the reporting unit exceeds its estimated fair value, additional steps are followed to determine if an impairment of goodwill is required. We estimate the fair value of our reporting units using discounted cash flow methodologies, as well as considering third party market value indicators. Goodwill impairment is measured by the excess of the carrying amount of the reporting unit’s goodwill over its implied fair value. Calculating the fair value of the reporting units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant estimates and assumptions by management. Should our estimates or assumptions regarding the fair value of our reporting units prove to be incorrect, we may record additional goodwill impairment in future periods and such impairments could be material.

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Valuation of Long-Lived Assets including Intangible Assets with Finite Useful Lives

We test the recoverability of our long-lived assets including identifiable intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of any such asset may not be recoverable. Such events or changes in circumstances include:

• significant actual underperformance relative to expected performance or projected future operating results;

• significant changes in the manner or use of the asset or the strategy of our overall business;

• significant adverse changes in the business climate in which we operate; and

• loss of a significant contract.

If we determine that the carrying value of certain long-lived assets may not be recoverable and may exceed its fair value based upon the existence of one or more of the above indicators, we will test for impairment based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss based on the difference between the estimated fair value and the carrying value of the asset. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from the asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should our estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material.

Income and Other Taxes and Regulatory Agency Fees

Our current and deferred income taxes, and associated valuation allowances as well as certain other tax and telecom regulatory agency fee accruals, are impacted by events and transactions arising in the normal course of business as well as in connection with special and nonrecurring items. Assessment of the appropriate amount and classification of income and other taxes and certain regulatory agency fees is dependent on several factors, including estimates of the timing and realization of deferred income tax assets, the results of Internal Revenue Service (IRS) tax audits of the Company’s Federal tax returns, other tax-related or regulatory fee-related audits, changes in tax laws or regulatory agency rules and regulations, as well as unanticipated future actions impacting related accruals of regulatory agency fees. As a result, the actual tax and/or regulatory fee payments may materially differ from these estimates.

Contingent Liabilities

We are subject to a number of lawsuits, investigations and claims that arise out of the conduct of our global business operations. We recognize a liability for such contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. We continually assess the likelihood of any adverse judgments or outcomes to our contingencies, as well as potential amounts or ranges of probable losses, and recognize a liability, if any, for these contingencies based on an analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Because many of these matters are resolved over long periods of time, our estimate of liabilities may change due to new developments, changes in assumptions or changes in our strategy.

RECENTLY ISSUED ACCOUNTING STANDARDS AND STANDARDS NOT YET ADOPTED

In February 2008, the FASB issued FASB Staff Position, or FSP, No. FAS 157-2, Effective Date of FASB Statement No. 157, which postponed the effective date of SFAS No. 157, Fair Value Measurements, 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). Nonrecurring nonfinancial assets and nonfinancial liabilities include those measured at fair value in goodwill impairment testing, indefinite lived intangible assets measured at fair value for impairment testing, those initially measured at fair value in a business combination, and nonfinancial liabilities initially measured at fair value for exit or disposal activities. We adopted SFAS 157 for nonrecurring nonfinancial assets and nonfinancial liabilities on August 1, 2009, which did not have a material impact on our financial position, results of operations or cash flows. We will apply the provisions of SFAS 157 to nonrecurring nonfinancial assets and nonfinancial liabilities at such time as a fair value measurement is required, which may result in a fair value that is materially different than would have been measured prior to the adoption of SFAS 157.

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On August 1, 2009, we adopted 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 will change the classification and presentation of noncontrolling interests in our financial statements, which is referred to as minority interests in the accompanying consolidated financial statements, for the quarter ending October 31, 2009. We do not expect the adoption of SFAS 160 to have a material impact on our financial position, results of operations or cash flows.

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. In April 2009, the FASB issued FSP 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which amends and clarifies SFAS 141(R) with regards to the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. We are required to apply SFAS 141(R) and FSP 141(R)-1 to business combinations with an acquisition date on or after August 1, 2009. SFAS 141(R) fundamentally changed many aspects of previous accounting requirements for business combinations. As such, if we enter into any business combinations, a transaction may significantly impact our financial position and results of operations, but not cash flows, when compared to acquisitions accounted for under previous U.S. GAAP.

On August 1, 2009, we adopted 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 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 adoption of FSP 142-3 had no impact on our consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which amends SFAS 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. The FSP also requires entities to disclose the methods and significant assumptions used to estimate fair value of financial instruments in interim financial statements, and to highlight any changes in the methods and assumptions from prior periods. FSP 107-1 became effective for our financial statements beginning on May 1, 2009. We will include the disclosures required by FSP 107-1 in our consolidated financial statements for the quarter ending October 31, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, to establish principles and requirements for subsequent events, in particular: (a) the period after the balance sheet date during which management of a

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reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. In accordance with SFAS 165, our management evaluated events or transactions that occurred after July 31, 2009 through October 29, 2009 for potential recognition or disclosure in the financial statements.

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140. SFAS 166 amends SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, by (a) eliminating the concept of a qualifying special-purpose entity, or QSPE, (b) clarifying and amending the derecognition criteria for a transfer to be accounted for as a sale, (c) amending and clarifying the unit of account eligible for sale accounting, and (d) requiring that a transferor initially measure at fair value and recognize all assets obtained and liabilities incurred as a result of a transfer of an entire financial asset or group of financial assets accounted for as a sale. Additionally, on and after the effective date, existing QSPEs must be evaluated for consolidation by reporting entities in accordance with the applicable consolidation guidance. SFAS 166 requires enhanced disclosures about, among other things, (a) a transferor’s continuing involvement with transfers of financial assets accounted for as sales, (b) the risks inherent in the transferred financial assets that have been retained, and (c) the nature and financial effect of restrictions on the transferor’s assets that continue to be reported in the statement of financial position. We are required to adopt SFAS 166 on August 1, 2010. We are currently evaluating the impact of SFAS 166 on our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS 167 amends FIN 46(R), Consolidation of Variable Interest Entities, and changes the consolidation guidance applicable to a variable interest entity (“VIE”). SFAS 167 also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. QSPEs, which were previously exempt from the application of this standard, will be subject to the provisions of this standard when it becomes effective. FAS No. 167 also requires enhanced disclosures about an enterprise’s involvement with a VIE. We are required to adopt SFAS 167 on August 1, 2010. We are currently evaluating the impact of SFAS 166 on our consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 establishes the FASB Accounting Standards Codification™ (or Codification) as the source of authoritative U.S. GAAP for all non-governmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification organizes and simplifies U.S. GAAP literature by reorganizing U.S. GAAP pronouncements into approximately 90 accounting topics within a consistent structure. The Codification is not intended change or alter existing U.S. GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Therefore, all references to U.S. GAAP in our financial statements for the quarter ending October 31, 2009 will follow the Codification. We do not expect SFAS 168 to have any impact of our financial position, results of operations or cash flows.

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RESULTS OF OPERATIONS

Year Ended July 31, 2009 compared to Year Ended July 31, 2008

The following table sets forth certain items in our statements of operations as a percentage of our total revenues from continuing operations:

Year ended July 31,	2009		2008
REVENUES:
IDT Telecom	80.2	%	83.1	%
IDT Energy	17.2		14.2
All Other	2.6		2.7
TOTAL REVENUES	100.0		100.0
COSTS AND EXPENSES:
Direct cost of revenues (exclusive of depreciation and amortization)	76.3		78.4
Selling, general and administrative	19.1		23.8
Depreciation and amortization	3.2		3.7
Bad debt	0.5		0.8
Research and development	0.6		0.7
Impairments	4.6		1.6
Restructuring charges	0.7		2.0
TOTAL COSTS AND EXPENSES	105.0		111.0
Gain on sale of interest in AMSO, LLC	0.2		—
Arbitration award income	—		2.3
Loss on disposal of businesses	—		(0.5	)
LOSS FROM OPERATIONS	(4.8	)	(9.2	)
Interest (expense) income, net	(0.1	)	0.5
Other expense, net	(2.2	)	(1.1	)
LOSS FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES	(7.1	)%	(9.8	)%

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

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Revenues
IDT Telecom	$	1,234.4	$	1,459.7	$	(225.3	)	(15.4	)%
IDT Energy		264.7		248.9		15.8		6.4
All Other		39.5		47.0		(7.5	)	(16.0	)
Total revenues	$	1,538.6	$	1,755.6	$	(217.0	)	(12.4	)%

Revenues.  The decrease in consolidated revenues in fiscal 2009 compared to fiscal 2008 was primarily due to a decline in IDT Telecom revenues, partially offset by an increase in IDT Energy revenues. The decrease in IDT Telecom revenues in fiscal 2009 compared to fiscal 2008 resulted from decreases in the revenues of both of the IDT Telecom segments. Approximately $53.5 million of the decrease in IDT Telecom revenues in fiscal 2009 compared to fiscal 2008 was due to changes in foreign currency exchange rates. IDT Telecom minutes of use (excluding minutes related to our Consumer Phone Services segment, as the portion of such minute traffic carried in our network is insignificant) declined 6.6% from 23.134 billion in fiscal 2008 to 21.601 billion in fiscal 2009.

The increase in IDT Energy revenues in fiscal 2009 compared to fiscal 2008 was primarily the result of an increase in natural gas revenues mostly due to increased consumption by the larger customer base of IDT Energy.

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The decrease in All Other revenues in the fiscal 2009 compared to fiscal 2008 is primarily due to the disposition of IDT Global Israel, Ltd., our call center operations in Israel, in the fourth quarter of fiscal 2008, as well as the disposition of an additional business in the first quarter of fiscal 2009. These two businesses generated aggregate revenues of $0.1 million and $8.9 million in fiscal 2009 and fiscal 2008, respectively.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Costs and expenses
Direct cost of revenues	$	1,173.6	$	1,376.1	$	(202.5	)	(14.7	)%
Selling, general and administrative		293.7		418.2		(124.5	)	(29.8	)
Depreciation and amortization		49.3		65.7		(16.4	)	(25.0	)
Bad debt		8.1		13.5		(5.4	)	(39.7	)
Research and development		9.0		11.6		(2.6	)	(21.9	)
Impairments		71.0		28.3		42.7		150.7
Restructuring charges		10.0		34.6		(24.6	)	(71.0	)
Total costs and expenses	$	1,614.7	$	1,948.0	$	(333.3	)	(17.1	)%

Direct Cost of Revenues.  The decrease in direct cost of revenues in fiscal 2009 compared to fiscal 2008 was due primarily to the decline in direct cost of revenues of IDT Telecom, which reflects the decline in IDT Telecom’s revenues, reductions in connectivity costs and approximately $51.1 million due to changes in foreign currency exchange rates. In addition, the decrease in IDT Energy’s direct cost of revenues in fiscal 2009 compared to fiscal 2008 was primarily due to significant decreases in the average unit cost of electricity. Overall gross margin increased from 21.6% in fiscal 2008 to 23.7% in fiscal 2009 due to increases in gross margins in IDT Energy and All Other, partially offset by lower gross margins in IDT Telecom.

Selling, General and Administrative.  The decrease in selling, general and administrative expenses in fiscal 2009 compared to fiscal 2008 was due to reductions in the selling, general and administrative expenses of IDT Telecom, All Other and corporate, offset by an increase in the selling, general and administrative expenses of IDT Energy. The reductions in the selling, general and administrative expenses of IDT Telecom, All Other and corporate were largely due to our cost savings program and reduction in force. The reduction in IDT Telecom’s selling, general and administrative expenses in fiscal 2009 compared to fiscal 2008 was primarily due to reductions in headcount, changes to employee benefit and bonus programs, reductions in facilities and maintenance costs, as well as reduced advertising and marketing expenses and lower legal and other professional fees. All Other selling, general and administrative expenses decreased in fiscal 2009 compared to fiscal 2008 primarily due to the divestiture of many non-profitable non-core businesses during the past year as we continue to focus on our core operations, as well as a decrease in legal fees in connection with ongoing litigation related to certain of our intellectual property. Corporate general and administrative expenses decreased in fiscal 2009 compared to fiscal 2008 primarily due to decreases in payroll and related expenses, legal fees and charitable contributions. In addition, fiscal 2008 included an accrual of $10.5 million related to a jury award for an employee matter. IDT Energy’s selling, general and administrative expenses increased in fiscal 2009 compared to fiscal 2008 due primarily to increases in compensation expense, billing related fees and customer acquisition costs. As a percentage of total revenue from continuing operations, selling, general and administrative expenses decreased from 23.8% in fiscal 2008 to 19.1% in fiscal 2009 as selling, general and administrative expenses decreased at a faster rate than total revenues.

We have successfully executed the majority of our cost-cutting initiatives in fiscal 2009, such that our current level of selling, general and administrative expenses offer comparatively modest opportunities for additional reductions.

Stock-based compensation expense included in selling, general and administrative expenses, primarily relating to the vesting of restricted stock and stock option grants, was $3.4 million in fiscal 2009 compared to $4.3 million in fiscal 2008.

On October 31, 2008, we entered into an Amended and Restated Employment Agreement with Mr. Howard S. Jonas, our Chairman and as of October 22, 2009 our Chief Executive Officer. Pursuant to this Agreement (i) the term of Mr. Jonas’ employment with us runs until December 31, 2013 and (ii) Mr. Jonas was granted 1.2 million restricted shares of our Class B common stock and 0.9 million restricted shares of our common

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stock in lieu of a cash base salary beginning January 1, 2009 through December 31, 2013. The restricted shares vest in different installments throughout the term of Mr. Jonas’ employment as delineated in the agreement, and all of the restricted shares paid to Mr. Jonas under the agreement automatically vest in the event of (i) a change in control of the Company; (ii) Mr. Jonas’ death; or (iii) if Mr. Jonas is terminated without cause or if he terminates his employment for good reason as defined in the agreement. A pro rata portion of the restricted shares will vest in the event of termination for cause. Total unrecognized compensation cost on the grant date was $5.5 million. The unrecognized compensation cost is expected to be recognized over the vesting period from January 1, 2009 through December 31, 2013. In fiscal 2009, we recognized $0.5 million of the compensation cost related to this agreement.

On November 5, 2008, we and Mr. James A. Courter, our Vice Chairman and until his retirement on October 21, 2009 our Chief Executive Officer, entered into an amendment to Mr. Courter’s employment agreement. Pursuant to the amendment, Mr. Courter was granted 0.4 million restricted shares of our Class B common stock in lieu of a cash base salary from January 1, 2009 until October 21, 2009. The restricted shares vested on October 21, 2009, the last day of the term under the amended employment agreement. Total

unrecognized compensation cost on the grant date was $0.8 million. In fiscal 2009, we recognized $0.6 million of the compensation cost related to this amendment. In the first quarter of fiscal 2010, we recognized the remaining $0.2 million of the compensation cost related to this amendment.

On October 21, 2009, upon his retirement as our Chief Executive Officer, Mr. Courter surrendered options to purchase an aggregate of 0.9 million shares of our Class B common stock (which constituted all of such options held by Mr. Courter) and received a grant of 0.3 million restricted shares of our Class B common stock. All of the restricted shares were vested on the date of grant. For a period of five years from the grant date, and subject to certain conditions, 0.2 million of the shares of our common stock will be convertible, at the option of Mr. Courter, into the number of shares of Genie Energy Corporation equal to 1% of the outstanding equity of Genie Energy Corporation at the time of conversion. In the first quarter of fiscal 2010, we recognized $0.6 million of stock based compensation as a result of the grant of the restricted stock.

Depreciation and Amortization.  The decrease in depreciation and amortization expense in fiscal 2009 compared to fiscal 2008 was primarily due to IDT Telecom property, plant and equipment becoming fully depreciated and a decrease in capital expenditures.

Bad Debt Expense.  Bad debt expense decreased in fiscal 2009 compared to fiscal 2008 due primarily to a decrease in IDT Telecom’s bad debt expense, partially offset by an increase in IDT Energy’s bad debt expense. The decrease in IDT Telecom’s bad debt expense in fiscal 2009 compared to fiscal 2008 was primarily due to the decrease in revenues and due to evaluations of the outstanding receivables in fiscal 2009 that resulted in adjustments to provisions. The increase in IDT Energy’s bad debt expense in fiscal 2009 compared to fiscal 2008 was due primarily to the increase in revenues and the resulting increase in the allowance for receivables that were not guaranteed under POR programs.

Research and Development.  Research and development expenses in fiscal 2009 and fiscal 2008 consist of the following:

(in millions)
Year ended July 31,	2009		2008
Telecom Platform Services Segment:
Fabrix T.V., Ltd.	$	2.7	$	4.7
Alternative Energy:
AMSO		3.2		6.6
Israel Energy Initiatives, Ltd.		3.1		0.3
Total research and development expenses	$	9.0	$	11.6

Fabrix T.V., Ltd. is our majority-owned venture developing a video content delivery and storage platform. Alternative Energy includes (1) AMSO, which commenced its research and development activities in the third quarter of fiscal 2008 upon its acquisition of AMSO, LLC, which is one of three holders of 10-year leases

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granted by the U.S. Bureau of Land Management to research, develop and demonstrate in-situ technologies for potential commercial shale oil production in western Colorado, and (2) IEI, our Israeli alternative energy venture, which was granted a license in Israel in the fourth quarter of fiscal 2008 to explore certain public lands for potential production of shale oil. In April 2008, we acquired equity interests of approximately 90% in AMSO, LLC primarily in exchange for cash of $5.5 million in transactions accounted for under the purchase method of accounting. We charged an aggregate of $5.5 million to research and development expense at the acquisition date, which included the amounts assigned to AMSO, LLC’s tangible and intangible assets to be used in its research and development project that have no alternative future use. In March 2009, Total acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. We no longer consolidate AMSO, LLC as of the closing of the transaction with Total, instead, we account for our 50% ownership interest in AMSO, LLC using the equity method.

Impairments.  Impairments in fiscal 2009 and fiscal 2008 consist of the following:

(in millions)
Year ended July 31,	2009		2008
Goodwill:
Telecom Platform Services – Rechargeable reporting unit	$	29.0	$	17.9
Telecom Platform Services – Wholesale Carrier reporting unit		—		5.8
Local Media – CTM Media Group		29.7		—
Local Media – WMET		1.2		—
Local Media – IDW Publishing		1.8		—
Total goodwill		61.7		23.7
FCC licenses		5.3		—
Other assets		4.0		4.6
Total impairments	$	71.0	$	28.3

We recorded aggregate impairments of $71.0 million in fiscal 2009, including $61.7 million related to goodwill. At July 31, 2009, the carrying amount of our remaining goodwill was $17.3 million. Our operating results for fiscal 2009, which included these significant impairment charges, are not necessarily indicative of the results that may be expected in the future. Impairment charges are not cash expenditures, therefore the impairments did not impact our liquidity at July 31, 2009, nor will these charges impact our future liquidity.

In the second quarter of fiscal 2009, the following events and circumstances indicated that the fair value of certain of our reporting units may be below their carrying value: (1) a significant adverse change in the business climate, (2) operating losses of reporting units, (3) significant revisions to internal forecasts, and (4) plans to restructure operations including reductions in workforce. We measured the fair value of our reporting units by discounting their estimated future cash flows using an appropriate discount rate. The carrying value including goodwill exceeded the estimated fair value of the following reporting units: Rechargeable, CTM Media Group, WMET and IDW Publishing. We therefore performed additional steps for these reporting units to determine whether an impairment of goodwill was required. As a result of this analysis, in fiscal 2009, we recorded aggregate goodwill impairment of $61.7 million. The goodwill impairment reduced the carrying amount of the goodwill in each of these reporting units to zero. Calculating the fair value of the reporting units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant estimates and assumptions. Should our estimates or assumptions regarding the fair value of our reporting units prove to be incorrect, we may record additional goodwill impairment in future periods and such impairments could be material.

The primary drivers in our assumptions that resulted in the goodwill impairment in fiscal 2009 were (1) lower than expected revenues since our prior annual goodwill impairment test conducted as of May 1, 2008 that caused us to reduce our revenue and cash flow projections at December 31, 2008, the date of our interim impairment test, (2) an increase in the discount rates used at December 31, 2008 compared to May 1, 2008, (3) reductions in the terminal value growth rates used at December 31, 2008 compared to May 1, 2008, and (4) no expectation of an economic recovery in our cash flow projections. The primary drivers behind our changed expectations for future results, cash flows and liquidity were (1) the global economic slowdown,

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(2) lower than expected revenues including a decrease in customer spending, (3) certain of our customers experiencing financial challenges including bankruptcy, and (4) specifically related to CTM Media Group, new lines of business that did not perform as expected and were discontinued beginning in the fourth quarter of fiscal 2008. All of these factors contributed to the reduction in the revenue and cash flow projections at December 31, 2008 compared to May 1, 2008.

IDT Spectrum, which is included in All Other, recorded an impairment in the second quarter of fiscal 2009 of $5.3 million, which reduced the carrying value of its FCC licenses to zero. The events and circumstances in the second quarter of fiscal 2009 described above indicated that the FCC licenses may be impaired. We estimated the fair value of these FCC licenses based on continuing operating losses and projected losses for the foreseeable future.

We recorded an impairment of $3.5 million in the second quarter of fiscal 2009, which reduced the carrying value of IDT Global Israel’s building in Israel to its estimated fair value at the time. We retained exclusive control over the sale of this building after we disposed of 80% of the issued and outstanding shares of IDT Global Israel in the fourth quarter of fiscal 2008. In June 2009, the building was sold for $12.7 million of which $6.4 million was used to repay the obligations secured by the building and $0.8 million was held in escrow. We received the net proceeds of $5.4 million from the sale and recognized a loss of $0.5 million on the sale.

As a result of our conclusion that an interim impairment test of goodwill was required during the second quarter of fiscal 2009, we also assessed the recoverability of certain of our long-lived assets in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The assessment of long-lived assets was based on projected undiscounted future cash flows of the long-lived asset groups compared to their carrying values. Our cash flow estimates were derived from our annual planning process and interim forecasting. We believe that our procedures for projecting future cash flows were reasonable and consistent with market conditions at the time of estimation. As a result of our assessment under SFAS 144, in fiscal 2009, we recorded aggregate impairments of $2.3 million related to certain leasehold interests, of which $2.0 million related to the Hillview property and is included in discontinued operations.

In the fourth quarter of fiscal 2009, we consolidated our operations in Newark, New Jersey into considerably less office space that we are leasing at 550 Broad Street. We will remain at 550 Broad Street on an interim basis while evaluating other long term relocation options. At July 31, 2009, the carrying value of the land, building and improvements that we own at 520 Broad Street, Newark, New Jersey was $49.9 million and the mortgage payable balance was $26.3 million. At July 31, 2009, we evaluated the land, building and improvements at 520 Broad Street for impairment and determined that the carrying value was recoverable. We are assessing a range of options as to the future use of 520 Broad Street, some of which could result in a loss from a reduction in the carrying value of the land, building and improvements and such loss could be material.

We recorded aggregate impairments of $28.3 million in fiscal 2008, including $23.7 million related to IDT Telecom’s goodwill and $4.6 million related to other assets. In the fourth quarter of fiscal 2008, we assessed the value and evaluated the performance of our reporting units. We measured the fair value of our reporting units by discounting their estimated future cash flows using an appropriate discount rate. As a result of this analysis, we recorded goodwill impairment of $17.9 million in Rechargeable and $5.8 million in Wholesale Carrier, both of which are reporting units within our Telecom Platform Services segment. In addition, in the fourth quarter of fiscal 2008, we assessed the recoverability of certain of our long-lived assets in accordance with SFAS 144. As a result of this assessment, we recorded an impairment charge of $3.5 million on certain of WMET’s property, plant and equipment.

Restructuring Charges.  The restructuring charges in fiscal 2009 and fiscal 2008 consisted primarily of severance related to a company-wide cost savings program and reduction in force. As of July 31, 2009, these programs resulted in the termination of approximately 1,570 employees since the third quarter of fiscal 2006. As of July 31, 2009, we had a total of approximately 1,400 employees, of which approximately 1,010 are located in the United States and approximately 390 are located at our international operations. The restructuring charges in fiscal 2009 also included costs for the shutdown or consolidation of certain facilities of $0.5 million in Corporate and $0.7 million in IDT Telecom. In fiscal 2009, IDT Telecom reversed accrued

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severance of $2.6 million as a result of modifications to retention and/or severance agreements with certain employees. In fiscal 2008, IDT Spectrum reversed $0.4 million of restructuring charges recorded in fiscal 2006 for a contract termination.

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

(in millions)	Balance at July 31, 2008		Charged to expense		Payments			Non-cash charges			Balance at July 31, 2009
IDT Telecom(a)	$	10.9	$	5.5	$	(13.4	)	$	—		$	3.0
IDT Energy		—		—		—			—			—
All Other		0.5		1.6		(2.1	)		—			—
Corporate		7.1		3.6		(7.1	)		—			3.6
TOTAL	$	18.5	$	10.7	$	(22.6	)	$	—		$	6.6
	Balance at July 31, 2007		Charged to expense		Payments			Non-cash charges			Balance at July 31, 2008
IDT Telecom	$	8.7	$	23.9	$	(21.5	)	$	(0.2	)	$	10.9
IDT Energy		—		0.1		(0.1	)		—			—
All Other		0.8		3.2		(2.6	)		(0.9	)		0.5
Corporate		8.3		7.4		(8.7	)		0.1			7.1
TOTAL	$	17.8	$	34.6	$	(32.9	)	$	(1.0	)	$	18.5

(a) IDT Telecom restructuring charges in fiscal 2009 included $0.7 million that is included in “Loss from discontinued operations” in the consolidated statement of operations.

Gain on Sale of Interest in AMSO, LLC.  In March 2009, Total acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. We recognized a gain of $2.6 million in the third quarter of fiscal 2009 in connection with the sale, which is included in loss from operations.

Arbitration Award Income.  In November 2007, our Net2Phone Cable Telephony subsidiary, which is included in our Telecom Platform 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 Cable Telephony had entered into in November 2004. We recorded income of $40.0 million for this arbitration award, including accrued interest, in the first quarter of fiscal 2008, which is included in loss from operations.

Loss on Disposal of Businesses.  Loss from operations in fiscal 2008 includes loss on disposal of businesses of $9.6 million. In the fourth quarter of fiscal 2008, we disposed of 80% of the issued and outstanding shares of IDT Global Israel, Ltd., our call center operations in Israel, in a transaction with the Chief Executive Officer of IDT Global Israel for a nominal amount and recorded a loss of $8.8 million.

(in millions)							Change
Year ended July 31,	2009			2008			$			%
Loss from operations	$	(73.5	)	$	(162.1	)	$	88.6		54.7	%
Interest (expense) income, net		(2.6	)		9.2			(11.8	)	(128.9	)
Other expense, net		(33.4	)		(18.5	)		(14.9	)	(80.9	)
Minority interests		(1.9	)		1.4			(3.3	)	(235.4	)
Benefit from (provision for) income taxes		4.5			(9.8	)		14.3		145.8
Loss from continuing operations		(106.9	)		(179.8	)		72.9		40.5
Loss from discontinued operations		(48.5	)		(44.5	)		(4.0	)	(9.0	)
Net loss	$	(155.4	)	$	(224.3	)	$	68.9		30.7	%

Our loss from operations in fiscal 2009 was negatively impacted by the impairments and restructuring charges described above. We expect impairments and restructuring charges to be significantly reduced in fiscal 2010

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compared to fiscal 2009. As a result, we expect our results from operations in fiscal 2010 will more closely track the performance of our businesses.

Interest (Expense) Income, net.  The decrease in net interest in fiscal 2009 compared to fiscal 2008 was primarily due 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.

Other Expense, net.  Other expense, net consists of the following:

Year ended July 31, (in millions)	2009			2008
Realized losses on marketable securities	$	(1.5	)	$	(6.5	)
Other than temporary decline in value of marketable securities		(6.8	)		(14.7	)
Gain on sale of subsidiary stock		0.3			—
Losses on investments		(21.1	)		(6.0	)
Equity in net loss of AMSO, LLC		(0.7	)		—
Foreign currency transaction (losses) gains		(2.2	)		4.4
(Loss) gain on sales of buildings		(0.3	)		4.1
Other		(1.1	)		0.2
Total other expense, net	$	(33.4	)	$	(18.5	)

In fiscal 2009 and fiscal 2008, other expense, net included other than temporary decline in value of auction rate securities of $6.8 million and $7.2 million, respectively, and in fiscal 2008, other than temporary decline in value of marketable securities also included $7.5 million related to certain equity securities. On September 23, 2008, we sold a 10% ownership interest in Zedge to Shaman II, L.P. for cash of $1.0 million. One of the limited partners in Shaman II, L.P. was a former employee of ours. We recorded the effect of changes in our ownership interest resulting from the issuance of equity by one of our subsidiaries in the consolidated statement of operations until August 1, 2009, the date we were required to adopt SFAS 160. Accordingly, in fiscal 2009, we recorded a gain of $0.3 million on the sale of Zedge stock. Other expense, net also included a loss of $0.3 million and a gain of $4.1 million on the sales of buildings in fiscal 2009 and fiscal 2008, respectively, as a result of the sale of IDT Global Israel’s building and the sale of Hillview’s property in fiscal 2009 and the sale of a building in Newark, New Jersey in fiscal 2008.

Minority Interests.  Minority interests were mostly related to the minority owners of UTA, from the minority owner of our real estate business and from the 46.67% minority owners of IDW Publishing. The change in minority interests in fiscal 2009 compared to fiscal 2008 was primarily due to the change in minority interest related to UTA and IDW Publishing.

Income Taxes.  The benefit from income taxes in fiscal 2009 is primarily due to a reversal of $16.0 million related to interest on federal income tax. The provision for income taxes in fiscal 2009, excluding the effect of the reversal, decreased compared to fiscal 2008 due primarily to a decrease in federal income tax expense, offset by increases in state and local and foreign income tax expense. State and local income taxes increased as a result of the increase in IDT Energy’s profits. Our foreign income tax expense results from income generated by our foreign subsidiaries that cannot be offset against losses generated in the United States. Our foreign income tax expense in fiscal 2009 also included $1.9 million related to an income tax audit in Belgium. Our federal income tax expense included interest of $4.6 million and $7.0 million in fiscal 2009 and fiscal 2008, respectively.

As a result of an IRS audit of our federal tax returns for fiscal years 2001, 2002, 2003 and 2004, we owed approximately $75 million in taxes for fiscal 2001, approximately $1 million for adjustments carried forward to fiscal 2005 and 2006, and $39.5 million in interest. In connection therewith, we paid $10.0 million of the amount owed in July 2008 and paid the remaining amount owed to the IRS, an aggregate of $108.4 million, in monthly installments from October 2008 through June 2009. In December 2008, the IRS commenced an audit of our federal tax returns for fiscal years 2005, 2006 and 2007. In May 2009, the IRS assessed a liability of $1.2 million for fiscal year 2005 which represents the approximately $1 million previously agreed to plus interest. The IRS granted our request for abatement of a portion of the interest and penalties that were incurred while we were making installment payments, and the IRS applied these payments to the amount owed for fiscal 2005.

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IDT Telecom—Telecom Platform Services and Consumer Phone Services Segments

IDT Telecom operates two business segments: Telecom Platform Services and Consumer Phone Services. Beginning in the second quarter of fiscal 2009, the Prepaid Products segment and the Wholesale Telecommunications Services segment were combined into the Telecom Platform Services segment, and consumer phone services outside the United States were transferred from the Consumer Phone Services segment to Telecom Platform Services. The changes in delineating the segments made in the second quarter of fiscal 2009 reflect the overlap in the methods used to provide consumer phone services outside the United States, prepaid products and wholesale telecommunications services, as well as the way operating results are reported and reviewed by our chief operating decision maker. To the extent possible, comparative historical results have been reclassified and restated as if the fiscal 2009 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.

(in millions, except revenue per minute)					Change
Year ended July 31,	2009		2008		$			%
Revenues
Telecom Platform Services	$	1,180.7	$	1,379.2	$	(198.5	)	(14.4	)%
Consumer Phone Services		53.7		80.5		(26.8	)	(33.3	)
Total revenues	$	1,234.4	$	1,459.7	$	(225.3	)	(15.4	)%
Minutes of use
Retail calling cards		7,463		8,647		(1,184	)	(13.7	)%
Wholesale carrier		14,138		14,487		(349	)	(2.4	)
Total minutes of use		21,601		23,134		(1,533	)	(6.6	)%
Average revenue per minute
Retail calling cards	$	0.0729	$	0.0797	$	(0.0068	)	(8.6	)%
Wholesale carrier		0.0428		0.0457		(0.0029	)	(6.3	)
Total average revenue per minute	$	0.0532	$	0.0584	$	(0.0052	)	(8.9	)%

Revenues.  We experienced revenue declines in fiscal 2009 compared to fiscal 2008 in both of the IDT Telecom segments. Approximately $53.5 million of the decrease in IDT Telecom revenues in fiscal 2009 compared to fiscal 2008 was due to changes in foreign currency exchange rates. As a percentage of IDT Telecom’s total revenues from continuing operations, Telecom Platform Services revenues increased from 94.5% in fiscal 2008 to 95.7% in fiscal 2009, and Consumer Phone Services revenues decreased from 5.5% in fiscal 2008 to 4.3% in fiscal 2009.

Telecom Platform Services revenues declined 14.4% in fiscal 2009 compared to fiscal 2008 primarily due to lower minutes of use worldwide, lower per minute price realizations and the negative effect from currency translation.

Total minutes of use for Telecom Platform Services declined by 6.6% in fiscal 2009 compared to fiscal 2008. Minutes of use relating to our Consumer Phone Services segment is not tracked as a meaningful business metric as the domestic traffic generated by this segment is not carried on our network, and the international traffic generated by this segment, though carried on our own network, is relatively insignificant. Within Telecom Platform Services, minutes of use relating to wholesale carrier activities decreased 2.4% in fiscal 2009 compared to fiscal 2008 as the overall economy softened and we focused on generating traffic from higher margin destinations. Minutes of use from our retail activities declined 13.7% in fiscal 2009 compared to fiscal 2008 primarily due to continued weakness in our calling card businesses in the United States, Europe, and South America, partially offset by an increase in our retail business in Asia. The decline in calling card minutes of use arose as a result of lower calling card sales stemming from competitive pressures and economic softness, as well as due to our decision to reduce discount pricing on our newly introduced calling cards. In addition, we believe that there may be a gradual shift in demand industry-wide away from calling cards and into wireless products.

Average revenue per minute is the average price realization we recognize on the minutes we sell within our Telecom Platform Services segment. Average revenue per minute declined 8.9% in fiscal 2009 compared to

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fiscal 2008. More specifically, in our retail calling card businesses, average revenue per minute declined 8.6% in fiscal 2009 compared to fiscal 2008 as a result of decreases in the average revenue per minute for all our regions. In our wholesale carrier business, average revenue per minute decreased 6.3% in fiscal 2009 compared to fiscal 2008 due primarily to continued aggressive competition.

Consumer Phone Services revenues declined 33.3% in fiscal 2009 compared to fiscal 2008 as we continue to fully harvest the business. This strategy has been in effect since calendar 2005, when the FCC decided to terminate the UNE-P pricing regime, which resulted in significantly inferior economics for this business. The customer base for our bundled, unlimited local and long distance services business was approximately 29,000 as of July 31, 2009 compared to 46,300 as of July 31, 2008. 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 addition, the customer base for our long distance-only services was approximately 99,400 as of July 31, 2009 compared to 133,300 as of July 31, 2008.

(in millions, except cost per minute)					Change
Year ended July 31,	2009		2008		$			%
Direct cost of revenues
Telecom Platform Services	$	942.2	$	1,091.5	$	(149.3	)	(13.7	)%
Consumer Phone Services		23.5		36.3		(12.8	)	(35.4	)
Total direct cost of revenues	$	965.7	$	1,127.8	$	(162.1	)	(14.4	)%
Average termination cost per minute
Retail calling cards	$	0.0557	$	0.0606	$	(0.0049	)	(8.0	)%
Wholesale carrier		0.0381		0.0395		(0.0014	)	(3.4	)
Total average termination cost per minute	$	0.0442	$	0.0473	$	(0.0031	)	(6.5	)%

Direct Cost of Revenues.  Direct cost of revenues of IDT Telecom decreased in fiscal 2009 compared to fiscal 2008 primarily as a result of the decline in minutes of use volume, a lower average termination cost per minute and a declining customer base in our Consumer Phone Services segment. Our average termination cost per minute represents the average direct cost for minutes purchased in order to terminate calls in our Telecom Platform Services segment. Approximately $51.1 million of the decrease in IDT Telecom’s direct cost of revenues in fiscal 2009 compared to fiscal 2008 was due to changes in foreign currency exchange rates. In addition, Telecom Platform Services direct cost of revenues decreased due to reductions in connectivity costs as we reduced excess capacity in our network. In May 2009, we completed the migration of our network from dedicated capacity TDM circuits to burstable Internet protocol circuits, which utilize connectivity capacity more efficiently and results in lower overall cost. Telecom Platform Services direct cost of revenues in fiscal 2009 and fiscal 2008 is net of the reversal of accrued regulatory fees of $3.3 million and $16.7 million, respectively, as a result of the completion of an audit of our U.S. calling card business by the Universal Service Administration Corporation for calendar years 2005 and 2006.

Direct cost of revenues for Consumer Phone Services decreased in fiscal 2009 compared to fiscal 2008 due primarily to lower revenues stemming from the reduction in customers. The decrease in direct cost of revenues for Consumer Phone Services would have been greater if not for the favorable settlement in the third quarter of fiscal 2008 of a long-standing dispute with one our connectivity suppliers which reduced the direct cost of revenues in fiscal 2008.

Year ended July 31,	2009		2008		Change
Gross margin percentage
Telecom Platform Services	20.2	%	20.9	%	(0.7	)%
Consumer Phone Services	56.3		54.8		1.5
Total gross margin percentage	21.8	%	22.7	%	(0.9	)%

Gross Margins.  Gross margins in our Telecom Platform Services segment decreased in fiscal 2009 compared to fiscal 2008 primarily due to lower profit per minute derived from our U.S. prepaid calling card and our wholesale carrier businesses, partially offset by a higher profit per minute on our calling card sales in other regions.

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Gross margins in our Consumer Phone Services segment increased in fiscal 2009 compared to fiscal 2008 due to a change in our customer mix towards higher margin long distance-only customers, which have been churning at a slower rate than our bundled, unlimited local and long distance customers, and as a result of certain price increases that we implemented beginning in the fourth quarter of fiscal 2008.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Selling, general and administrative expenses
Telecom Platform Services	$	199.2	$	263.2	$	(64.0	)	(24.3	)%
Consumer Phone Services		11.2		14.4		(3.2	)	(22.0	)
Total selling, general and administrative expenses	$	210.4	$	277.6	$	(67.2	)	(24.2	)%

Selling, General and Administrative.  The decrease in selling, general and administrative expenses in IDT Telecom in fiscal 2009 compared to fiscal 2008 was primarily due to reductions in headcount, changes to employee benefit and bonus programs, reductions in facilities and maintenance costs, as well as reduced advertising and marketing expenses and lower legal and other professional fees. Compensation and benefit costs in fiscal 2009 included an aggregate reduction of $1.4 million related to the 401(k) plan employer matching contributions and a refund of New Jersey unemployment taxes. Compensation and benefit costs are expected to decline in future periods as a result of the headcount reductions and other initiatives in fiscal 2008 and fiscal 2009. As a percentage of IDT Telecom’s total revenues from continuing operations, selling, general and administrative expenses decreased from 19.0% in fiscal 2008 to 17.0% in fiscal 2009 as IDT Telecom’s selling, general and administrative expenses decreased at a faster rate than its revenues.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Depreciation and amortization
Telecom Platform Services	$	42.4	$	53.7	$	(11.3	)	(21.0	)%
Consumer Phone Services		0.5		2.9		(2.4	)	(83.3	)
Total depreciation and amortization	$	42.9	$	56.6	$	(13.7	)	(24.2	)%

Depreciation and amortization.  The decrease in depreciation and amortization expense in the fiscal 2009 compared to fiscal 2008 was primarily due to property, plant and equipment becoming fully depreciated and a decrease in capital expenditures.

(in millions)						Change
Year ended July 31,	2009			2008		$			%
Bad debt expense
Telecom Platform Services	$	6.1		$	7.2	$	(1.1	)	(14.9	)%
Consumer Phone Services		(0.1	)		3.9		(4.0	)	(103.5	)
Total bad debt expense	$	6.0		$	11.1	$	(5.1	)	(46.1	)%

Bad Debt Expense.  The decrease in bad debt expense in both of the IDT Telecom segments in fiscal 2009 compared to fiscal 2008 was primarily due to the decrease in revenues and due to evaluations of the outstanding receivables in fiscal 2009 that resulted in adjustments to our provisions.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Research and development expenses
Telecom Platform Services	$	2.7	$	4.7	$	(2.0	)	(40.0	)%
Consumer Phone Services		—		—		—		—
Total research and development expenses	$	2.7	$	4.7	$	(2.0	)	(40.0	)%

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Research and Development.  Research and development expenses in our Telecom Platform Services segment in fiscal 2009 and fiscal 2008 were related to Fabrix T.V., Ltd., our majority-owned venture developing a video content delivery and storage platform.

(in millions)					Change
Year ended July 31,	2009		2008		$		%
Impairments
Telecom Platform Services	$	29.1	$	24.7	$	4.4	17.9	%
Consumer Phone Services		—		—		—	—
Total impairments	$	29.1	$	24.7	$	4.4	17.9	%

Impairments.  In the second quarter of fiscal 2009, certain events and circumstances indicated that the fair value of IDT Telecom’s reporting units may be below their carrying value. We measured the fair value of our reporting units by discounting their estimated future cash flows using an appropriate discount rate. The carrying value including goodwill of IDT Telecom’s Rechargeable reporting unit exceeded its estimated fair value, therefore we performed additional steps to determine whether an impairment of goodwill was required. As a result of this analysis, in fiscal 2009, we recorded a goodwill impairment of $29.0 million, which reduced the carrying amount of Rechargeable’s goodwill to zero. On July 31, 2009, IDT Telecom’s remaining goodwill was $10.4 million. Calculating the fair value of the reporting units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant estimates and assumptions. Should our estimates or assumptions regarding the fair value of our reporting units prove to be incorrect, we may record additional goodwill impairment in future periods and such impairments could be material.

We recorded aggregate impairments of $23.7 million in fiscal 2008 related to Telecom Platform Services segment goodwill. In the fourth quarter of fiscal 2008, we assessed the value and evaluated the performance of IDT Telecom’s reporting units. We measured the fair value of the reporting units by discounting their estimated future cash flows using an appropriate discount rate. As a result of this analysis, in fiscal 2008, we recorded goodwill impairments of $17.9 million in Rechargeable and $5.8 million in Wholesale Carrier, both of which are reporting units within our Telecom Platform Services segment.

Impairments of other assets in fiscal 2009 and fiscal 2008 were $0.1 million and $1.0 million, respectively.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Restructuring charges
Telecom Platform Services	$	4.8	$	22.8	$	(18.0	)	(79.1	)%
Consumer Phone Services		—		1.1		(1.1	)	(100.0	)
Total restructuring charges	$	4.8	$	23.9	$	(19.1	)	(80.0	)%

Restructuring Charges.  The restructuring charges in fiscal 2009 and fiscal 2008 consisted primarily of severance related to a company-wide cost savings program and reduction in force. The restructuring charges in fiscal 2009 also included costs for the shutdown or consolidation of certain facilities of $0.7 million, and are net of the reversal of accrued severance of $2.6 million in the first quarter of fiscal 2009 as a result of modifications to retention and/or severance agreements with certain employees.

Arbitration Award Income.  In November 2007, our Net2Phone Cable Telephony subsidiary, which is included in our Telecom Platform 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 Cable Telephony had entered into in November 2004. We recorded income of $40.0 million for this arbitration award, including accrued interest, in the first quarter of fiscal 2008, which is included in loss from operations.

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(in millions)							Change
Year ended July 31,	2009			2008			$			%
(Loss) income from operations
Telecom Platform Services	$	(45.8	)	$	(48.5	)	$	2.7		5.6	%
Consumer Phone Services		18.6			21.8			(3.2	)	(14.6	)
Total loss from operations	$	(27.2	)	$	(26.7	)	$	(0.5	)	(1.7	)%

IDT Energy Segment

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Revenues	$	264.7	$	248.9	$	15.8		6.4	%
Direct cost of revenues		192.5		221.1		(28.6	)	(12.9	)
Selling, general and administrative		25.7		20.9		4.8		23.2
Depreciation and amortization		0.1		0.1		—		59.3
Bad debt		1.0		0.7		0.3		29.4
Restructuring charges		—		0.1		(0.1	)	(76.3	)
Income from operations	$	45.4	$	6.0	$	39.4		650.3	%

In fiscal 2009, IDT Energy capitalized on unusually favorable energy market conditions to generate $45.4 million in income from operations. Recently, those conditions have largely dissipated as energy market rates have stabilized. Moreover, IDT Energy’s rate of customer acquisition has slowed significantly, so that fiscal 2009’s gross margins and amount of income from operations are not reliable indicators of future performance.

Revenues.  IDT Energy’s revenues consisted of electricity sales of $157.2 million in fiscal 2009 compared to $155.6 million in fiscal 2008, and natural gas sales of $107.5 million in fiscal 2009 compared to $93.3 million in fiscal 2008. IDT Energy’s revenues are impacted by, among other things, 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. In fiscal 2009, approximately 83% of IDT Energy’s natural gas revenues were generated in the second and third fiscal quarters and approximately 55% of electricity revenues were generated in the first and fourth fiscal quarters. Commodity prices are generally higher during these peak demand seasons, and, therefore contribute to the seasonal fluctuation in revenues. After peaking in the first month of fiscal 2009, commodity costs declined sharply and steadily throughout the remainder of the fiscal year. Consequently IDT Energy’s rates were higher in the first and second quarters of fiscal 2009 for both natural gas and electricity.

IDT Energy experienced slightly higher electricity revenues and higher natural gas revenues in fiscal 2009 compared to fiscal 2008 primarily as a result of increased consumption by the larger customer base, although average electricity and natural gas rates charged to customers declined. As of July 31, 2009, IDT Energy’s customer base consisted of approximately 397,000 meters (228,000 electric and 169,000 natural gas) compared to 376,000 meters (216,000 electric and 160,000 natural gas) as of July 31, 2008.

IDT Energy reorganized its sales teams and restructured its marketing approach during the fourth quarter of fiscal 2009 to create a significantly smaller, but better trained external sales force. As a result of this initiative, IDT Energy expects to reduce customer churn and focus acquisition efforts on higher value generating customers. This re-programming effort slowed the pace of new meter acquisitions significantly during the fourth quarter of fiscal 2009, resulting in a net loss of approximately 17,000 meters compared to the customer base on April 30, 2009. Given current market conditions and the focus on reducing churn, IDT Energy expects to return to positive net customer acquisitions during the first half of fiscal 2010, although at a rate of growth below that achieved during the first half of fiscal 2009.

IDT Energy continues to expand its customer base opportunistically in New York with the goal of acquiring profitable customers in low-risk markets; more specifically in regions where receivables are guaranteed under POR programs, billing is handled by the utility, and commodity procurement can be effectuated on a real-time market basis. IDT Energy also regularly monitors other deregulated or deregulating markets to determine if they are appropriate for entry. IDT Energy’s management is encouraged by positive steps recently adopted by regulatory agencies and utilities in several other states to deregulate energy markets and is presently working on various options for geographic expansion.

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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 $102.1 million in fiscal 2009 compared to $136.9 million in fiscal 2008, and cost of natural gas of $90.4 million in fiscal 2009 compared to $84.2 million in fiscal 2008. Direct cost of revenues for electricity decreased in fiscal 2009 compared to fiscal 2008 primarily due to significant decreases in the average unit cost during the periods. Direct cost of revenues for natural gas increased in fiscal 2009 compared to fiscal 2008 primarily due to the increase in consumption although the average unit cost decreased.

Gross margins in IDT Energy increased to 27.3% in fiscal 2009 compared to 11.2% in fiscal 2008. Comprising these figures were gross margins on electricity sales in fiscal 2009 of 35.0% compared to 12.0% in fiscal 2008 and gross margins on natural gas sales in fiscal 2009 of 15.9% compared to 9.7% in fiscal 2008. The gross margin increases in the fiscal 2009 compared to fiscal 2008 occurred primarily because our average unit cost of electricity and natural gas decreased due to unusually favorable market conditions. 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 fiscal 2009 compared to fiscal 2008 was due primarily to increases in compensation expense, billing related fees and customer acquisition costs. Compensation expense increased in fiscal 2009 compared to fiscal 2008 primarily due to an increase in bonus expense, which is based on a profit sharing plan that was finalized subsequent to the first quarter of fiscal 2008. The increase in billing related fees in fiscal 2009 compared to fiscal 2008 was a result of increases in the fees charged by certain utilities for their POR programs, which reflected the increase in bad debt risk assumed by the utilities through these programs, as well as the transition of a significant portion of IDT Energy’s unguaranteed receivables to a POR program in the third quarter of fiscal 2009. Customer acquisition costs increased in fiscal 2009 compared to fiscal 2008 primarily due to an increase in the commission paid to acquire new customers subsequent to the first quarter of fiscal 2008. As a percentage of total IDT Energy revenues, selling, general and administrative expenses increased from 8.4% in fiscal 2008 to 9.7% in fiscal 2009 due to the increases in selling, general and administrative expenses described above.

Bad Debt Expense.  The increase in bad debt expense in fiscal 2009 compared to fiscal 2008 was due primarily to the increase in revenues and the resulting increase in the allowance for receivables that were not guaranteed under POR programs. A significant portion of IDT Energy’s unguaranteed receivables transitioned to a POR program in the third quarter of fiscal 2009.

All Other

On September 14, 2009, we completed the CTM Spin-Off. Prior to completing the CTM Spin-Off, the following subsidiaries of ours were transferred to CTM Holdings: (i) CTM Media Group, Inc.; (ii) IDT Local Media, Inc.; (iii) IDT Internet Mobile Group, which holds a majority interest in Idea and Design Works, LLC (IDW Publishing); and (iv) Beltway Acquisition Corporation, which holds the broadcast license of the WMET-AM radio station. CTM Holdings’ businesses were included in Local Media in All Other during fiscal 2009 and fiscal 2008. CTM Holdings met the criteria to be reported as a discontinued operation on September 14, 2009, therefore the assets, liabilities, results of operations and cash flows of CTM Holdings and its subsidiaries will be classified in discontinued operations in the first quarter of fiscal 2010.

In the first quarter of fiscal 2009, certain real estate investments that were historically included in Corporate were transferred to All Other, and IDW Publishing was transferred from the IDT Internet Mobile Group in All Other to Local Media in All Other. The other component of the IDT Internet Mobile Group, Zedge, is now included in the “other” lines of business in All Other. To the extent possible, comparative historical results for All Other and Corporate have been reclassified and restated 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.

We expect that Alternative Energy, which is included in All Other, will be a reportable business segment beginning in the first quarter of fiscal 2010.

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(in millions)					Change
Year ended July 31,	2009		2008		$			%
Revenues
Local Media	$	33.7	$	32.6	$	1.1		3.3	%
Alternative Energy		—		—		—		—
Other		5.8		14.4		(8.6	)	(59.6	)
Total revenues	$	39.5	$	47.0	$	(7.5	)	(16.0	)%

Revenues.  The decrease in All Other revenues in fiscal 2009 compared to fiscal 2008 was due to a decrease in revenues in the “other” lines of business, partially offset by an increase in Local Media revenues. Revenues in the “other” lines of business decreased in fiscal 2009 compared to fiscal 2008 primarily due to the disposition of IDT Global Israel, Ltd., our call center operations in Israel, in the fourth quarter of fiscal 2008, as well as the disposition of an additional business in the first quarter of fiscal 2009. These two businesses generated aggregate revenues of $0.1 million and $8.9 million in fiscal 2009 and fiscal 2008, respectively. Local Media revenues increased in fiscal 2009 compared to fiscal 2008 primarily as a result of an increase in IDW Publishing revenues partially offset by a decrease in CTM Media Group revenues. IDW Publishing revenues increased primarily as a result of an increase in titles sold. CTM Media Group revenues decreased primarily as a result of the economic slowdown which reduced its brochure distribution business in the third quarter of fiscal 2009, offset by rate increases, the addition of new customers and the addition of two new lines of business, all of which occurred in the first half of fiscal 2009.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Direct cost of revenues
Local Media	$	14.6	$	12.6	$	2.0		16.5	%
Alternative Energy		—		—		—		—
Other		0.7		14.6		(13.9	)	(95.0	)
Total direct cost of revenues	$	15.3	$	27.2	$	(11.9	)	(43.6	)%

Direct Cost of Revenues.  The decrease in direct cost of revenues in fiscal 2009 compared to fiscal 2008 was primarily due to a decrease in the direct cost of revenues in the “other” lines of business, which was primarily due to the disposition of IDT Global Israel in the fourth quarter of fiscal 2008 and an additional business in the first quarter of fiscal 2009. These two businesses incurred aggregate direct cost of revenues of $0.3 million and $13.3 million in fiscal 2009 and fiscal 2008, respectively.

All Other aggregate gross margin increased from 42.0% in fiscal 2008 to 61.1% in fiscal 2009 primarily due to the disposition of IDT Global Israel in the fourth quarter of fiscal 2008. IDT Global Israel had negative gross margins throughout fiscal 2008. Local Media’s gross margin declined from 61.5% in fiscal 2008 to 56.5% in fiscal 2009 primarily due to the increase in direct cost of revenues which exceeded the increase in revenues.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
Selling, general and administrative expenses
Local Media	$	16.2	$	21.7	$	(5.5	)	(25.4	)%
Alternative Energy		0.2		—		0.2		Nm
Other		12.8		37.2		(24.4	)	(65.7	)
Total selling, general and administrative expenses	$	29.2	$	58.9	$	(29.7	)	(50.6	)%

nm—not meaningful

Selling, General and Administrative.  Selling, general and administrative expenses decreased in fiscal 2009 compared to fiscal 2008 primarily due to a decrease in the selling, general and administrative expenses in the “other” lines of business. The “other” decrease was due to the divestiture of many non-profitable non-core businesses during the past year as we continue to focus on our core operations, as well as a decrease in legal

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fees in connection with ongoing litigation related to certain of our intellectual property, and in the second quarter of fiscal 2009, a $1.7 million real estate tax refund for prior periods awarded to us on appeal. As a percentage of the All Other aggregate revenues from continuing operations, selling, general and administrative expenses decreased from 125.3% in fiscal 2008 to 73.7% in fiscal 2009.

Research and Development.   Research and development expenses in fiscal 2009 and fiscal 2008 consist of the following:

(in millions)
Year ended July 31,	2009		2008
Alternative Energy:
AMSO	$	3.2	$	6.6
Israel Energy Initiatives, Ltd.		3.1		0.3
Total research and development expenses	$	6.3	$	6.9

Alternative Energy includes (1) AMSO, which commenced its research and development activities in the third quarter of fiscal 2008 upon its acquisition of AMSO, LLC, which is one of three holders of 10-year leases granted by the U.S. Bureau of Land Management to research, develop and demonstrate in-situ technologies for potential commercial shale oil production in western Colorado, and (2) IEI, our Israeli alternative energy venture, which was granted a license in Israel in the fourth quarter of fiscal 2008 to explore certain public lands for potential production of shale oil. In April 2008, we acquired equity interests of approximately 90% in AMSO, LLC primarily in exchange for cash of $5.5 million in transactions accounted for under the purchase method of accounting. We charged an aggregate of $5.5 million to research and development expense at the acquisition date, which included the amounts assigned to AMSO, LLC’s tangible and intangible assets to be used in its research and development project that have no alternative future use. In March 2009, Total acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. We no longer consolidate AMSO, LLC as of the closing of the transaction with Total, instead, we account for our 50% ownership interest in AMSO, LLC using the equity method.

Impairments.  Impairments in fiscal 2009 and fiscal 2008 consist of the following:

(in millions)
Year ended July 31,	2009		2008
Goodwill:
Local Media – CTM Media Group	$	29.7	$	—
Local Media – WMET		1.2		—
Local Media – IDW Publishing		1.8		—
Total goodwill		32.7		—
FCC licenses		5.3		—
Other assets		3.9		3.7
Total impairments	$	41.9	$	3.7

In the second quarter of fiscal 2009, certain events and circumstances indicated that the fair value of certain of our reporting units may be below their carrying value. We measured the fair value of our reporting units by discounting their estimated future cash flows using an appropriate discount rate. The carrying value including goodwill of our CTM Media Group, WMET and IDW Publishing reporting units exceeded their estimated fair value, therefore we performed additional steps for these reporting units to determine whether an impairment of goodwill was required. As a result of this analysis, in fiscal 2009, we recorded aggregate goodwill impairments of $32.7 million. The goodwill impairment reduced the carrying amount of the goodwill in each of CTM Media Group, WMET and IDW Publishing to zero. On July 31, 2009, the remaining goodwill in All Other was $3.2 million. Calculating the fair value of the reporting units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant estimates and assumptions. Should our estimates or assumptions regarding the fair value of our reporting units prove to be incorrect, we may record additional goodwill impairment in future periods and such impairments could be material.

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IDT Spectrum recorded an impairment in the second quarter of fiscal 2009 of $5.3 million, which reduced the carrying value of its FCC licenses to zero. The events and circumstances in the second quarter of fiscal 2009 described above indicated that the FCC licenses may be impaired. We estimated the fair value of these FCC licenses based on continuing operating losses and projected losses for the foreseeable future.

We recorded an impairment of $3.5 million in the second quarter of fiscal 2009, which reduced the carrying value of IDT Global Israel’s building in Israel to its estimated fair value at the time. We retained exclusive control over the sale of this building after we disposed of 80% of the issued and outstanding shares of IDT Global Israel in the fourth quarter of fiscal 2008. In June 2009, the building was sold for $12.7 million of which $6.4 million was used to repay the obligations secured by the building and $0.8 million was held in escrow. We received the net proceeds of $5.4 million from the sale and recognized a loss of $0.5 million on the sale.

In the fourth quarter of fiscal 2008, we assessed the recoverability of certain of our long-lived assets in accordance with SFAS 144. As a result of this assessment, we recorded an impairment charge of $3.5 million on certain of WMET’s property, plant and equipment.

Restructuring Charges.  Restructuring charges in fiscal 2009 and fiscal 2008 were $1.6 million and $3.2 million, respectively. These charges were primarily for severance related to the company-wide cost savings program and reduction in force. In fiscal 2008, IDT Spectrum reversed $0.4 million of restructuring charges recorded in fiscal 2006 for a contract termination.

Gain on Sale of Interest in AMSO, LLC.  In March 2009, Total acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. We recognized a gain of $2.6 million in the third quarter of fiscal 2009 in connection with the sale, which is included in Alternative Energy’s loss from operations.

Loss on Disposal of Businesses.  Loss from operations in fiscal 2008 includes loss on disposal of businesses of $9.6 million. In the fourth quarter of fiscal 2008, we disposed of 80% of the issued and outstanding shares of IDT Global Israel, Ltd., our call center operations in Israel, in a transaction with the Chief Executive Officer of IDT Global Israel for a nominal amount and recorded a loss of $8.8 million.

(in millions)							Change
Year ended July 31,	2009			2008			$			%
Loss from operations
Local Media	$	(33.0	)	$	(7.9	)	$	(25.1	)	(319.6	)%
Alternative Energy		(3.8	)		(7.0	)		3.2		45.2
Other		(21.6	)		(56.6	)		35.0		62.0
Total loss from operations	$	(58.4	)	$	(71.5	)	$	13.1		18.4	%

Corporate

In the first quarter of fiscal 2009, certain real estate investments that were historically included in Corporate were transferred to All Other. To the extent possible, comparative historical results for Corporate and All Other have been reclassified and restated 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.

(in millions)					Change
Year ended July 31,	2009		2008		$			%
General and administrative expenses	$	28.4	$	60.8	$	(32.4	)	(53.3	)%
Depreciation and amortization		1.3		1.7		(0.4	)	(23.5	)
Restructuring charges		3.6		7.4		(3.8	)	(51.0	)
Loss from operations	$	33.3	$	69.9	$	(36.6	)	(52.4	)%

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Corporate costs include certain services, such as corporate executive compensation, consulting fees, treasury and accounts payable, tax and accounting services, human resources and payroll, corporate purchasing, 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, 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 decreased in fiscal 2009 compared to fiscal 2008 primarily due to decreases in payroll and related expenses, legal fees and charitable contributions. In addition, fiscal 2008 included an accrual of $10.5 million related to a jury award for an employment matter. As a percentage of our total consolidated revenues from continuing operations, corporate general and administrative expenses decreased from 3.5% in fiscal 2008 to 1.8% in fiscal 2009 because corporate general and administrative expenses decreased at a faster rate than the decrease in our consolidated revenues.

Restructuring Charges.  Restructuring charges in fiscal 2009 and fiscal 2008 consisted primarily of severance related to a company-wide cost savings program and reduction in force. Restructuring charges in fiscal 2009 also include costs for the shutdown or consolidation of certain facilities of $0.5 million.

LIQUIDITY AND CAPITAL RESOURCES

General

Historically, we satisfied our cash requirements primarily through a combination of our existing cash and cash equivalents, proceeds from the sale of businesses, proceeds from the sales and maturities of marketable securities and investments, arbitration awards and litigation settlements, and borrowings from third parties.

As of July 31, 2009, we had cash, cash equivalents, restricted cash and cash equivalents, marketable securities and investments of $196.7 million and working capital (current assets less current liabilities) of $62.2 million. In addition, as of July 31, 2009, our assets of discontinued operations included cash and cash equivalents of $13.1 million, of which we will retain approximately $10 million held by IDT Financial Services pursuant to regulatory requirements upon completion of the proposed sale. As of July 31, 2009, investments included $12.4 million in holdings of pooled investment vehicles, including hedge funds, of which $0.6 million is included in “Investments-short term” and $11.8 million is included in “Investments-long-term” in our consolidated balance sheet.

In September 2009, prior to the CTM Spin-Off, we funded CTM Holdings with an additional $2.0 million in cash.

As of July 31, 2009, cash and cash equivalents of $65.0 million that serve as collateral were restricted against letters of credit, and were included in “Restricted cash and cash equivalents” in our consolidated balance sheet. Also, as of July 31, 2009, marketable securities of $5.1 million were restricted primarily against letters of credit and were included in “Marketable securities” in our consolidated balance sheet. The letters of credit outstanding at July 31, 2009 were primarily collateral for IDT Energy’s purchases of natural gas through wholesale bilateral contracts with suppliers and various utility companies and electric capacity, energy and ancillary services through the wholesale markets, as well as to secure equipment financing and mortgage repayments on various buildings. As a result of IDT Energy’s Preferred Supplier Agreement with BP, as of October 28, 2009, an aggregate of $57.0 million in letters of credit outstanding at July 31, 2009 that were collateral for IDT Energy have been reduced to $7.8 million.

Our marketable securities at July 31, 2009 included auction rate securities with a cost of $14.3 million and an estimated fair value of $0.6 million. The underlying asset for these securities is preferred stock of the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). The fair values of the auction rate securities, which cannot be corroborated by the market, were estimated based on the value of the underlying assets and our assumptions. At July 31, 2008, we determined that there was an other than temporary decline in the value of these auction rate securities, and accordingly, recorded a $7.2 million expense and reduced the auction rate securities balance to an estimated fair value of

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$7.1 million. On September 7, 2008, the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship administered by the FHFA. One result of the conservatorship and related actions of the FHFA was a significant decline in the market value of Fannie Mae and Freddie Mac’s preferred stock. In fiscal 2009, we determined that there was an additional other than temporary decline in the value of these auction rate securities, and accordingly, recorded a $6.8 million expense that was included in “Other expense, net” in our consolidated statement of operations.

On September 30, 2008 and October 8, 2008, we received notices from the NYSE that we were no longer in compliance with the NYSE’s $100 million market capitalization threshold and the $1.00 average closing price over a consecutive 30-day trading period requirement, respectively, required for continued listing. We submitted a plan to the NYSE to regain compliance with the market capitalization standard, and that plan was accepted. The NYSE monitors compliance with the plan and may commence delisting procedures if we fail to meet the milestones set forth in our plan. We have until March 2010 to regain compliance with the $100 million market capitalization standard. As of October 26, 2009, we had a 30-day average market capitalization of $71.3 million. On April 8, 2009, the NYSE notified us that the stock price for each of our listed equity securities was above the NYSE’s minimum requirement of a $1.00 average share price over the preceding 30 trading days and a $1.00 share price on the close of the last trading day of the six-month cure period (April 8, 2009), thus restoring our compliance with the minimum share price requirement for continued listing on the NYSE.

(in millions) Year ended July 31,	2009			2008
Cash flows (used in) provided by
Operating activities	$	(101.4	)	$	(141.1	)
Investing activities		45.8			270.5
Financing activities		(18.5	)		(76.8	)
Effect of exchange rate changes on cash and cash equivalents		(3.0	)		3.5
Decrease (increase) in cash and cash equivalents from continuing operations		(77.1	)		56.1
Net cash provided by (used in) discontinued operations		36.6			(42.6	)
Decrease (increase) in cash and cash equivalents	$	(40.5	)	$	13.5

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.

As of July 31, 2009, our company-wide cost savings program and our reduction in force have resulted in the termination of approximately 1,570 employees since the third quarter of fiscal 2006. Severance and other payments related to these costs savings programs were $22.6 million and $32.9 million in fiscal 2009 and fiscal 2008, respectively. As of July 31, 2009, $6.6 million remained accrued for the ultimate payment of severance and other costs related to these cost savings initiatives.

As a result of an IRS audit of our federal tax returns for fiscal years 2001, 2002, 2003 and 2004, we owed approximately $75 million in taxes for fiscal 2001, approximately $1 million for adjustments carried forward to fiscal 2005 and 2006, and $39.5 million in interest. In connection therewith, we paid $10.0 million of the amount owed in July 2008 and paid the remaining amount owed to the IRS, an aggregate of $108.4 million, in monthly installments from October 2008 through June 2009. In December 2008, the IRS commenced an audit of our federal tax returns for fiscal years 2005, 2006 and 2007. In May 2009, the IRS assessed a liability of $1.2 million for fiscal year 2005 which represents the approximately $1 million previously agreed to plus interest. The IRS granted our request for abatement of a portion of the interest and penalties that were incurred while we were making installment payments, and the IRS applied these payments to the amount owed for fiscal 2005. In addition, an audit in the Netherlands of one of our subsidiaries was completed in October 2008 that resulted in a settlement of $4.4 million including interest, which was paid in December 2008.

We are currently subject to audits in various jurisdictions for various other taxes, including audits relating to value added tax, or VAT, sales and use tax, payroll tax, gross receipts tax and property tax. On September 4,

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2008, a Swedish court granted an application made by the Swedish Tax Agency to seize SEK 100 million ($13.4 million) of assets owned by one of our subsidiaries, Inter Direct Tel Ltd., as security for payment of VAT. Inter Direct Tel appealed the seizure order and on October 6, 2008, the appellate court reversed the lower court’s seizure order. On December 17, 2008, the Swedish Tax Agency sent Inter Direct Tel an Audit Memo describing its reasoning for a VAT assessment of approximately SEK 112 million ($15.1 million) and SEK 22 million ($3.0 million) in penalties. On March 27, 2009, Inter Direct Tel responded to the comments in the Audit Memo. On June 5, 2009, Inter Direct Tel received a re-assessment from the Swedish Tax Agency in the same amounts assessed in the Audit Memo with the payment due on July 13, 2009. Inter Direct Tel received a suspension of the payment obligation until the matter is addressed by the appropriate court. On September 30, 2009, Inter Direct Tel filed an appeal of the re-assessment. We cannot be certain of the ultimate outcome of this matter at this time.

Two of the more significant other audits relate to sales and use tax in New Jersey and payroll tax in Newark, New Jersey, for which we have accrued an aggregate of $5.6 million as of July 31, 2009. Our management believes that we have adequately provided for all of the obligations for these taxes, however amounts asserted by taxing authorities could be greater than the accrued amounts. Accordingly, additional provisions may be recorded in the future as revised estimates are made or underlying matters are settled or resolved. Imposition of assessments as a result of tax and regulatory audits could have an adverse affect on our results of operations, cash flows and financial condition.

Investing Activities

In fiscal 2009 and fiscal 2008, proceeds from sales and maturities of marketable securities net of purchases of marketable securities were $93.0 million and $246.8 million, respectively.

Our capital expenditures were $15.3 million in fiscal 2009 compared to $18.1 million in fiscal 2008. We currently anticipate that total capital expenditures for all of our divisions in fiscal 2010 will be in the $7.5 million to $12.5 million range. In May 2009, we completed the migration of our global network from dedicated capacity TDM circuits to burstable Internet protocol circuits, which utilize connectivity capacity more efficiently and results in lower overall cost. 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.

In fiscal 2009 and fiscal 2008, cash used for investments and acquisitions was $8.0 million and $21.8 million, respectively. In fiscal 2009, $5.9 million was used to acquire the 49% interest in UTA that we did not own, including cash of UTA DR and EGB that were assigned to the seller in the transaction, $1.0 million was used for a short-term certificate of deposit, and $1.1 million was used for capital contributions to AMSO, LLC. The fiscal 2008 amount included cash used for our investment in AMSO LLC of $5.5 million and additional investments in pooled investment vehicles including hedge funds of $15.9 million.

We received $28.6 million in fiscal 2009 from the redemption of certain of our investments in pooled investment vehicles. We received $70.1 million in fiscal 2008 from the sale or redemption of certain of our investments, including investments in pooled investment vehicles.

Restricted cash and cash equivalents increased $60.9 million in fiscal 2009 as a result of our shifting balances from restricted marketable securities to restricted cash and cash equivalents, and increased $1.7 million in fiscal 2008. Restricted cash, cash equivalents and marketable securities serve as collateral for letters of credit for IDT Energy’s purchases of natural gas and electric capacity, energy and ancillary services, as well as to secure equipment financing and mortgage repayments on various buildings.

In March 2009, Total acquired a 50% interest in AMSO, LLC in exchange for cash paid to us of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures.

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In fiscal 2009, we received proceeds from sales of buildings of $4.9 million for the sale of IDT Global Israel’s building and the sale of Hillview’s property, plus we received cash of $3.1 million in August 2009 related to the sale of Hillview’s property. We sold a building in Newark, New Jersey in fiscal 2008 and received cash of $4.9 million from the sale. We recorded a loss of $0.3 million and a gain of $4.1 million on the sales of the buildings in fiscal 2009 and fiscal 2008, respectively.

Financing Activities

We distributed cash of $2.8 million and $4.1 million in fiscal 2009 and fiscal 2008, respectively, to the minority equity holders of subsidiaries.

On September 23, 2008, we sold a 10% ownership interest in Zedge to Shaman II, L.P. for cash of $1.0 million. One of the limited partners in Shaman II, L.P. was a former employee of ours. In November 2008, we sold a 10% minority interest in Israel Energy Initiatives, Ltd. to one of Israel Energy Initiatives, Ltd.’s employees for cash of $0.2 million.

In fiscal 2008, we received proceeds from the exercise of our stock options of $0.1 million. We received proceeds from purchases under our employee stock purchase plan of less than $0.1 million in fiscal 2009 and $1.2 million in fiscal 2008.

Repayments of capital lease obligations were $7.7 million and $25.6 million in fiscal 2009 and fiscal 2008, respectively. We also repaid other borrowings of $0.9 million and $3.0 million in fiscal 2009 and fiscal 2008, respectively.

In June 2006, our Board of Directors authorized a stock repurchase program for the repurchase of up to an aggregate of 8.3 million shares of our Class B common stock and common stock, without regard to class. On December 17, 2008, our Board of Directors increased the aggregate number of shares of our Class B common stock and common stock, without regard to class, that we are authorized to repurchase under the stock repurchase program from the 3.3 million shares that remained available for repurchase to 8.3 million shares. In fiscal 2009, we repurchased 3.2 million shares of Class B common stock and 1.5 million shares of common stock for an aggregate purchase price of $8.3 million. In fiscal 2008, we repurchased 1.8 million shares of Class B common stock and 0.2 million shares of common stock for an aggregate purchase price of $44.5 million. As of July 31, 2009, 6.1 million shares remained available for repurchase under the stock repurchase program.

In fiscal 2009 and fiscal 2008, we acquired in each year less than 0.1 million shares of our Class B common stock held by certain of our employees for less than $0.1 million and $0.9 million, respectively, to satisfy the employees’ tax withholding obligations in connection with the lapsing of restrictions on restricted stock awards.

CHANGES IN TRADE ACCOUNTS RECEIVABLE, ALLOWANCE FOR DOUBTFUL ACCOUNTS AND DEFERRED REVENUE

Gross trade accounts receivable decreased to $158.1 million at July 31, 2009 from $193.5 million at July 31, 2008 mostly due to reductions in revenues. The allowance for doubtful accounts as a percentage of gross trade accounts receivable decreased to 10.4% at July 31, 2009 from 10.8% at July 31, 2008 mainly because the allowance balance decreased 21.6% while the gross trade accounts receivable balance decreased 18.3%.

Deferred revenue as a percentage of total revenues vary from period to period depending on the mix and the timing of revenues. Deferred revenue arises primarily from the sales by IDT Telecom of our calling cards and consumer phone services. Deferred revenue decreased to $69.2 million at July 31, 2009 from $88.6 million at July 31, 2008 primarily due to a decline in activations of our calling cards in the U.S. and Europe, partially offset by increased calling card activations in Asia, and the decline in our consumer phone services business.

Other Sources and Uses of Cash

We intend to, where appropriate, make limited strategic investments and small 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

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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, our U.K.-based Toucan business and IDT Carmel’s debt portfolios). We continually evaluate our portfolio for opportunities to monetize select businesses where we deem appropriate.

On October 23, 2009, we sold our land and building in San Juan, Puerto Rico that was used for our domestic call center operations. The sales price was cash of $7.4 million. At July 31, 2009, the carrying value of the land and building was $6.7 million and the mortgage payable balance was $6.2 million.

We incurred a loss from continuing operations in each of the five years in the period ended July 31, 2009. We incurred a net loss in fiscal 2009, fiscal 2008, fiscal 2006 and fiscal 2005, and we would have incurred a net loss in fiscal 2007 except for a gain on the sale of a discontinued operation. We also had negative cash flow from operating activities in each of the three years in the period ended July 31, 2009. We had an accumulated deficit at July 31, 2009 of $251.9 million. Historically, we satisfied our cash requirements primarily through a combination of our existing cash and cash equivalents, proceeds from the sale of businesses, proceeds from the sales and maturities of marketable securities and investments, arbitration awards and litigation settlements, and borrowings from third parties. We currently expect our operations in the next twelve months and the balance of cash, cash equivalents, marketable securities and pooled investment vehicles including hedge funds that we held as of July 31, 2009 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. The foregoing is based on a number of assumptions, including that we will collect our receivables, effectively manage our working capital requirements, prevail in legal actions and other claims initiated against us, and maintain our revenue levels and liquidity. Predicting these matters is particularly difficult in the current worldwide economic situation and overall decline in consumer demand. Failure to generate sufficient revenue and operating income could have a material adverse effect on our results of operations, financial condition and cash flows. The recoverability of assets is highly dependent on the ability of management to execute our business plan.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following tables quantify our future contractual obligations and commercial commitments as of July 31, 2009:

CONTRACTUAL OBLIGATIONS

Payments Due by Period

(in millions)	Total		Less than 1 year		1—3 years		4—5 years		After 5 years
Capital lease obligations (including interest)	$	13.8	$	7.9	$	5.8	$	0.1	$	—
Operating leases		14.8		6.2		6.4		2.2		—
Other obligations(1)		2.1		1.2		0.5		0.4		—
Notes payable (including interest)		74.2		3.5		6.8		7.1		56.8
TOTAL CONTRACTUAL OBLIGATIONS(2)	$	104.9	$	18.8	$	19.5	$	9.8	$	56.8

(1) Includes purchase commitments and other obligations.

(2) The above table does not include the following due to the uncertainty of the amount and timing of any such payments. In connection with the sale of IDT Entertainment to Liberty Media Corporation in the first quarter of fiscal 2007, we are 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 (the 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, which is included in “Other long-term liabilities” in the consolidated balance sheet.

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OTHER COMMERCIAL COMMITMENTS

Payments Due by Period

(in millions)	Total		Less than 1 year		1—3 years		4—5 years		After 5 years
Standby letters of credit	$	70.4	$	67.4	$	0.2	$	0.1	$	2.7

The letters of credit outstanding at July 31, 2009 were primarily collateral for IDT Energy’s purchases of natural gas through wholesale bilateral contracts with suppliers and various utility companies and electric capacity, energy and ancillary services through the wholesale markets, as well as to secure equipment financing and mortgage repayments on various buildings. As a result of IDT Energy’s Preferred Supplier Agreement with BP, as of October 28, 2009, an aggregate of $57.0 million in letters of credit outstanding at July 31, 2009 that were collateral for IDT Energy have been reduced to $7.8 million.

FOREIGN CURRENCY RISK

Revenues from our international operations represented 33.8% and 35.9% of our consolidated revenues from continuing operations for fiscal 2009 and fiscal 2008, 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 U.S. Dollar-denominated revenues with operating expenses that are paid in the same currencies. While the impact from fluctuations in foreign exchange rates affects our revenues and expenses denominated in foreign currencies, the net amount of our exposure to foreign currency exchange rate changes at the end of each reporting period is generally not material. From time to time, we may enter into foreign exchange hedges, although there were none outstanding since the fourth quarter of fiscal 2008.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations, that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks.

Smaller reporting companies are not required to provide the information required by this item.

Item 8. Financial Statements and Supplementary Data.

The Consolidated Financial Statements and supplementary data of the Company and the report of the independent registered public accounting firm thereon set forth starting on page F-1 herein are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T). 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 Annual Report on Form 10-K. Based on this evaluation, and as a result of the material weakness described in Item 9A to Part II of our Annual Report on Form 10-K for the year ended July 31, 2008 that was remediated as of July 31, 2009, our Chief Executive Officer and Chief Financial Officer have concluded as of July 31, 2009, that our disclosure controls and procedures were effective and were designed to ensure that material information relating to our and our consolidated subsidiaries would be accumulated and communicated to them by others within those entities to allow timely decisions regarding required disclosure.

As described in Item 9A to Part II of our Annual Report on Form 10-K for the year ended July 31, 2008, during the audit of our financial statements as of July 31, 2008 and for the year then ended, a material weak-

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ness existed relating to our lack of internal expertise and resulting failure to properly execute control procedures designed to prepare and evaluate the annual testing for impairment of goodwill and other intangible assets not subject to amortization as required by SFAS No. 142, “Goodwill and Other Intangible Assets.” This material weakness resulted in a material audit adjustment for an impairment charge with respect to goodwill.

Consequently, our consolidated financial statements as of July 31, 2008 and for the year then ended properly reflected the results of the goodwill impairment testing.

To remediate this material weakness, we performed a more rigorous fact gathering process and consideration of the relevant valuation assumptions in our Step 1 analysis under SFAS 142. In addition, in May 2009, certain of our personnel received training on valuation techniques to improve our internal expertise. We also enhanced and expanded our review procedures to include additional personnel who were involved in a timelier manner. We believe these measures adequately addressed the material weakness that existed at July 31, 2008 related to the annual testing for impairment required by SFAS 142. Our remediation effort was completed with our annual testing for impairment required by SFAS 142. Regarding our interim test for impairment conducted for our fiscal quarter ended April 30, 2009, we engaged a valuation consulting firm to assist us with our analysis. We will continue to evaluate and monitor our remediation of the material weakness and will take all appropriate action when and as necessary to ensure we have effective internal controls over financial reporting.

There were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s report on internal control over financial reporting is included in this Annual Report on Form 10-K on page 76 and is incorporated herein by reference.

Item 9B. Other Information.

None.

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The following is a list of our directors and executive officers along with the specific information required by Rule 14a-3 of the Securities Exchange Act of 1934:

Executive Officers

Howard S. Jonas—Chairman of the Board and Chief Executive Officer

Bill Pereira—Chief Financial Officer and Treasurer

Ira A. Greenstein—President

Mitch Silberman—Chief Accounting Officer and Controller

Joyce J. Mason—Executive Vice President, General Counsel and Secretary

Douglas W. Mauro—Chief Tax Officer

Liore Alroy—Executive Vice President

Claude Pupkin—Executive Vice President

Directors

Howard S. Jonas

James A. Courter—Vice Chairman of the Board of Directors of IDT Corporation

Eric Cosentino—Rector of the Episcopal Church of the Divine Love in Montrose, New York.

James Mellor—Chairman of USEC, Inc. (NYSE: USU), a global energy company and previously served as its Chairman and Chief Executive Officer.

Judah Schorr—Founder of Judah Schorr MD PC, an anesthesia provider to hospitals, ambulatory surgery centers and medical offices, and has been its President and owner since its inception, as well as the President of its subsidiary, Tutto Anesthesia. Dr. Schorr is the Director of Anesthesia Services at Bergen Regional Medical Center, the largest hospital in the state of New Jersey, and the Managing Partner of Chavrusa Realty Corp., a commercial real-estate company in Long Island, New York.

The remaining information required by this Item will be contained in the Company’s Proxy Statement for its Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

We have included as exhibits to this Annual Report on Form 10-K certificates of our Chief Executive Officer and Chief Financial Officer certifying the quality of the company’s public disclosure. In December 2008, our former Chief Executive Officer submitted to the New York Stock Exchange a certificate certifying that he was not aware of any violations by us of the New York Stock Exchange corporate governance listing standards.

We make available free of charge through the investor relations page of our web site (www.idt.net/ir) our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports, and all beneficial ownership reports on Forms 3, 4 and 5 filed by directors, officers and beneficial owners of more than 10% of our equity, as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission. We have adopted codes of business conduct and ethics for all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. Copies of the codes of business conduct and ethics are available on our web site.

Our web site and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K or our other filings with the SEC.

Item 11. Executive Compensation.

The information required by this Item will be contained in the Company’s Proxy Statement for its Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item will be contained in the Company’s Proxy Statement for its Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will be contained in the Company’s Proxy Statement for its Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

Item 14. Principal Accounting Fees and Services.

The information required by this Item will be contained in the Company’s Proxy Statement for its Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after July 31, 2009, and which is incorporated by reference herein.

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Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Report:

1. Report of Management on Internal Control Over Financial Reporting

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements covered by Report of Independent Registered Public Accounting Firm

2. Financial Statement Schedule.

All schedules have been omitted since they are either included in the Notes to Consolidated Financial Statements or not required or not applicable.

3. The exhibits listed in paragraph (b) of this item. Exhibit Numbers 10.01 10.02, 10.03, 10.04, 10.05, 10.06, 10.07, 10.08, 10.09, 10.10, 10.15, 10.17 and 10.18 are management contracts or compensatory plans or arrangements.

(b) Exhibits.

Exhibit Number	Description of Exhibits
3.01(1)	Second Restated Certificate of Incorporation of the Registrant.
3.02(2)	Fourth Amended and Restated By-laws of the Registrant.
10.01(3)	Employment Agreement between the Registrant and James Courter.
10.02(3)	Amendment to the Employment Agreement between the Registrant and James A. Courter.
10.03(3)	Amendment No. 2 to the Employment Agreement between the Registrant and James A. Courter.
10.04(4)	Amendment No. 3 to Employment Agreement, dated May 12, 2005, between IDT Corporation and James A. Courter.
10.05(5)	Amendment No. 4 to Employment Agreement, dated January 29, 2007, between IDT Corporation and James A. Courter.
10.06(6)	Amendment No. 5 to Employment Agreement, dated March 13, 2007, between IDT Corporation and James A. Courter.
10.07(7)	Amendment No. 6 to Employment Agreement, dated November 5, 2008, between the Registrant and James A. Courter.
10.08(7)	Amended and Restated Employment Agreement, dated October 31, 2008, between the Registrant and Howard S. Jonas.
10.09(8)	1996 Stock Option and Incentive Plan, as amended and restated, of IDT Corporation.
10.10(9)	2005 Stock Option and Incentive Plan of IDT Corporation, as amended.
10.11(10)	Purchase and Sale Agreement dated August 11, 2006, between Liberty Media Corporation (and its subsidiaries) and IDT Corporation (and TLL Dutch Holdings B.V.).
10.12(11)	Share Sale and Purchase Agreement, dated September 7, 2006, by and among IDT Dutch Holdings BV, IDT Corporation and Pipex Communications PLC.
10.13(12)	Agreement of Sale between 520 Broad Street Associates, L.L.C. and Registrant, dated September 19, 2007 and amended October 17, 2007 and November 7, 2007.
10.14(13)	Purchase and Sale Contract among the Registrant, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I LLC, and its predecessors and Sherman Originator III LLC dated January 30, 2009.

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Exhibit Number	Description of Exhibits
10.15(9)	Employment Letter Agreement between the Registrant and Claude Pupkin dated August 3, 2007.
10.16(9)	Separation and General Release Agreement, dated January 2, 2009, between the Registrant and Stephen Brown.
10.17(9)	Consulting Agreement, dated January 2, 2009, between the Registrant and Stephen Brown.
10.18(14)	Employment Agreement, dated April 29, 2009, between the Registrant and Bill Pereira.
10.19**	Purchase Agreement, dated June 16, 2009, by and among IDT Domestic Telecom, Inc., IDT Telecom, Inc., UTCG Holdings, LLC and Carlos Gomez.
10.20**	Preferred Supplier Agreement, dated as of June 29, 2009, by and among BP Energy Company, BP Corporation North America Inc. and IDT Energy, Inc.
14.01*	Code of Business Ethics and Conduct, Updated as of June 15, 2009.
16.01(15)	Letter from Ernst & Young, LLP, the Company’s former independent accountant.
21.01*	Subsidiaries of the Registrant.
23.01*	Consent of Grant Thornton LLP.
31.01*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01*	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.02*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* filed herewith.

** This exhibit is filed herewith but reflects a redacted copy of the agreement. We have filed a confidentiality request with the Securities and Exchange Commission with respect to certain portions of the agreement.

  (1) Incorporated by reference to Form 8-K, filed February 25, 2009.

  (2) Incorporated by reference to Form 8-K, filed September 23, 2009.

  (3) Incorporated by reference to Form 10-K for the fiscal year ended July 31, 2006, filed October 16, 2006.

  (4) Incorporated by reference to Form 8-K, filed May 16, 2005.

  (5) Incorporated by reference to Form 8-K, filed February 2, 2007.

  (6) Incorporated by reference to Form 8-K, filed March 16, 2007.

  (7) Incorporated by reference to Form 8-K, filed November 6, 2008.

  (8) Incorporated by reference to Schedule 14A, filed November 3, 2004.

  (9) Incorporated by reference to Form 10-Q for fiscal quarter ended January 31, 2009 filed March 17, 2009.

  (10) Incorporated by reference to Form 8-K, filed August 14, 2006.

  (11) Incorporated by reference to Form 8-K, filed September 13, 2006.

  (12) Incorporated by reference to Form 8-K, filed November 9, 2007.

  (13) Incorporated by reference to Form 8-K, filed February 5, 2009.

  (14) Incorporated by reference to Form 8-K, filed May 1, 2009.

  (15) Incorporated by reference to Form 8-K, filed March 27, 2008.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

IDT CORPORATION
By:	/s/    Howard S. Jonas
	Howard S. Jonas Chairman and Chief Executive Officer

Date:    October 29, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Titles	Date
/s/    Howard S. Jonas Howard S. Jonas	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	October 29, 2009
/s/    Bill Pereira Bill Pereira	Chief Financial Officer and Treasurer (Principal Financial Officer)	October 29, 2009
/s/    Mitch Silberman Mitch Silberman	Chief Accounting Officer and Controller (Principal Accounting Officer)	October 29, 2009
/s/    James A. Courter James A. Courter	Vice Chairman and Director	October 29, 2009
/s/    Eric F. Cosentino Eric F. Cosentino	Director	October 29, 2009
/s/    James R. Mellor James R. Mellor	Director	October 29, 2009
/s/    Judah Schorr Judah Schorr	Director	October 29, 2009

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REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

We, the management of IDT Corporation (the “Company”), are responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management has evaluated internal control over financial reporting by the Company using the criteria for effective internal control established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Management has assessed the effectiveness of the Company’s internal controls over financial reporting as of July 31, 2009. Based on this assessment, we believe that the internal control over financial reporting of the Company as of July 31, 2009 was effective and through operation provided reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America, as a result of the remediation of a material weakness in the Company’s internal controls and procedures, as described below.

During the audit of our financial statements as of July 31, 2008 and for the year then ended, a material weakness existed relating to our lack of internal expertise and resulting failure to properly execute control procedures designed to prepare and evaluate the annual testing for impairment of goodwill and other intangible assets not subject to amortization for our Wholesale, Rechargeable, and Carmel reporting units as required by SFAS No. 142, “Goodwill and Other Intangible Assets.” This material weakness resulted in a material audit adjustment aggregating $25.3 million for an impairment charge with respect to goodwill for our Wholesale, Rechargeable, and Carmel reporting units. Consequently, our consolidated financial statements as of July 31, 2008 and for the year then ended properly reflected the results of the goodwill impairment in accordance with U.S. GAAP.

To remediate this material weakness, we performed a more rigorous fact gathering process and consideration of the relevant valuation assumptions in our Step 1 analysis under SFAS 142. In addition, in May 2009, certain of our personnel received training on valuation techniques to improve our internal expertise. We also enhanced and expanded our review procedures to include additional personnel who were involved in a timelier manner. We believe these measures adequately addressed the material weakness that existed at July 31, 2008 related to the annual testing for impairment required by SFAS 142. Our remediation effort was completed with our annual testing for impairment required by SFAS 142. Regarding our interim test for impairment conducted for our fiscal quarter ended April 30, 2009, we engaged a valuation consulting firm to assist us with our analysis. We will continue to evaluate and monitor our remediation of the material weakness and will take all appropriate action when and as necessary to ensure we have effective internal controls over financial reporting.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

/s/  Howard S. Jonas

Howard S. Jonas

Chairman and Chief Executive Officer

/s/  Bill Pereira

Bill Pereira

Chief Financial Officer and Treasurer

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IDT Corporation

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of July 31, 2009 and 2008	F-3
Consolidated Statements of Operations for the Years Ended July 31, 2009 and 2008	F-4
Consolidated Statements of Stockholders’ Equity for the Years Ended July 31, 2009 and 2008	F-5
Consolidated Statements of Cash Flows for the Years Ended July 31, 2009 and 2008	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

IDT Corporation

We have audited the accompanying consolidated balance sheets of IDT Corporation (a Delaware corporation) and subsidiaries (the “Company”) as of July 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended July 31, 2009. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of IDT Corporation and subsidiaries as of July 31, 2009 and 2008, and the results of their operations and their cash flows for each of the two years in the period ended July 31, 2009 in conformity with accounting principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLP

New York, New York

October 29, 2009

F-2

IDT CORPORATION

CONSOLIDATED BALANCE SHEETS

July 31 (in thousands)	2009			2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	111,255		$	158,265
Restricted cash and cash equivalents (Note 18)		64,992			4,133
Marketable securities (Note 18)		5,702			105,030
Trade accounts receivable, net of allowance for doubtful accounts of $16,413 and $20,933 at July 31, 2009 and 2008, respectively		141,648			172,519
Prepaid expenses		18,034			19,307
Investments-short-term		1,655			22,563
Other current assets		18,802			50,528
Assets of discontinued operations		14,532			162,996
TOTAL CURRENT ASSETS		376,620			695,341
Property, plant and equipment, net		133,468			164,861
Goodwill		17,275			74,509
Licenses and other intangibles, net		5,938			9,394
Investments—long-term		13,099			40,295
Deferred income tax assets, net		—			2,300
Other assets		13,220			16,275
TOTAL ASSETS	$	559,620		$	1,002,975
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	67,474		$	75,684
Accrued expenses		160,131			201,718
Deferred revenue		69,236			88,618
Income taxes payable		2,031			123,000
Capital lease obligations—current portion		7,280			9,316
Notes payable—current portion		820			1,052
Other current liabilities		5,415			13,956
Liabilities of discontinued operations		1,998			70,008
TOTAL CURRENT LIABILITIES		314,385			583,352
Capital lease obligations—long-term portion		5,737			11,148
Notes payable—long-term portion		43,281			42,543
Other liabilities		16,775			17,745
TOTAL LIABILITIES		380,178			654,788
Minority interests		3,148			5,850
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; 9,241 and 8,358 shares issued and 4,202 and 4,847 shares outstanding at July 31, 2009 and 2008, respectively		92			84
Class A common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and outstanding at July 31, 2009 and 2008		33			33
Class B common stock, $.01 par value; authorized shares—200,000; 22,913 and 21,301 shares issued and 15,503 and 17,083 shares outstanding at July 31, 2009 and 2008, respectively		229			213
Additional paid-in capital		720,804			717,256
Treasury stock, at cost, consisting of 5,039 and 3,511 shares of common stock and 7,410 and 4,218 shares of Class B common stock at July 31, 2009 and 2008, respectively		(293,901	)		(285,536	)
Accumulated other comprehensive income		953			6,754
Accumulated deficit		(251,916	)		(96,467	)
TOTAL STOCKHOLDERS’ EQUITY		176,294			342,337
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	559,620		$	1,002,975

See accompanying notes to consolidated financial statements.

F-3

IDT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended July 31 (in thousands, except per share data)	2009			2008
REVENUES	$	1,538,610		$	1,755,526
COSTS AND EXPENSES:
Direct cost of revenues (exclusive of depreciation and amortization)		1,173,554			1,376,144
Selling, general and administrative (i)		293,667			418,236
Depreciation and amortization		49,285			65,686
Bad debt		8,130			13,488
Research and development		9,035			11,567
Impairments		70,968			28,311
Restructuring charges		10,028			34,613
TOTAL COSTS AND EXPENSES		1,614,667			1,948,045
Gain on sale of interest in AMSO, LLC		2,598			—
Arbitration award income		—			40,000
Loss on disposal of businesses		—			(9,569	)
Loss from operations		(73,459	)		(162,088	)
Interest (expense) income, net		(2,656	)		9,195
Other expense, net		(33,466	)		(18,497	)
Loss from continuing operations before minority interests and income taxes		(109,581	)		(171,390	)
Minority interests		(1,901	)		1,404
Benefit from (provision for) income taxes		4,521			(9,870	)
Loss from continuing operations		(106,961	)		(179,856	)
Discontinued operations, net of tax:
Loss from discontinued operations		(45,860	)		(39,586	)
Loss on disposal/sale of discontinued operations		(2,628	)		(4,888	)
Total discontinued operations		(48,488	)		(44,474	)
NET LOSS	$	(155,449	)	$	(224,330	)
Earnings per share:
Basic and diluted:
Loss from continuing operations	$	(4.75	)	$	(7.09	)
Total discontinued operations		(2.15	)		(1.75	)
Net loss	$	(6.90	)	$	(8.84	)
Weighted-average number of shares used in calculation of basic and diluted earnings per share		22,542			25,390
(i) Stock based compensation included in selling, general and administrative expense	$	3,407		$	4,285

See accompanying notes to consolidated financial statements.

F-4

IDT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock					Class A Common Stock					Class B Common Stock					Additional Paid-In Capital			Treasury Stock			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount			Shares		Amount			Shares		Amount
BALANCE AT JULY 31, 2007	25,075		$	251		9,817			98		63,261		$	633		$	711,103		$	(240,355	)	$	10,750		$	147,682		$	630,162
Reverse stock split	(16,717	)		(167	)	(6,545	)		(65	)	(42,174	)		(422	)		654			—			—			—			—
BALANCE AT JULY 31, 2007 AFTER REVERSE STOCK SPLIT	8,358			84		3,272			33		21,087			211			711,757			(240,355	)		10,750			147,682			630,162
Adoption of FASB Interpretation No. 48	—			—		—			—		—			—			—			—			—			(19,819	)		(19,819	)
Exercise of stock options, net of 5 shares issued from treasury	—			—		—			—		4			—			(79	)		173			—			—			94
Issuance of shares of Class B common stock through employee stock purchase plan	—			—		—			—		125			1			1,172			—			—			—			1,173
Restricted Class B common stock purchased from employees	—			—		—			—		—			—			—			(897	)		—			—			(897	)
Repurchases of common stock and Class B common stock through repurchase program	—			—		—			—		—			—			—			(44,457	)		—			—			(44,457	)
Stock based compensation	—			—		—			—		—			—			4,407			—			—			—			4,407
Restricted Class B common stock issued to employees	—			—		—			—		85			1			(1	)		—			—			—			—
Change in unrealized gain (loss) on available-for-sale securities	—			—		—			—		—			—			—			—			(2,616	)		—			(2,616	)
Foreign currency translation adjustment	—			—		—			—		—			—			—			—			(1,380	)		—			(1,380	)
Net loss for the year ended July 31, 2008	—			—		—			—		—			—			—			—			(224,330	)		(224,330	)		(224,330	)
Comprehensive loss																						$	(228,326	)
BALANCE AT JULY 31, 2008	8,358			84		3,272			33		21,301			213			717,256			(285,536	)		6,754			(96,467	)		342,337
Issuance of shares of Class B common stock through employee stock purchase plan	—			—		—			—		36			—			36			—			—			—			36
Restricted Class B common stock purchased from employees	—			—		—			—		—			—			—			(45	)		—			—			(45	)
Repurchases of common stock and Class B common stock through repurchase program	—			—		—			—		—			—			—			(8,320	)		—			—			(8,320	)
Stock based compensation	—			—		—			—		—			—			3,356			—			—			—			3,356
Restricted stock issued to employees	883			8		—			—		1,576			16			(24	)		—			—			—			—
Sales of stock of subsidiaries	—			—		—			—		—			—			180			—			—			—			180
Change in unrealized gain (loss) on available-for-sale securities	—			—		—			—		—			—			—			—			3,173			—			3,173
Foreign currency translation adjustment	—			—		—			—		—			—			—			—			(8,974	)		—			(8,974	)
Net loss for the year ended July 31, 2009	—			—		—			—		—			—			—			—			(155,449	)		(155,449	)		(155,449	)
Comprehensive loss																						$	(161,250	)
BALANCE AT JULY 31, 2009	9,241		$	92		3,272		$	33		22,913		$	229		$	720,804		$	(293,901	)	$	953		$	(251,916	)	$	176,294

See accompanying notes to consolidated financial statements.

F-5

IDT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended July 31 (in thousands)	2009			2008
OPERATING ACTIVITIES
Net (loss) income	$	(155,449	)	$	(224,330	)
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Net loss from discontinued operations		48,488			44,474
Depreciation and amortization		49,285			65,686
Restructuring charges		(12,485	)		9,069
Impairments		70,968			28,311
Minority interests		1,901			(1,404	)
Deferred income taxes		2,300			5,832
Write-off of acquired research and development assets		—			6,672
Provision for doubtful accounts receivable		8,130			13,633
Net realized losses from sales of marketable securities and investments		9,192			17,365
Gain on sale of interest in AMSO, LLC		(2,598	)		—
Loss (gain) on sales of buildings		311			(4,146	)
(Gain) loss on sale/disposal of businesses		(272	)		9,569
Gain on sale of stock of subsidiary		(336	)		—
Interest in the equity of investments		21,950			6,078
Stock-based compensation		3,407			4,285
Change in assets and liabilities, net of effects from dispositions/sales of businesses:
Trade accounts receivable		13,474			(35,407	)
Prepaid expenses, other current assets and other assets		19,215			11,506
Trade accounts payable, accrued expenses, other current liabilities and other liabilities		(40,669	)		(64,129	)
Income taxes payable		(120,969	)		(10,000	)
Deferred revenue		(17,244	)		(24,139	)
Net cash used in operating activities		(101,401	)		(141,075	)
INVESTING ACTIVITIES
Capital expenditures		(15,253	)		(18,121	)
Purchase of building		—			(24,778	)
Repayment of notes receivable, net		201			15,003
Investments and acquisitions		(7,950	)		(21,782	)
Proceeds from sales and redemptions of investments		28,601			70,105
Restricted cash and cash equivalents		(60,859	)		(1,693	)
Proceeds from sale of interest in AMSO, LLC		3,199			—
Proceeds from sales of buildings		4,892			4,872
Proceeds from sales and maturities of marketable securities		148,985			689,789
Purchases of marketable securities		(56,035	)		(442,945	)
Net cash provided by investing activities		45,781			270,450
FINANCING ACTIVITIES
Distributions to minority shareholders of subsidiaries		(2,760	)		(4,087	)
Proceeds from sales of stock of subsidiaries		1,187			—
Proceeds from exercise of stock options		—			94
Proceeds from employee stock purchase plan		36			1,173
Repayments of capital lease obligations		(7,701	)		(25,644	)
Repayments of borrowings		(916	)		(2,984	)
Repurchases of common stock and Class B common stock		(8,365	)		(45,354	)
Net cash used in financing activities		(18,519	)		(76,802	)
DISCONTINUED OPERATIONS
Net cash provided by (used in) operating activities		776			(2,134	)
Net cash provided by (used in) investing activities		36,969			(39,918	)
Net cash used in financing activities		(1,106	)		(590	)
Net cash provided by (used in) discontinued operations		36,639			(42,642	)
Effect of exchange rate changes on cash and cash equivalents		(3,004	)		3,551
Net (decrease) increase in cash and cash equivalents		(40,504	)		13,482
Cash and cash equivalents (including discontinued operations) at beginning of year		164,886			151,404
Cash and cash equivalents (including discontinued operations) at end of year		124,382			164,886
Less cash and cash equivalents of discontinued operations at end of year		(13,127	)		(6,621	)
Cash and cash equivalents (excluding discontinued operations) at end of year	$	111,255		$	158,265
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments made for interest	$	8,865		$	9,711
Cash payments made for income taxes	$	113,552		$	13,090
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES
Aggregate of note payable issued, note receivable forgiven, ownership interests assigned and other consideration for the UTA acquisition	$	4,833		$	—
Assumption of mortgage payable in connection with the purchase of building	$	—		$	26,851
Purchases of property, plant and equipment through capital lease obligations	$	299		$	398

See accompanying notes to consolidated financial statements.

F-6

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Business and Summary of Significant Accounting Policies

Description of Business

IDT Corporation (“IDT” or the “Company”) is a multinational holding company with subsidiaries spanning several industries. The Company’s principal businesses include: IDT Telecom, which provides telecommunications services to consumers and businesses, including prepaid and rechargeable calling cards, a range of voice over Internet protocol (“VoIP”) communications services, wholesale carrier services, and local, long distance and wireless phone services; IDT Energy, which operates an Energy Services Company, or ESCO, in New York State; Alternative Energy, which consists of American Shale Oil Corporation (“AMSO”), which manages the Company’s 50% interest in American Shale Oil, L.L.C. (“AMSO, LLC”), the Company’s U.S. oil shale initiative, and Israel Energy Initiatives, Ltd., the Company’s Israeli alternative energy venture; and Zedge, which provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing.

On September 14, 2009, the Company completed a pro rata distribution of the common stock of CTM Media Holdings, Inc. (“CTM Holdings”) to the Company’s stockholders of record as of the close of business on August 3, 2009 (the “CTM Spin-Off”) (see Note 22). CTM Holdings’ businesses include: CTM Media Group, which is a distributor of print and online advertising and information in targeted North American tourist markets; IDW Publishing, which is a comic and book publisher with a diverse catalog of licensed and independent titles; and WMET 1160AM, which is a paid programming radio station in the Washington, D.C. metropolitan area. Since CTM Holdings did not meet the criteria to be reported as discontinued operations until September 14, 2009, the assets, liabilities, results of operations and cash flows of CTM Holdings and its subsidiaries are included in the Company’s continuing operations for all periods presented.

On September 30, 2008 and October 8, 2008, the Company received notices from the New York Stock Exchange (“NYSE”) that it was no longer in compliance with the NYSE’s $100 million market capitalization threshold and the $1.00 average closing price over a consecutive 30-day trading period requirement, respectively, required for continued listing. The Company submitted a plan to the NYSE to regain compliance with the market capitalization standard, and that plan was accepted. The NYSE monitors compliance with the plan and may commence delisting procedures if the Company fails to meet the milestones set forth in its plan. The Company has until March 2010 to regain compliance with the $100 million market capitalization standard. As of October 26, 2009, the Company had a 30-day average market capitalization of $71.3 million. On April 8, 2009, the NYSE notified the Company that the stock price for each of the Company’s listed equity securities was above the NYSE’s minimum requirement of a $1.00 average share price over the preceding 30 trading days and a $1.00 share price on the close of the last trading day of the six-month cure period (April 8, 2009), thus restoring the Company’s compliance with the minimum share price requirement for continued listing on the NYSE.

The Company has the following three reportable business segments: Telecom Platform Services, Consumer Phone Services and IDT Energy. All other operating segments that are not reportable individually are included in All Other. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division.

A one-for-three reverse stock split of all of the Company’s outstanding common stock, Class A common stock and Class B common stock was effective on February 24, 2009 (see Note 12). All share, weighted average share and per share amounts in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to reflect the one-for-three reverse stock split. The one-for-three reverse stock split did not affect the number of authorized shares or the par value per share.

The Company incurred a loss from continuing operations in each of the five years in the period ended July 31, 2009. The Company incurred a net loss in fiscal 2009, fiscal 2008, fiscal 2006 and fiscal 2005, and the Company would have incurred a net loss in fiscal 2007 except for a gain on the sale of a discontinued operation. The Company also had negative cash flow from operating activities in each of the three years in the period ended July 31, 2009. The Company had an accumulated deficit at July 31, 2009 of $251.9 million. Historically, the Company satisfied its cash requirements primarily through a combination of its existing cash

F-7

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and cash equivalents, proceeds from the sale of businesses, proceeds from the sales and maturities of marketable securities and investments, arbitration awards and litigation settlements, and borrowings from third parties. The Company currently expects its operations in the next twelve months and the balance of cash, cash equivalents, marketable securities and pooled investment vehicles including hedge funds that it held as of July 31, 2009 will be sufficient to meet its currently anticipated working capital and capital expenditure requirements, and to fund any potential operating cash flow deficits within any of its segments for at least the next twelve months. The foregoing is based on a number of assumptions, including that the Company will collect its receivables, effectively manage its working capital requirements, prevail in legal actions and other claims initiated against it, and maintain its revenue levels and liquidity. Predicting these matters is particularly difficult in the current worldwide economic situation and overall decline in consumer demand. Failure to generate sufficient revenue and operating income could have a material adverse effect on the Company’s results of operations, financial condition and cash flows. The recoverability of assets is highly dependent on the ability of management to execute its business plan.

Basis of Consolidation and Accounting for Investments

The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled subsidiaries. In addition, the Company has not identified any variable interests in which the Company is the primary beneficiary. All significant intercompany accounts and transactions between the consolidated subsidiaries are eliminated. Investments in businesses that the Company does not control, but in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters are accounted for using the cost 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, investments in pooled investment vehicles including hedge funds are accounted for using the equity method unless the Company’s interest is so minor that it has virtually no influence over operating and financial policies. Equity and cost method investments are included in “Investments” in the accompanying consolidated balance sheets. The Company periodically evaluates its equity and cost method investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded in “Other expense, net” in the accompanying consolidated statements of operations, and a new basis in the investment is established.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year’s presentation. As described in Note 2, certain subsidiaries have been reclassified to discontinued operations for all periods presented. At July 31, 2008, restricted cash and cash equivalents of $4.1 million previously included in cash and cash equivalents have been stated separately in the consolidated balance sheet. Restricted cash and cash equivalents of $4.1 million and $2.4 million at July 31, 2008 and 2007, respectively, previously included in cash and cash equivalents have been excluded from cash and cash equivalents in the consolidated statements of cash flows. Impairments and restructuring charges in fiscal 2008 that were previously combined in one line have been stated separately in the consolidated statements of operations and cash flows. As described in Note 21, business segment results for fiscal 2008 have been reclassified and restated to conform to the current year’s presentation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

F-8

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Revenue Recognition

Traditional voice and VoIP telephony services are recognized as revenue when services are provided, primarily based on usage and/or the assessment of monthly fees. Revenue derived from sales of calling cards is deferred upon sale of the cards and are recognized as revenue when call usage of the cards occur and/or administrative fees are imposed, thereby reducing the Company’s outstanding obligation to the customer. Revenues from IDT Energy, the Company’s retail energy business, are recognized based on deliveries of electricity and natural gas to customers.

Direct Cost of Revenues

Direct cost of revenues for IDT Telecom consists primarily of termination costs, toll-free and payphone costs, and network costs—including customer/carrier interconnect charges and leased fiber circuit charges. Direct cost of revenues for IDT Energy consists primarily of the cost of natural gas and electricity sold. Also included in direct energy costs are scheduling costs, Independent System Operator, or ISO, fees, pipeline costs and utility service charges. Direct cost of revenues excludes depreciation and amortization expense.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Marketable Securities

The Company has investments in marketable securities that are considered “available-for-sale” under Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under SFAS 115, available-for-sale securities are required to be carried at their fair value, with unrealized gains and losses (net of income taxes) that are considered temporary in nature recorded in “Accumulated other comprehensive income” in the accompanying consolidated balance sheets. The fair values of the Company’s investments in marketable securities are determined in accordance with SFAS No. 157, Fair Value Measurements. The Company periodically evaluates its investments in marketable securities for impairment due to declines in market value considered to be other than temporary. Such impairment evaluations include, in addition to persistent, declining market prices, general economic and Company-specific evaluations. If the Company determines that a decline in market value is other than temporary, then a charge to operations is recorded in “Other expense, net” in the accompanying consolidated statements of operations and a new cost basis in the investment is established.

On May 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the guidance in U.S. GAAP for assessing whether an impairment of a debt security is other than temporary, and revises the presentation and disclosure in the financial statements of other than temporary impairments of debt and equity securities. In addition, in April 2009, the Securities and Exchange Commission (“SEC”) amended Topic 5.M. in the Staff Accounting Bulletin Series entitled Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities to exclude debt securities from its scope. Topic 5.M. as amended maintains the staff’s previous views related to equity securities. The adoption of FSP 115-2 and the amendment to Topic 5.M. did not have a material impact on the Company’s financial position, results of operations or cash flows.

Property, Plant and Equipment

Equipment, buildings, computer software and furniture and fixtures are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives, which range as follows: equipment—5, 7 or 20 years; buildings—40 years; computer software—2, 3 or 5 years and furniture and fixtures—5, 7 or 10 years. Leasehold improvements are recorded at cost and are depreciated on a straight-line basis over the term of their lease or their estimated useful lives, whichever is shorter.

F-9

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-Lived Assets

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company tests the recoverability of its long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company tests for impairment based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material.

Goodwill and Other Intangibles

Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, goodwill and other indefinite lived intangible assets are not amortized. These assets are reviewed annually (or more frequently under various conditions) for impairment using a fair value approach. The goodwill impairment assessment involves estimating the fair value of the reporting unit and comparing it to its carrying amount. If the carrying value of the reporting unit exceeds its estimated fair value, additional steps are followed to determine if an impairment of goodwill is required. The fair value of the reporting units is estimated using discounted cash flow methodologies, as well as considering third party market value indicators. Goodwill impairment is measured by the excess of the carrying amount of the reporting unit’s goodwill over its implied fair value. Calculating the fair value of the reporting units, and allocating the estimated fair value to all of the tangible assets, intangible assets and liabilities, requires significant estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, the Company may be required to record additional impairments to its goodwill in future periods and such impairments could be material.

Costs associated with obtaining the right to use trademark and patents owned by third parties are capitalized and amortized on a straight-line basis over the term of the trademark and patents licenses. The fair value of customer lists, trademark and non-compete agreements acquired in a business combination accounted for under the purchase method are amortized over their estimated useful lives as follows: customer lists are amortized ratably over the approximately 15 year period of expected cash flows; trademark is amortized on a straight-line basis over the 5 year period of expected cash flows; and non-compete agreement is amortized on a straight-line basis over the 3 year term of the agreement.

Derivative Instruments and Hedging Activities

The Company accounts for derivatives and hedging activities in accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, which requires that all derivative instruments be recorded on the balance sheet at their respective fair values. The accounting for changes in the fair value (that is, gains or losses) of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.

On February 1, 2009, the Company adopted SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities-an amendment of FASB Statement No. 133. 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 adoption of SFAS 161 had no impact on the Company’s consolidated financial statements, other than the enhanced required disclosures that are included in Note 10.

F-10

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

IDT Energy supplies electricity and natural gas to its retail customers. IDT Energy utilizes forward physical delivery contracts for a substantial amount of its purchases of electricity and natural gas. These physical delivery contracts are defined as commodity derivative contracts under SFAS 133. Using the exemption available for qualifying contracts under SFAS 133, IDT Energy applies the normal purchase and normal sale accounting treatment to its forward physical delivery contracts. Accordingly, IDT Energy recognizes revenue from customer sales as energy is delivered to retail customers, and the related energy under the forward physical delivery contract is recognized as direct cost of revenues when it is received from suppliers. In addition, IDT Energy may enter into forward contracts designated as hedges against unfavorable fluctuations in electricity and natural gas prices. Such contracts do not qualify to be accounted for under hedge accounting in accordance with SFAS 133 and are recorded at fair value as a current asset or liability and any changes in fair value are recorded in “Direct cost of revenues” in the consolidated statements of operations.

The Company may also enter into foreign exchange and commodity prices forward contracts, designated as economic hedges or as speculative, which do not qualify to be accounted for under hedge accounting in accordance with SFAS 133. These contracts are designed to minimize the effect of fluctuations in foreign currencies or to take advantage of market trends and fluctuations in commodity prices. Such contracts are recorded at fair value as a current derivative asset or liability and any changes in fair value are recorded in “Other expense, net” in the consolidated statements of operations.

Advertising Expense

The majority of the Company’s advertising expense is incurred by IDT Telecom. Most of the advertisements are in print or television media, with expenses recorded as they are incurred. In fiscal 2009 and fiscal 2008, advertising expense included in selling, general and administrative expenses was $13.5 million and $19.7 million, respectively.

Research and Development Costs

Costs for research and development, including the Company’s alternative energy and video content delivery and storage platform initiatives, as well as the internal development of new software products and for substantial enhancements to existing software products to be sold, are expensed as incurred until technological feasibility has been established, at which time any additional costs are capitalized.

Capitalized Internal Use Software Costs

The Company capitalizes the cost of internal-use software that has a useful life in excess of one year in accordance with Statement of Position (“SOP”) 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. These costs consist of payments made to third parties and the salaries of employees working on such software development. Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred. Capitalized internal use software costs are amortized on a straight-line basis over their estimated useful lives. Amortization expense related to such capitalized software in fiscal 2009 and fiscal 2008 was $10.5 million and $13.7 million, respectively. Unamortized capitalized internal use software costs at July 31, 2009 and 2008 were $10.8 million and $16.5 million, respectively.

Repairs and Maintenance

The Company charges the cost of repairs and maintenance, including the cost of replacing minor items not constituting substantial betterment, to selling, general and administrative expenses as these costs are incurred.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries denominated in foreign currencies are translated to U.S. Dollars at end-of-period rates of exchange, and their monthly results of operations are translated to U.S. Dollars at the average rates of exchange for that month. Gains or losses resulting from such foreign currency translations are recorded in “Accumulated other comprehensive income” in the accompanying consolidated balance sheets.

F-11

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

Effective August 1, 2007, the Company adopted FASB Interpretation (“FIN”) No. 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 SFAS 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 statements. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Commitments and Contingencies

The Company records and discloses commitments and contingencies in accordance with SFAS No. 5, Accounting for Contingencies, and related interpretations. The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. In accordance with SFAS 5, an estimated possible loss or a range of loss is disclosed when it is at least reasonably possible that a loss may have been incurred.

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.

The following securities have been excluded from the dilutive earnings per share computation because the Company reported losses from continuing operations for those years, and the impact of the assumed exercise of stock options, vesting of restricted stock and issuance of contingently issuable shares would have been anti-dilutive:

July 31 (in thousands)	2009	2008
Stock options	1,984	2,317
Non-vested restricted stock	2,493	131
Contingently issuable shares	—	8
TOTAL	4,477	2,456

F-12

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock-Based Compensation

The Company recognizes compensation cost for all share-based payments granted subsequent to August 1, 2005 based on the grant-date fair value estimated in accordance with SFAS No. 123 (revised 2004), Share-Based Payment. In accordance with Staff Accounting Bulletin (“SAB”) No. 107, stock-based compensation is included in selling, general and administrative expense.

Taxes Collected from Customers and Remitted to Governmental Authorities

On February 1, 2007, the Company adopted EITF No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 provides guidance regarding accounting for certain taxes assessed by a governmental authority that are imposed on and concurrent with specific revenue-producing transactions between a seller and a customer. These taxes include, among others, Universal Service Fund (“USF”) charges, sales, use, value added and some excise taxes. The Company currently records 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 $2.8 million and $3.8 million in fiscal 2009 and fiscal 2008, respectively, were recorded on a gross basis.

Vulnerability Due to Certain Concentrations

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, marketable securities, investments in pooled investment vehicles including hedge funds and trade accounts receivable. The Company holds cash and cash equivalents at several major financial institutions, which often exceed FDIC insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of its counterparties. While the Company may be exposed to credit losses due to the nonperformance of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition.

Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers in various geographic regions and industry segments comprising the Company’s customer base. No single customer accounted for more than 10% of consolidated revenues in fiscal 2009 or fiscal 2008. However, the Company’s five largest customers collectively accounted for 6.7% and 7.6% of its consolidated revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively. The Company’s customers with the five largest receivables balances collectively accounted for 24.6% and 15.9% of the consolidated gross trade accounts receivable at July 31, 2009 and 2008, respectively. This concentration of customers increases the Company’s risk associated with nonpayment by those customers. In an effort to reduce such risk, the Company performs ongoing credit evaluations of its significant retail telecom, wholesale carrier and cable telephony customers. In addition, the Company attempts to mitigate the credit risk related to specific wholesale carrier customers by also buying services from the customer in question, in order to create an opportunity to offset its payables and receivables and reduce its net trade receivable exposure risk. When it is practical to do so, the Company will increase its purchases from wholesale customers with receivable balances that exceed the Company’s payable in order to maximize the offset and reduce its credit risk.

The Company is also subject to risks associated with its international operations, including fluctuations in exchange rates and trade accounts receivable collections. Management regularly monitors the creditworthiness of its domestic and international customers and believes that it has adequately provided for any exposure to potential credit losses. Allowances for doubtful accounts are based on management’s past collection experience and existing economic conditions. Doubtful accounts are written-off upon final determination that the trade accounts will not be collected.

F-13

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. The change in the allowance for doubtful accounts is as follows:

Year ended July 31 (in thousands)	Balance at beginning of year		Additions charged to costs and expenses		Deductions(1)			Balance at end of year
2009
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	20,933	$	8,130	$	(12,650	)	$	16,413
2008
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	19,102	$	13,633	$	(11,802	)	$	20,933

(1) Primarily uncollectible accounts written off, net of recoveries.

Fair Value of Financial Instruments

The estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. At July 31, 2009 and 2008, the carrying value of the Company’s trade accounts receivable, prepaid expenses, investments-short-term, other current assets, trade accounts payable, accrued expenses, deferred revenue, income taxes payable, capital lease obligations—current portion, notes payable—current portion and other current liabilities approximate fair value because of the short period of time to maturity. At July 31, 2009 and 2008, the carrying value of the long term portion of the Company’s notes payable and capital lease obligations approximate fair value as their contractual interest rates approximate market yields for similar debt instruments.

Fair Value Measurements

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 U.S. GAAP, establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value, and expands disclosures about fair value measurements. SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements and related disclosures, the SFAS 157 fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad levels:

Level 1 –	quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 –	quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 –	unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

F-14

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In February 2008, the FASB issued FSP No. FAS 157-2, Effective Date of FASB Statement No. 157, which postponed 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). Nonrecurring nonfinancial assets and nonfinancial liabilities include those measured at fair value in goodwill impairment testing, indefinite lived intangible assets measured at fair value for impairment testing, those initially measured at fair value in a business combination, and nonfinancial liabilities initially measured at fair value for exit or disposal activities. The Company adopted SFAS 157 except as permitted under FSP 157-2 as of August 1, 2008, which did not have a material impact on its financial position, results of operations or cash flows. The Company adopted SFAS 157 for nonrecurring nonfinancial assets and nonfinancial liabilities on August 1, 2009, which did not have a material impact on its financial position, results of operations or cash flows. The Company will apply the provisions of SFAS 157 to nonrecurring nonfinancial assets and nonfinancial liabilities at such time as a fair value measurement is required, which may result in a fair value that is materially different than would have been measured prior to the adoption of SFAS 157.

On October 10, 2008, the FASB issued FSP No. FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active, which clarifies application of SFAS 157 in a market that is not active. FSP 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. On April 9, 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly, which superseded FSP 157-3. FSP 157-4 provides additional guidance on (a) how to determine when markets become inactive and thus potentially require significant adjustment to transactions or quoted prices and (b) how to determine if a transaction or group of transactions is forced or distressed (that is, not orderly), and amends the disclosure provisions of SFAS 157. The Company was required to apply FSP 157-4 beginning on May 1, 2009. FSP 157-4 did not have a material impact on the Company’s financial position, results of operations or cash flows.

Effective August 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of SFAS 115. SFAS 159 permits companies to choose to measure 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. The Company chose not to elect the fair value option for the valuation of any of its eligible assets or liabilities, therefore the adoption of SFAS 159 had no impact on the Company’s financial position, results of operations or cash flows.

Other Recently Adopted Accounting Standards

On August 1, 2009, the Company adopted 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. The Company will change the classification and presentation of noncontrolling interests in its financial statements, which is referred to as minority interests in the accompanying consolidated financial statements, for the quarter ending October 31, 2009. The Company does not expect the adoption of SFAS 160 to have a material impact on its financial position, results of operations or cash flows.

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

F-15

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, which amends and clarifies SFAS 141(R) with regards to the initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. The Company is required to apply SFAS 141(R) and FSP 141(R)-1 to business combinations with an acquisition date on or after August 1, 2009. SFAS 141(R) fundamentally changed many aspects of previous accounting requirements for business combinations. As such, if the Company enters into any business combinations, 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 previous U.S. GAAP.

In June 2009, the SEC issued SAB No. 112 to amend or rescind portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. Specifically, the staff updated the Series in order to bring existing guidance into conformity with SFAS 141(R) and SFAS 160. SAB 112 was effective in June 2009. The adoption of SAB 112 did not have a material impact on the Company’s financial position, results of operations or cash flows.

On August 1, 2009, the Company adopted 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 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 adoption of FSP 142-3 had no impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, which amends SFAS 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. The FSP also requires entities to disclose the methods and significant assumptions used to estimate fair value of financial instruments in interim financial statements, and to highlight any changes in the methods and assumptions from prior periods. FSP 107-1 became effective for the Company’s financial statements beginning on May 1, 2009. The Company will include the disclosures required by FSP 107-1 in its consolidated financial statements for the quarter ending October 31, 2009.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events, to establish principles and requirements for subsequent events, in particular: (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. In accordance with SFAS 165, the Company’s management evaluated events or transactions that occurred after July 31, 2009 through October 29, 2009 for potential recognition or disclosure in the financial statements.

F-16

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Recently Issued Accounting Standards Not Yet Adopted

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140. SFAS 166 amends SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, by (a) eliminating the concept of a qualifying special-purpose entity (“QSPE”), (b) clarifying and amending the derecognition criteria for a transfer to be accounted for as a sale, (c) amending and clarifying the unit of account eligible for sale accounting, and (d) requiring that a transferor initially measure at fair value and recognize all assets obtained and liabilities incurred as a result of a transfer of an entire financial asset or group of financial assets accounted for as a sale. Additionally, on and after the effective date, existing QSPEs must be evaluated for consolidation by reporting entities in accordance with the applicable consolidation guidance. SFAS 166 requires enhanced disclosures about, among other things, (a) a transferor’s continuing involvement with transfers of financial assets accounted for as sales, (b) the risks inherent in the transferred financial assets that have been retained, and (c) the nature and financial effect of restrictions on the transferor’s assets that continue to be reported in the statement of financial position. The Company is required to adopt SFAS 166 on August 1, 2010. The Company is currently evaluating the impact of SFAS 166 on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R). SFAS 167 amends FIN 46(R), Consolidation of Variable Interest Entities, and changes the consolidation guidance applicable to a variable interest entity (“VIE”). SFAS 167 also amends the guidance governing the determination of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate an entity, by requiring a qualitative analysis rather than a quantitative analysis. The qualitative analysis will include, among other things, consideration of who has the power to direct the activities of the entity that most significantly impact the entity’s economic performance and who has the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred. QSPEs, which were previously exempt from the application of this standard, will be subject to the provisions of this standard when it becomes effective. FAS No. 167 also requires enhanced disclosures about an enterprise’s involvement with a VIE. The Company is required to adopt SFAS 167 on August 1, 2010. The Company is currently evaluating the impact of SFAS 166 on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162. SFAS 168 establishes the FASB Accounting Standards Codification™ (or Codification) as the source of authoritative U.S. GAAP for all non-governmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. The Codification organizes and simplifies U.S. GAAP literature by reorganizing U.S. GAAP pronouncements into approximately 90 accounting topics within a consistent structure. The Codification is not intended change or alter existing U.S. GAAP. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Therefore, all references to U.S. GAAP in the Company’s financial statements for the quarter ending October 31, 2009 will follow the Codification. The Company does not expect SFAS 168 to have any impact on its financial position, results of operations or cash flows.

Note 2—Discontinued Operations and Other Dispositions

Hillview Avenue Realty, LLC

On July 31, 2009, Hillview Avenue Realty, LLC (“Hillview”), a majority owned subsidiary of the Company, closed on the sale of its property located at 3373 and 3375 Hillview Avenue in Palo Alto, California. The Company has a 69.27% ownership interest in Hillview. The property consisted of two interconnected office buildings located on 6.68 acres. The sales price was $62.7 million. The Company’s net proceeds from the sale, after deduction of the mortgage debt secured by the property that was assumed by the buyer or repaid in connection with the sale, transaction expenses and the interests of the other owners of Hillview, were $3.1

F-17

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

million, which was received in August 2009. This sale met the criteria to be reported as discontinued operations as of July 31, 2009 and accordingly, the assets, liabilities, results of operations and cash flows of the property are classified as discontinued operations for all periods presented. The Company recognized a gain of $0.2 million in the fourth quarter of fiscal 2009 in connection with the sale of Hillview’s property.

As a result of the Company’s conclusion that an interim impairment test of goodwill was required during the second quarter of fiscal 2009 (see Note 6), the Company also assessed the recoverability of certain of its long-lived assets in accordance with SFAS 144. As a result of the Company’s assessment, in the third quarter of fiscal 2009, the Company recorded impairment of $2.0 million related to the Hillview property.

European Prepaid Payment Services Business

On July 9, 2009, the Company entered into an agreement for the sale of the capital stock of IDT Financial Services Holding Limited (“IDT Financial Services”), the Company’s European prepaid payment services business, for approximately $3 million, subject to adjustment based on changes in the net assets of IDT Financial Services. IDT Financial Services provides prepaid MasterCard^® products in the United Kingdom under the “Prime Card” brand. In addition, the Company will retain the approximately $10 million held by IDT Financial Services pursuant to regulatory requirements which is included in “Cash and cash equivalents” of discontinued operations at July 31, 2009. As of July 31, 2009, IDT Financial Services met the criteria to be classified as held for sale and reported as discontinued operations. Accordingly, the assets, liabilities, results of operations and cash flows of IDT Financial Services are classified as discontinued operations for all periods presented.

Union Telecard Dominicana, S.A and Ethnic Grocery Brands LLC

On June 24, 2009, the Company acquired the 49% interest in Union Telecard Alliance, LLC (“UTA”) that it did not own in exchange for (a) $4.9 million in cash, (b) a promissory note in the principal amount of $1.2 million payable in thirty-six equal monthly installments, (c) the forgiveness of a note receivable in the amount of $1.2 million including principal and accrued interest, (d) the assignment of all of the interests in Union Telecard Dominicana, S.A. (“UTA DR”) held by UTA, (e) the assignment of an 80% ownership interest in Ethnic Grocery Brands LLC (“EGB”) held by UTA, and (f) other consideration of $0.4 million. UTA retained a 10% ownership interest in EGB. In addition, the seller may receive up to an additional $1.7 million for post-closing contingencies. The aggregate purchase price was $9.7 million, which included the aggregate estimated fair value of the interests in UTA DR and EGB of $2.0 million. UTA is the distributor of the Company’s prepaid calling cards in the United States. UTA DR and EGB met the criteria to be reported as discontinued operations and accordingly, the assets, liabilities, results of operations and cash flows of UTA DR and EGB are classified as discontinued operations for all periods presented. The Company recognized a loss in connection with the assignments of UTA DR and EGB of $2.5 million in the fourth quarter of fiscal 2009, which is included in “Loss on disposal/sale of discontinued operations” in the accompanying consolidated statement of operations.

IDT Carmel

On January 30, 2009, IDT Carmel, Inc., IDT Carmel Portfolio Management LLC, and FFPM Carmel Holdings I LLC (all of which are subsidiaries of the Company) (collectively “IDT Carmel”) and Sherman Originator III LLC consummated the sale, pursuant to a Purchase and Sale Contract, of substantially all of IDT Carmel Portfolio Management LLC’s debt portfolios with an aggregate face value of $951.6 million for cash of $18.0 million. The Company exited the debt collection business in April 2009. IDT Carmel met the criteria to be reported as a discontinued operation and accordingly, IDT Carmel’s assets, liabilities, results of operations and cash flows are classified as discontinued operations for all periods presented. IDT Carmel recognized a loss of $34.3 million in the second quarter of fiscal 2009 in connection with the sale of its debt portfolios.

IDT Entertainment

In the first quarter of fiscal 2007, the Company completed the sale of IDT Entertainment to Liberty Media Corporation. Loss on disposal/sale of discontinued operations in fiscal 2009 and fiscal 2008 of $0.3 million and $4.9 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.

F-18

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Significant Accounting Policies of Discontinued Operations

The Company purchased debt portfolios that experienced deterioration of credit quality at a significantly lower price than their contractual amount. Upon acquisition of debt portfolios, static pools of accounts were established, which were aggregated based on certain common risk criteria. Each static pool was recorded at cost, which included external acquisition costs, and was accounted for as a single unit for the recognition of income, principal payments and loss provision. Once pools were established, they were not changed unless replaced, returned or sold.

The Company accounted for its purchased debt portfolios in accordance with SOP 03-3, Accounting for Certain Loans or Debt Securities Acquired in a Transfer, which provided for recognition of the excess of the undiscounted collections expected at acquisition over the cost of the purchased debt as income. Income was recognized on a level-yield basis over the expected life of the debt (the “effective yield method”) based on the expected internal rate of return (“IRR”). Subsequent increases in cash flows expected to be collected were generally recognized prospectively through an increase to the IRR over the debt’s remaining life. Decreases in cash flows expected to be collected were recognized as impairment. Recognition of income under the effective yield method was dependent on having a reasonable expectation about the timing and amount of cash flows expected to be collected. The Company used the cost recovery method to account for a portfolio if it could not reasonably predict the timing and amount of collections from the portfolio. Under the cost recovery method, no income was recognized until the Company fully collected the cost of the portfolio.

Summary Financial Data of Discontinued Operations

Revenues, loss before income taxes and net loss of Hillview, IDT Financial Services, UTA DR, EGB and IDT Carmel, which are included in discontinued operations, were as follows:

Year ended July 31 (in thousands)	2009			2008
REVENUES:
Hillview	$	6,630		$	6,552
IDT Financial Services		2,732			2,833
UTA DR		59,416			41,080
EGB		23,242			26,348
IDT Carmel		16,535			45,651
TOTAL	$	108,555		$	122,464
LOSS BEFORE INCOME TAXES:
Hillview	$	(2,396	)	$	(1,507	)
IDT Financial Services		(1,821	)		(6,996	)
UTA DR		(257	)		(967	)
EGB		(2,514	)		(4,765	)
IDT Carmel		(38,867	)		(25,297	)
TOTAL	$	(45,855	)	$	(39,532	)
NET LOSS:
Hillview	$	(2,396	)	$	(1,507	)
IDT Financial Services		(1,821	)		(6,997	)
UTA DR		(262	)		(967	)
EGB		(2,514	)		(4,768	)
IDT Carmel		(38,867	)		(25,347	)
TOTAL	$	(45,860	)	$	(39,586	)

F-19

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The assets and liabilities of IDT Financial Services at July 31, 2009, and Hillview, IDT Financial Services, UTA DR, EGB and IDT Carmel at July 31, 2008, which are included in discontinued operations, consist of the following:

July 31 (in thousands)	2009		2008
ASSETS
Cash and cash equivalents	$	13,127	$	6,621
Marketable securities		—		6,432
Trade accounts receivable, net		957		6,123
Purchased debt portfolios		—		63,059
Property, plant and equipment, net		—		65,070
Other assets		448		15,691
TOTAL ASSETS OF DISCONTINUED OPERATIONS	$	14,532	$	162,996
LIABILITIES
Trade accounts payable	$	1,670	$	7,230
Accrued expenses		328		1,769
Notes payable		—		58,670
Other liabilities		—		2,339
TOTAL LIABILITIES OF DISCONTINUED OPERATIONS	$	1,998	$	70,008

IDT Global Israel

In the fourth quarter of fiscal 2008, the Company disposed of 80% of the issued and outstanding shares of IDT Global Israel, Ltd., its call center operations in Israel, in a transaction with the Chief Executive Officer of IDT Global Israel for a nominal amount and recorded a loss of $8.8 million. In fiscal 2009, the Company disposed of the remaining 20% of the issued and outstanding shares of IDT Global Israel. The Company retained exclusive control over the sale of IDT Global Israel’s building. The Company agreed to use a certain amount of IDT Global Israel’s call center services for one year after the disposal. The disposal did not meet the criteria to be reported as a discontinued operation; therefore IDT Global Israel’s historical results of operations are included in continuing operations.

At July 31, 2008, the estimated sales price of the building net of costs to sell of $18.2 million was included in “Other current assets” and the balance of the obligations secured by the building of $7.1 million was included in “Other current liabilities”. In fiscal 2009, the Company recorded an impairment of $3.5 million, which reduced the carrying value of the building to its estimated fair value at the time. In June 2009, the building was sold for $12.7 million of which $6.4 million was used to repay the obligations secured by the building and $0.8 million was held in escrow. The Company retained a floor in the building and reclassified $1.6 million from “Other current assets” to “Property, plant and equipment”. The Company received the net proceeds of $5.4 million from the sale and recognized a loss of $0.5 million on the sale.

The Company’s results of operations for fiscal 2009 and fiscal 2008 included revenues generated by IDT Global Israel’s operations of nil and $5.3 million, respectively, and loss from operations of $1.1 million and $10.3 million, respectively.

Note 3—Marketable Securities

The Company classifies all of its marketable securities as “available-for-sale” securities. Marketable securities are stated at fair value, with unrealized gains and losses in such securities reflected, net of tax, in “Accumulated other comprehensive income” in the accompanying consolidated balance sheets. The Company intends to maintain a liquid portfolio to take advantage of investment opportunities. Therefore, all marketable securities are classified as “short-term.”

The Company’s marketable securities at July 31, 2009 and 2008 included auction rate securities with a cost of $14.3 million. The underlying asset for these securities is preferred stock of the Federal National Mortgage

F-20

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”). The fair values of the auction rate securities, which cannot be corroborated by the market, were estimated based on the value of the underlying assets and the Company’s assumptions. At July 31, 2008, the Company determined that there was an other than temporary decline in the value of these auction rate securities, and accordingly, recorded a $7.2 million expense that was included in “Other expense, net” in the accompanying consolidated statement of operations and reduced the auction rate securities balance to an estimated fair value of $7.1 million. On September 7, 2008, the Federal Housing Finance Agency (“FHFA”) placed Fannie Mae and Freddie Mac into conservatorship administered by the FHFA. One result of the conservatorship and related actions of the FHFA was a significant decline in the market value of Fannie Mae and Freddie Mac’s preferred stock. In fiscal 2009, the Company determined that there was an additional other than temporary decline in the value of these auction rate securities, and accordingly, recorded a $6.8 million expense that was included in “Other expense, net” in the accompanying consolidated statement of operations.

The following is a summary of marketable securities:

(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
July 31, 2009:
Available-for-sale securities:
Corporate and other debt securities	$	5,508	$	232	$	(52	)	$	5,688
Equity securities		15		—		(1	)		14
TOTAL	$	5,523	$	232	$	(53	)	$	5,702
July 31, 2008:
Available-for-sale securities:
U.S. Government Agency Obligations	$	76,313	$	50	$	(863	)	$	75,500
Corporate and other debt securities		30,800		—		(1,292	)		29,508
Equity securities		19		6		(3	)		22
TOTAL	$	107,132	$	56	$	(2,158	)	$	105,030

Proceeds from sales and maturities of available-for-sale securities and the gross realized losses that have been included in earnings as a result of those sales in fiscal 2009 were $149.0 million and $(9.2) million, respectively. Proceeds from sales and maturities of available-for-sale securities and the gross realized losses that have been included in earnings as a result of those sales in fiscal 2008 were $689.8 million and $(21.3) million, respectively. The Company uses the specific identification method in computing the gross realized gains and gross realized losses on the sales of marketable securities.

The contractual maturities of the Company’s available-for-sale debt securities at July 31, 2009 are as follows:

(in thousands)	Fair Value
Within one year	$	5,685
After one year through five years		3
After five years through ten years		—
TOTAL	$	5,688

F-21

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following available-for-sale securities are in an unrealized loss position for which other-than-temporary impairments have not been recognized:

(in thousands)	Unrealized Losses		Fair Value
July 31, 2009:
Corporate and other debt securities	$	52	$	5,103
Equity securities		1		14
TOTAL	$	53	$	5,117
July 31, 2008:
U.S. Government Agency Obligations	$	863	$	67,109
Corporate and other debt securities		1,292		22,408
Equity securities		3		1
TOTAL	$	2,158	$	89,518

The following available-for-sale securities were in a continuous unrealized loss position for 12 months or longer:

(in thousands)	Unrealized Losses		Fair Value
July 31, 2008:
Available-for-sale securities:
U.S. Government Agency Obligations	$	600	$	9,400
Corporate and other debt securities		265		1,735
TOTAL	$	865	$	11,135

At July 31, 2008, the Company concluded that the decline in the fair value of these marketable debt securities was temporary, since collection was probable and the Company had the intent and ability to hold these securities until the forecasted recovery of fair value up to the cost of the securities. At July 31, 2009, there were no available-for-sale securities in a continuous unrealized loss position for 12 months or longer.

Note 4—Fair Value Measurements

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of July 31, 2009:

(in thousands)	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
Assets:
Marketable securities	$	17	$	—	$	5,103	$	5,120
Auction rate securities included in marketable securities		—		—		582		582
Total marketable securities	$	17	$	—	$	5,685	$	5,702
Liabilities:
Derivative contracts	$	493	$	—	$	686	$	1,179

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

The Company’s marketable securities at July 31, 2009 included auction rate securities with a cost of $14.3 million. The fair values of the auction rate securities, which cannot be corroborated by the market, were estimated based on the value of the underlying assets and the Company’s assumptions, and are therefore classified as Level 3. The Company’s investments in pooled investment vehicles including hedge funds, which are included in “Investments—short-term” and “Investments—long-term” in the accompanying consolidated

F-22

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

balance sheets, are accounted for using the equity method unless the Company’s interest is so minor that it has virtually no influence over operating and financial policies pursuant to the guidance in EITF Topic D-46, Accounting for Limited Partnership Investments and EITF 03-16, Accounting for Investments in Limited Liability Companies. The Company’s investments in pooled investment vehicles including hedge funds are therefore excluded from the fair value measurements table above.

The Company’s derivative contracts are valued using quoted market prices or significant unobservable inputs. These contracts consist of (1) natural gas and electricity forward contracts to fix the price that IDT Energy will pay for specified amounts of natural gas and electricity on specified dates, which are classified as Level 1 and (2) an embedded derivative in a structured note that must be bifurcated, which is classified as Level 3. The fair values of the structured note, which is included in marketable securities and is classified as Level 3, and the embedded derivative were estimated primarily based on pricing information from the counterparty.

The following table summarizes the change in the balance of the Company’s assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at July 31, 2009:

Year ended July 31 (in thousands)	2009
	Assets			Liabilities
Balance, beginning of year	$	53,265		$	(155	)
Total gains (losses) (realized or unrealized):
Included in earnings in “Other expense, net”		(8,671	)		(831	)
Included in other comprehensive loss		3,171			—
Purchases, sales, issuances and settlements		(42,080	)		300
Transfers in (out) of Level 3		—			—
Balance, end of year	$	5,685		$	(686	)
The amount of total gains or losses for the year included in earnings in “Other expense, net” attributable to the change in unrealized gains or losses relating to assets or liabilities still held at the end of the year	$	(6,750	)	$	(531	)

Note 5—Property, Plant and Equipment

Property, plant and equipment consist of the following:

July 31 (in thousands)	2009			2008
Equipment	$	451,430		$	453,130
Land and buildings		66,139			64,767
Computer software		84,101			87,328
Leasehold improvements		48,379			48,685
Furniture and fixtures		11,715			12,593
		661,764			666,503
Less accumulated depreciation and amortization		(528,296	)		(501,642	)
Property, plant and equipment, net	$	133,468		$	164,861

On February 7, 2008, the Company completed the purchase of its headquarters office building at 520 Broad Street in Newark, New Jersey 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. In the fourth quarter of fiscal 2009, the Company consolidated its operations into considerably less office space that the Company is leasing at 550 Broad Street, Newark, New Jersey. The Company will remain at 550 Broad Street on an interim basis while evaluating other long term relocation options. At July 31, 2009, the carrying

F-23

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

value of the land, building and improvements at 520 Broad Street was $49.9 million and the mortgage payable balance was $26.3 million. At July 31, 2009, the Company evaluated the land, building and improvements at 520 Broad Street for impairment and determined that the carrying value was recoverable. The Company is assessing a range of options as to the future use of 520 Broad Street, some of which could result in a loss from a reduction in the carrying value of the land, building and improvements and such loss could be material.

On October 23, 2009, the Company sold its land and building in San Juan, Puerto Rico that was used for the Company’s domestic call center operations. The sales price was cash of $7.4 million. At July 31, 2009, the carrying value of the land and building was $6.7 million and the mortgage payable balance was $6.2 million.

In the fourth quarter of fiscal 2008, the Company assessed the value of its WMET radio station in the Washington, D.C. metropolitan area. The Company measured WMET’s fair value by discounting its estimated future cash flows using an appropriate discount rate. As a result of this assessment, the Company recorded an impairment charge of $3.5 million on certain of WMET’s property, plant and equipment, measured by the excess of the carrying amount of the asset group over the estimated fair value.

Property, plant and equipment under capital leases were $52.7 million and $51.7 million at July 31, 2009 and 2008, respectively. The accumulated depreciation related to these assets under capital leases was $44.8 million and $33.7 million at July 31, 2009 and 2008, respectively. Depreciation of property, plant and equipment under capital leases is included in depreciation and amortization expense in the accompanying consolidated statements of operations. Depreciation and amortization expense of property, plant and equipment was $46.2 million and $60.7 million in fiscal 2009 and fiscal 2008, respectively.

Note 6—Goodwill, Licenses and Other Intangibles

On June 24, 2009, the Company acquired the 49% interest in UTA that it did not own in exchange for (a) $4.9 million in cash, (b) a promissory note in the principal amount of $1.2 million payable in thirty-six equal monthly installments, (c) the forgiveness of a note receivable in the amount of $1.2 million including principal and accrued interest, (d) the assignment of all of the interests in UTA DR held by UTA, (e) the assignment of an 80% ownership interest in EGB held by UTA, and (f) other consideration of $0.4 million. UTA retained a 10% ownership interest in EGB. In addition, the seller may receive up to an additional $1.7 million for post-closing contingencies. The aggregate purchase price was $9.7 million, which included the aggregate estimated fair value of the interests in UTA DR and EGB of $2.0 million. The aggregate purchase price is subject to adjustment when the post-closing contingencies are resolved. The acquisition was accounted for under the purchase method and accordingly, the Company recorded goodwill of $4.8 million that represented the excess purchase price paid over the fair value of the net assets acquired. All of the goodwill recorded for this acquisition is expected to be deductible for income tax purposes. The consolidated financial statements included the results of operations, financial position and cash flows of UTA prior to the acquisition of the 49% interest since UTA was one of the Company’s controlled subsidiaries prior to the acquisition. The primary reasons for the acquisition of the 49% interest in UTA that the Company did not own were (1) to streamline the Company’s operations in the domestic prepaid calling card business, (2) to enhance the Company’s capacity to develop marketing and distribution strategies for prepaid calling card products to deliver high-quality, competitively priced products to its customers, and (3) to increase revenues from the network of sub-distributors that sell the Company’s calling cards to retail outlets throughout most of the United States.

The following table summarizes the allocation of the aggregate purchase price to the assets acquired as of the acquisition date:

(in thousands)
ASSETS
Intangible assets—customer lists	$	3,154
Intangible assets—trademark		1,632
Intangible assets—non-compete agreement		183
Goodwill		4,752
TOTAL ASSETS ACQUIRED	$	9,721

F-24

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In fiscal 2009, the Company recorded impairment charges of $61.7 million related to goodwill and $5.3 million related to Federal Communications Commission (“FCC”) licenses. In the second quarter of fiscal 2009, the following events and circumstances indicated that the fair value of certain of the Company’s reporting units may be below their carrying value: (1) a significant adverse change in the business climate, (2) operating losses of reporting units, (3) significant revisions to internal forecasts, and (4) plans to restructure operations including reductions in workforce. The Company measured the fair value of its reporting units by discounting their estimated future cash flows using an appropriate discount rate. The carrying value including goodwill exceeded the estimated fair value of the following reporting units: IDW Publishing, CTM Media Group, and WMET radio, all of which are included in All Other, and Rechargeable, which is a unit of the Telecom Platform Services segment. The Company therefore performed additional steps for these reporting units to determine whether an impairment of goodwill was required. As a result of this analysis, the Company recorded goodwill impairment of $1.8 million in IDW Publishing, $29.7 million in CTM Media Group, $1.2 million in WMET and $29.0 million in Rechargeable, which reduced the carrying amount of the goodwill in each of these reporting units to zero.

IDT Spectrum, which is included in All Other, recorded an impairment in fiscal 2009 of $5.3 million, which reduced the carrying value of its FCC licenses to zero. IDT Spectrum holds a significant number of FCC licenses for commercial fixed wireless spectrum. The events and circumstances in the second quarter of fiscal 2009 described above indicated that the FCC licenses may be impaired. The Company estimated the fair value of these FCC licenses based on continuing operating losses and projected losses for the foreseeable future.

In fiscal 2008, the Company recorded goodwill impairment of $23.7 million in its Telecom Platform Services segment. In the fourth quarter of fiscal 2008, the Company assessed the value and evaluated the financial performance of its reporting units. The Company measured the fair value of the reporting units by discounting their estimated future cash flows using an appropriate discount rate. As a result of this analysis, the Company recorded goodwill impairment of $17.9 million in Rechargeable and $5.8 million in Wholesale Carrier.

In fiscal 2008, the purchase price allocations were completed for acquisitions in fiscal 2007. The final purchase price allocations resulted in the allocation in All Other of $0.9 million from goodwill to other intangible assets, and the allocation in the Telecom Platform Services segment of $1.2 million related to the acquisition of Fabrix T.V., Ltd., the Company’s majority-owned venture developing a video content delivery and storage platform, from goodwill to research and development expense.

The table below reconciles the change in the carrying amount of goodwill by operating segment for the period from July 31, 2007 to July 31, 2009:

(in thousands)	Telecom Platform Services			IDT Energy		All Other			Corporate			Total
Balance as of July 31, 2007	$	59,598		$	3,663	$	36,214		$	499		$	99,974
Acquisitions		—			—		62			—			62
Purchase price allocation		(1,184	)		—		(924	)		—			(2,108	)
Foreign currency translation adjustments		288			—		—			—			288
Impairments		(23,707	)		—		—			—			(23,707	)
Balance as of July 31, 2008		34,995			3,663		35,352			499			74,509
Reclassification		—			—		499			(499	)		—
Acquisition		4,752			—		—			—			4,752
Foreign currency translation adjustments		(303	)		—		(27	)		—			(330	)
Impairments		(29,039	)		—		(32,617	)		—			(61,656	)
Balance as of July 31, 2009	$	10,405		$	3,663	$	3,207		$	—		$	17,275

F-25

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The table below presents information on the Company’s licenses and other intangible assets:

(in thousands)	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Balance
As of July 31, 2009
Intangible assets with indefinite life:
FCC licenses	Indefinite life	$	499	$	—		$	499
Amortized intangible assets:
Trademarks and patents	4.8 years		9,514		(7,466	)		2,048
Customer lists	14.9 years		13,814		(10,732	)		3,082
Other	2.6 years		7,600		(7,291	)		309
Total licenses and other intangibles		$	31,427	$	(25,489	)	$	5,938
As of July 31, 2008
Intangible assets with indefinite life:
FCC licenses	Indefinite life	$	5,841	$	—		$	5,841
Amortized intangible assets:
Trademarks and patents	4.2 years		7,996		(5,657	)		2,339
Customer lists	3.5 years		10,614		(10,435	)		179
Other	3.0 years		7,446		(6,411	)		1,035
Total licenses and other intangibles		$	31,897	$	(22,503	)	$	9,394

Amortization expense of licenses and other intangible assets was $3.1 million and $5.0 million in fiscal 2009 and fiscal 2008, respectively. The Company estimates that amortization expense of intangible assets with finite lives will be $1.8 million, $1.0 million, $0.7 million, $0.6 million and $0.5 million in fiscal 2010, fiscal 2011, fiscal 2012, fiscal 2013 and fiscal 2014, respectively.

Note 7—Impairments

The Company’s impairments by business segment consist of the following:

Year ended July 31 (in thousands)	2009		2008
Telecom Platform Services	$	29,063	$	24,656
All Other		41,905		3,655
TOTAL	$	70,968	$	28,311

The Company recorded aggregate impairment charges of $71.0 million in fiscal 2009 of which $61.7 million related to goodwill, $5.3 million related to FCC licenses and $4.0 million related to other assets. In fiscal 2009, the Company recorded goodwill impairment of $29.0 million in its Telecom Platform Services segment and $32.7 million in All Other.

IDT Spectrum, which is included in All Other, recorded an impairment in fiscal 2009 related to its FCC licenses of $5.3 million. Also in fiscal 2009, the Company recorded an impairment of $3.5 million which reduced the carrying value of IDT Global Israel’s building in Israel, and aggregate impairments of $0.5 million primarily related to certain leasehold interests.

In fiscal 2008, the Company recorded impairment charges related to goodwill of $23.7 million in its Telecom Platform Services segment. Also in fiscal 2008, WMET recorded impairment of $3.5 million related to certain of its fixed assets.

F-26

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 8—Investment in American Shale Oil, LLC

In April 2008, AMSO, a wholly owned subsidiary of the Company, acquired a 75% equity interest in AMSO, LLC in exchange for cash of $2.5 million and certain commitments for future funding of AMSO, LLC’s operations. In a separate transaction in April 2008, the Company acquired an additional 14.9437% equity interest in AMSO, LLC in exchange for cash of $3.0 million.

AMSO, LLC is one of three holders of leases granted by the U.S. Bureau of Land Management (“BLM”) to research, develop and demonstrate in-situ technologies for potential commercial shale oil production (“RD&D Lease”) in western Colorado. The RD&D Lease awarded to AMSO, LLC by the BLM covers an area of 160 acres. The lease runs for a ten year period beginning on January 1, 2007, and is subject to an extension of up to five years if AMSO, LLC can demonstrate that a process leading to the production of commercial quantities of shale oil is diligently being pursued. Once AMSO, LLC demonstrates the economic and environmental viability of its technology, it will have the opportunity to submit a one time payment pursuant to the Oil Shale Management Regulations and convert its RD&D Lease to a commercial lease on 5,120 acres which overlap and are contiguous with the 160 acres in its RD&D Lease. The acquisition of AMSO, LLC 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 included the amounts assigned to AMSO, LLC’s tangible and intangible assets to be used in its research and development project that have no alternative future use.

In March 2009, pursuant to a Member Interest Purchase Agreement entered into on December 19, 2008, TOTAL E&P Research & Technology USA, (“Total”), a subsidiary of TOTAL S.A., the world’s fifth largest integrated oil and gas company, acquired a 50% interest in AMSO, LLC in exchange for cash paid to the Company of $3.2 million and Total’s commitment to fund the majority of AMSO, LLC’s research, development and demonstration expenditures. The Company recognized a gain of $2.6 million in fiscal 2009 in connection with the sale. While AMSO will operate the project during the RD&D phase, Total will provide a majority of the funding during the RD&D phase, and technical assistance throughout the life of the project. Total will lead the planning of the commercial development and will assume management responsibilities during the subsequent commercial phase.

The Company consolidated AMSO, LLC prior to the closing of the transaction with Total. Beginning with the closing, the Company accounts for its 50% ownership interest in AMSO, LLC using the equity method since the Company has the ability to exercise significant influence over its operating and financial matters, although it no longer controls AMSO, LLC. Pursuant to FIN 46(R), AMSO, LLC is a variable interest entity, however, the Company is not the primary beneficiary because it will not absorb a majority of the expected losses or receive a majority of the expected residual returns.

The following table summarizes the change in the balance of the Company’s Investment in AMSO, LLC beginning with Total’s acquisition of a 50% interest in AMSO, LLC. The investment in AMSO, LLC is included in “Investments-long-term” in the consolidated balance sheet and equity in net loss of AMSO, LLC is included in “Other expense, net” in the consolidated statement of operations.

(in thousands)
Balance, March 2, 2009	$	(65	)
Capital contributions		1,074
Equity in net loss of AMSO, LLC		(731	)
Balance, July 31, 2009	$	278

In accordance with the agreement between the parties, AMSO has committed to a total investment of $10.0 million in AMSO, LLC, subject to certain exceptions described below where the amount could be greater or

F-27

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

lesser. Total has the option of withdrawing from AMSO, LLC and terminating its obligation to make capital contributions at the end of the first phase, and in that case AMSO’s commitment would be reduced to $5.3 million.

Although, subject to certain exceptions, AMSO and Total are not obligated to make additional contributions beyond their respective shares (which for AMSO is $10.0 million), they could dilute or forfeit their ownership interests in AMSO, LLC if they fail to contribute their respective shares for additional funding.

Total can increase AMSO’s initial required funding commitment of $10.0 million up to an additional $8.75 million if Total wishes to continue to fund the pilot test up to an agreed upon commitment level.

At July 31, 2009, the Company’s estimated maximum exposure to additional loss as a result of its required investment in AMSO, LLC was $8.1 million. The Company’s estimated maximum exposure to additional loss will increase as AMSO’s commitment to fund AMSO, LLC increases. The estimated maximum exposure at July 31, 2009 was determined as follows:

(in thousands)
AMSO’s total committed investment in AMSO, LLC	$	10,000
Less: 20% of capital contributions to AMSO, LLC prior to March 2, 2009		(807	)
Less: cumulative capital contributions to AMSO, LLC on and after March 2, 2009		(1,074	)
Estimated maximum exposure to additional loss	$	8,119

AMSO’s total committed investment in AMSO, LLC and its estimated maximum exposure to additional loss is subject to certain exceptions where the amounts could be greater. One exception is the additional funding that may be necessary to fund the pilot test as described above. The other significant exception is additional capital contributions that may be required to fund unexpected liabilities outside the purview of the traditional research, development and demonstration operations incorporated in AMSO, LLC’s budgeting and planning. However, any additional capital contributions for such liabilities would have to be authorized by both AMSO and Total.

Summarized unaudited balance sheet data of AMSO, LLC is as follows:

July 31 (in thousands)	2009		2008
ASSETS
Cash and cash equivalents	$	2,088	$	679
Other current assets		451		—
Equipment, net		8		—
TOTAL ASSETS	$	2,547	$	679
LIABILITIES AND MEMBERS’ INTERESTS
Current liabilities	$	960	$	105
Other liabilities		—		1,586
Members’ interests		1,587		(1,012	)
TOTAL LIABILITIES AND MEMBERS’ INTERESTS	$	2,547	$	679

F-28

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Summarized unaudited statement of operations data of AMSO, LLC is as follows:

Year ended July 31 (in thousands)	2009			2008
REVENUES	$	—		$	—
COST AND EXPENSES:
Research and development		6,813			1,015
TOTAL COSTS AND EXPENSES		6,813			1,015
Loss from operations		(6,813	)		(1,015	)
Other income		4			3
NET LOSS	$	(6,809	)	$	(1,012	)

Note 9—Notes Payable

The Company’s notes payable consist of the following:

July 31 (in thousands)	2009			2008
$11.0 million secured term loan due August 2015(a)	$	10,431		$	10,591
$26.9 million secured term loan due April 2020(b)		26,282			26,589
$7.2 million secured term loan due May 2035(c)		6,177			6,415
$1.2 million note due June 2012(d)		1,211			—
Total notes payable		44,101			43,595
Less current portion		(820	)		(1,052	)
Notes payable—long term portion	$	43,281		$	42,543

The estimated future principal payments for the notes payable as of July 31, 2009 are as follows:

(in thousands)
Year ending July 31:
2010	$	820
2011		833
2012		810
2013		501
2014		647
Thereafter		40,490
Total notes payable	$	44,101

(a) On August 26, 2005, the Company entered into an $11.0 million term loan payable over 10 years to finance the cost of two properties used to house the Company’s telecom network infrastructure. The loan bears interest at the rate of 5.60% per annum and is payable in monthly installments consisting of principal and interest of $0.1 million beginning on October 1, 2005, with the last installment of $9.2 million payable on August 1, 2015. The loan is secured by a mortgage on the two properties.

(b) On February 7, 2008, the Company completed the purchase of its headquarters office building at 520 Broad Street in Newark, New Jersey 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. The mortgage secures a promissory note that bears interest at the rate of 8.9% per annum. The maturity date of the note is April 1, 2020. Effective April 1, 2009, the Company and the note holder entered into a mortgage loan modification agreement pursuant to which the note was modified as follows: (1) during the period from April 1, 2009 through March 31, 2013 (the “Modification Period”), the note will continue to incur interest at the rate of 8.9% per annum, however the Company will only pay interest at the rate of 6.9% per annum, (2) the Company will not pay any monthly principal payments during the Modification Period, (3) the interest of 2.0% per annum will be added to the principal balance during the Modification Period (an aggregate of $2.1 million), although this interest will not accrue interest during the Modification Period, (4) monthly payments

F-29

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of principal and interest of $0.2 million will commence at the end of the Modification Period, (5) the maturity date of the note remains April 1, 2020, and (6) a final balloon payment of $25.5 million is due on the maturity date.

(c) On June 30, 2005, the Company entered into a $7.2 million term loan payable over 30 years to finance the cost of a property in San Juan, Puerto Rico that was used for the Company’s domestic call center operations. The loan bears interest at the three month LIBOR plus 1.00% and is payable in monthly installments consisting of principal and interest beginning on July 31, 2005, with the last installment payable on May 30, 2035. The loan is secured by a mortgage on the property. The effective interest rate on July 31, 2009 and 2008 was 1.52% and 3.79%, respectively. On October 23, 2009, the Company sold its property in San Juan, Puerto Rico. The sales price was cash of $7.4 million.

(d) On June 24, 2009, the Company issued a promissory note in the principal amount of $1.2 million in connection with the acquisition of the 49% interest in UTA that it did not own. The note bears interest at 0.76% per annum. The principal and interest are payable in thirty six equal, monthly installments beginning on July 24, 2009 with the last payment on June 24, 2012.

Note 10—Derivative Instruments

The primary risks managed by the Company using derivative instruments are commodity price risk and interest rate risk. Natural gas and electricity forward contracts are entered into to fix the price that IDT Energy will pay for specified amounts of natural gas and electricity on specified dates. An interest rate swap was used to achieve a fixed interest rate on a portion of the Company’s variable-rate debt. In addition, one of the Company’s marketable securities is a structured note that contains an embedded derivative feature.

IDT Energy has entered into forward contracts as hedges against unfavorable fluctuations in natural gas and electricity prices. These contracts do not qualify for hedge accounting treatment and therefore, the changes in fair value are recorded in earnings. As of July 31, 2009, IDT Energy had the following outstanding forward contracts:

Commodity	Settlement Date	Volume
Electricity	August 2009	9,200 MW h
Electricity	September 2009	8,400 MW h
Natural gas	January 2010	77,500 mmbtu
Natural gas	February 2010	70,000 mmbtu
Natural gas	March 2010	77,500 mmbtu

The Company had an interest rate swap related to the variable rate obligations secured by the IDT Global Israel building. In June 2009, the building was sold, at which time the obligations were repaid and the interest rate swap was canceled (see Note 2).

The structured note included in marketable securities as of July 31, 2009 has a par value of $5.0 million and matures in November 2009.

The fair value of outstanding derivative instruments recorded as liabilities in the accompanying condensed consolidated balance sheets were as follows:

July 31 (in thousands)		2009		2008
Liability Derivatives	Balance Sheet Location
Derivatives not designated or not qualifying as hedging instruments under SFAS 133:
Energy contracts	Other current liabilities	$	493	$	—
Structured note embedded derivative	Other current liabilities		686		—
Total liability derivatives		$	1,179	$	—

F-30

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The effects of derivative instruments on the condensed consolidated statements of operations were as follows:

		Amount of Gain (Loss) Recognized on Derivatives
Year ended July 31 (in thousands)		2009			2008
	Location of Gain (Loss) Recognized on Derivatives
Derivatives not designated or not qualifying as hedging instruments under SFAS 133:
Energy contracts	Direct cost of revenues	$	(950	)	$	668
Interest rate contracts	Other expense, net		(300	)		—
Structured note embedded derivative	Other expense, net		(531	)		—
Total		$	(1,781	)	$	668

The Company is exposed to credit loss in the event of nonperformance by counterparties on the above derivative instruments. Although nonperformance is possible, the Company does not anticipate nonperformance by any of these parties primarily because the contracts are with creditworthy counterparties.

Note 11—Income Taxes

Significant components of the Company’s deferred income tax assets and deferred income tax liabilities consist of the following:

July 31 (in thousands)	2009			2008
Deferred income tax assets:
Bad debt reserve	$	4,616		$	4,409
Accrued expenses		8,163			15,209
Exercise of stock options and lapsing of restrictions on restricted stock		24,403			24,503
Charitable contributions		16,142			18,286
Unrecognized loss on securities		41,307			13,751
Net operating loss		386,801			361,637
Depreciation		189			—
Other		1,552			1,552
Total deferred income tax assets		483,173			439,347
Deferred income tax liabilities:
Gain on sales of subsidiary stock		(91,013	)		(90,879	)
Depreciation		—			(4,159	)
Total deferred income tax liabilities		(91,013	)		(95,038	)
Valuation allowance		(392,160	)		(342,009	)
DEFERRED INCOME TAX ASSETS, NET	$	—		$	2,300

F-31

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The benefit from (provision for) income taxes consists of the following:

Year ended July 31 (in thousands)	2009			2008
Current:
Federal	$	13,410		$	(6,684	)
State and local		(3,412	)		(3,488	)
Foreign		(3,177	)		(1,998	)
		6,821			(12,170	)
Deferred:
Federal		—			—
State and local		—			—
Foreign		(2,300	)		2,300
		(2,300	)		2,300
BENEFIT FROM (PROVISION FOR) INCOME TAXES	$	4,521		$	(9,870	)

The benefit from income taxes in fiscal 2009 is primarily due to a reversal of $16.0 million related to interest on federal income tax.

The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as follows:

Year ended July 31 (in thousands)	2009			2008
U.S. federal income tax benefit at statutory rate	$	39,017		$	59,495
Valuation allowance		(34,329	)		(42,139	)
Foreign tax rate differential		(10,287	)		(16,204	)
Nondeductible expenses		(100	)		(950	)
Interest on income taxes		11,428			(8,936	)
Other		222			(1,815	)
Prior year tax benefit		2,204			1,550
State and local income tax, net of federal benefit		(3,634	)		(871	)
BENEFIT FROM (PROVISION FOR) INCOME TAXES	$	4,521		$	(9,870	)

At July 31, 2009, the Company had federal and state net operating loss carryforwards of approximately $265 million. This carry-forward loss is available to offset future U.S. federal and state taxable income. The net operating loss carryforwards will start to expire in fiscal 2010, with fiscal 2009’s loss expiring in fiscal 2030. The Company has foreign net operating losses of approximately $220 million, which will start to expire in fiscal 2011. The Company’s subsidiary, Net2Phone, which provides VoIP communications services, has additional net operating losses of approximately $569 million which will expire through fiscal 2027. With the reacquisition of Net2Phone by the Company in March 2006, these losses will be limited under Internal Revenue Service (“IRS”) section 382 to approximately $7 million per year.

The Company has not recorded U.S. income tax expense for foreign earnings, as such earnings are permanently reinvested outside the United States. The cumulative undistributed foreign earnings are included in accumulated deficit in the Company’s consolidated balance sheets, and consisted of approximately $443 million at July 31, 2009. Upon distribution of these foreign earnings to the Company’s domestic entities, the Company may be subject to U.S. income taxes and foreign withholding taxes, however, it is not practicable to determine the amount, if any, which would be paid.

As a result of an IRS audit of the Company’s federal tax returns for fiscal years 2001, 2002, 2003 and 2004, the Company owed approximately $75 million in taxes for fiscal 2001, approximately $1 million for adjustments carried forward to fiscal 2005 and 2006, and $39.5 million in interest. In connection therewith, the

F-32

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Company paid $10.0 million of the amount owed in July 2008 and paid the remaining amount owed to the IRS, an aggregate of $108.4 million, in monthly installments from October 2008 through June 2009. In December 2008, the IRS commenced an audit of the Company’s federal tax returns for fiscal years 2005, 2006 and 2007. In May 2009, the IRS assessed a liability of $1.2 million for fiscal year 2005 which represents the approximately $1 million previously agreed to plus interest. The IRS granted our request for abatement of a portion of the interest and penalties that were incurred while the Company was making installment payments, and the IRS applied these payments to the amount owed for fiscal 2005.

Effective August 1, 2007, the Company adopted FIN 48, which, among other things, clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements in accordance with SFAS 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. 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 $358.8 million and a corresponding increase in non-current income tax payable.

The table below summarizes the change in the balance of unrecognized income tax benefits:

Year ended July 31 (in thousands)	2009			2008
Balance at beginning of year (excluding interest)	$	5,500		$	323,793
Additions based on tax positions related to the current year		3,495			—
Additions for tax positions of prior years		1,900			125,019
Reductions for tax positions of prior years		(1,100	)		(89,984	)
Settlements		(4,400	)		(353,328	)
Lapses of statutes of limitations		—			—
Balance at end of year	$	5,395		$	5,500

The reduction in unrecognized income tax benefits in fiscal 2008 was a result of the IRS audit, and was offset by a reduction in the Company’s net operating loss carryforwards and an adjustment to the Company’s valuation allowance. There was no impact on the Company’s effective income tax rate. An audit in the Netherlands of a subsidiary of the Company was completed in October 2008 that resulted in a settlement of $4.4 million including interest, which was paid in December 2008. In fiscal 2009, the Company accrued $1.9 million related to an income tax audit in Belgium. All of the $5.4 million of unrecognized income tax benefits at July 31, 2009 would affect the Company’s effective income tax rate if recognized.

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 $40.0 million. In fiscal 2009 and fiscal 2008, the Company recorded interest of $4.6 million and $8.9 million, respectively. Also in fiscal 2009, the Company reversed $16.0 million of interest on federal income tax. As of July 31, 2009 and 2008, accrued interest included in current income taxes payable was $37.5 million and $48.9 million, respectively.

The Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2005 to fiscal 2009, state and local tax returns generally for fiscal 2001 to fiscal 2009 and foreign tax returns generally for fiscal 2002 to fiscal 2009. Management of the Company believes that it has adequately reserved 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.

F-33

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 12—Stockholders’ Equity

One-for-Three Reverse Stock Split

On December 17, 2008, the Company’s Board of Directors approved, authorized and recommended to the Company’s stockholders to amend and restate the Company’s Restated Certificate of Incorporation to affect a one-for-three reverse split of each of the outstanding shares of the Company’s common stock, Class A common stock and Class B common stock. On January 20, 2009, Mr. Howard S. Jonas, the Company’s Chairman of the Board and as of October 22, 2009 the Company’s Chief Executive Officer, and his affiliates, the record holders of shares representing a majority of the aggregate voting power of the Company’s outstanding capital stock, delivered to the Company a written consent in lieu of a special meeting of stockholders representing approximately 71% of the voting power of the Company’s stock, approving the amended Restated Certificate of Incorporation thereby approving the one-for-three reverse stock split. The one-for-three reverse stock split was effective on February 24, 2009. The one-for-three reverse stock split was intended to satisfy compliance with the NYSE’s price criteria for continued listing. All share, weighted average share and per share amounts, as well as stock option, non-vested restricted stock and contingently issuable share amounts, in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to reflect the one-for-three reverse stock split. The one-for-three reverse stock split did not affect the number of authorized shares or the par value per share.

Class A Common Stock, Class B Common Stock, and Common Stock

The rights of holders of Class A common stock, Class B common stock and common stock are identical except for certain voting and conversion rights and restrictions on transferability. The holders of Class A common stock are entitled to three votes per share. The holders of Class B common stock are entitled to one-tenth of a vote per share, and the holders of common stock are entitled to one vote per share. Class A common stock is subject to certain limitations on transferability that do not apply to Class B common stock and common stock. Each share of Class A common stock may be converted into one share of common stock, at any time, at the option of the holder.

Treasury Stock

In June 2006, the Company’s Board of Directors authorized a stock repurchase program for the repurchase of up to an aggregate of 8.3 million shares of the Company’s Class B common stock and common stock, without regard to class. On December 17, 2008, the Company’s Board of Directors increased the aggregate number of shares of the Company’s Class B common stock and common stock, without regard to class, that the Company is authorized to repurchase under the stock repurchase program from the 3.3 million shares that remained available for repurchase to 8.3 million shares. In fiscal 2009, the Company repurchased 3.2 million shares of Class B common stock and 1.5 million shares of common stock for an aggregate purchase price of $8.3 million. In fiscal 2008, the Company repurchased 1.8 million shares of Class B common stock and 0.2 million shares of common stock for an aggregate purchase price of $44.5 million. As of July 31, 2009, 6.1 million shares remained available for repurchase under the stock repurchase program.

In fiscal 2009 and fiscal 2008, the Company acquired in each year less than 0.1 million of its Class B common stock held by certain of its employees for less than $0.1 million and $0.9 million, respectively, to satisfy the employees’ tax withholding obligations in connection with the lapsing of restrictions on 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.

Sales of Stock of Subsidiaries

On September 23, 2008, the Company sold a 10% ownership interest in Zedge to Shaman II, L.P. for cash of $1.0 million. The Company recorded in its consolidated statement of operations the effect of changes in its ownership interest resulting from the issuance of equity by one of its subsidiaries until August 1, 2009, the date upon which the Company was required to adopt SFAS 160. Accordingly, in fiscal 2009, the Company recorded a gain of $0.3 million on the sale of Zedge stock. One of the limited partners in Shaman II, L.P. was a former employee of the Company.

F-34

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In November 2008, the Company sold a 10% minority interest in Israel Energy Initiatives, Ltd. to one of Israel Energy Initiatives, Ltd.’s employees for cash of $0.2 million. Since Israel Energy Initiatives, Ltd. was a newly formed, research and development entity, the sale of the equity interest was accounted for as an increase in consolidated additional paid-in capital.

Note 13—Stock Based Compensation

Share-Based Compensation Plans

The Company’s 2005 Stock Option and Incentive Plan is intended to provide incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2005 Stock Option and Incentive Plan may include stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. On December 17, 2008, the Company’s stockholders adopted an amendment to the 2005 Stock Option and Incentive Plan to (a) increase the number of shares automatically granted to each non-employee director each year to 4,167 shares of Class B common stock for service on the Board of Directors and an additional 4,167 shares of Class B common stock for service as a member of one or more Committees of the Board of Directors of the Company; (b) increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 1.3 million shares; (c) reserve 1.0 million shares of the Company’s common stock available for the grant of awards thereunder; and (d) remove the restriction that prohibits a grantee from receiving more than 0.7 million options to purchase common stock or Class B common stock or more than 0.7 million shares of restricted stock or deferred stock units during a calendar year. At July 31, 2009, the Company had 3.2 million shares of Class B common stock reserved for award under its 2005 Stock Option and Incentive Plan and 0.6 million shares were available for future grants. In addition, at July 31, 2009, the Company had 1.0 million shares of common stock reserved for award under its 2005 Stock Option and Incentive Plan and 0.1 million shares were available for future grants.

In September 2009, the Company’s Board of Directors authorized and approved an amendment to the 2005 Stock Option and Incentive Plan to increase by 0.7 million shares the amount of the Company’s Class B common stock that is reserved for issuance under the 2005 Stock Option and Incentive Plan. This amendment is subject to the approval of the Company’s stockholders at their next annual meeting.

Compensation cost is generally recognized using the accelerated method over the vesting period. No income tax benefits were recognized in the consolidated statements of operations for share-based compensation arrangements during fiscal 2009 or fiscal 2008. The Company does not currently recognize the tax benefits resulting from tax deductions in excess of the compensation cost recognized from its share-based compensation because the Company does not currently expect to realize the tax benefit due to the uncertainty of future taxable income.

Stock Options

Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Option awards generally vest on a graded basis over three years of service and have ten-year contractual terms. The fair value of stock options are estimated on the date of the grant using a Black-Scholes valuation model that uses the assumptions noted in the following table. No option awards were granted in fiscal 2009. Expected volatility is based on historical volatility of the Company’s Class B common stock and other factors. The Company uses historical data on exercise of stock options, post vesting forfeitures and other factors to estimate the expected term of the share-based payments granted. The risk free rate is based on the U.S. Treasury yield curve in effect at the time of grant.

	2008
ASSUMPTIONS
Average risk-free interest rate	4.26	%
Expected dividend yield	—
Expected volatility	25	%
Expected term	5.2 years

F-35

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of stock option activity for the Company is as follows:

	Number of Options (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at July 31, 2008	2,317		$	29.78
Granted	—			—
Exercised	—			—
Cancelled / Forfeited	(333	)		34.69
OUTSTANDING AT JULY 31, 2009	1,984		$	28.96	4.2	$	—
EXERCISABLE AT JULY 31, 2009	1,845		$	28.66	3.9	$	—

The weighted-average grant-date fair value of options granted by the Company during fiscal 2008 was $7.80. The total intrinsic value of options exercised during fiscal 2008 was $0.1 million.

On October 21, 2009, upon the retirement of Mr. James A. Courter as the Company’s Chief Executive Officer, Mr. Courter surrendered options to purchase an aggregate of 0.9 million shares of the Company’s Class B common stock (which constituted all of such options held by Mr. Courter) and received a grant of 0.3 million restricted shares of the Company’s Class B common stock. All of the restricted shares were vested on the date of grant. For a period of five years from the grant date, and subject to certain conditions, 0.2 million of the shares of the Company’s Class B common stock will be convertible, at the option of Mr. Courter, into the number of shares of Genie Energy Corporation equal to 1% of the outstanding equity of Genie Energy Corporation at the time of conversion. The Company’s subsidiary, Genie Energy Corporation, was organized in August 2009 and is comprised of IDT Energy and Alternative Energy (which consists of AMSO and the Company’s interest in Israel Energy Initiatives, Ltd.). In the first quarter of fiscal 2010, the Company recognized $0.6 million of stock based compensation as a result of the grant of the restricted stock.

Restricted Stock

The fair value of nonvested shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.

On October 31, 2008, the Company entered into an Amended and Restated Employment Agreement with Mr. Jonas. Pursuant to this Agreement (i) the term of Mr. Jonas’ employment with the Company runs until December 31, 2013 and (ii) Mr. Jonas was granted 1.2 million restricted shares of the Company’s Class B common stock and 0.9 million restricted shares of the Company’s common stock in lieu of a cash base salary beginning January 1, 2009 through December 31, 2013. The restricted shares vest in different installments throughout the term of Mr. Jonas’ employment as delineated in the agreement, and all of the restricted shares paid to Mr. Jonas under the agreement automatically vest in the event of (i) a change in control of the Company; (ii) Mr. Jonas’ death; or (iii) if Mr. Jonas is terminated without cause or if he terminates his employment for good reason as defined in the agreement. A pro rata portion of the restricted shares will vest in the event of termination for cause. Total unrecognized compensation cost on the grant date was $5.5 million. The unrecognized compensation cost is expected to be recognized over the vesting period from January 1, 2009 through December 31, 2013. In fiscal 2009, the Company recognized $0.5 million of the compensation cost related to this agreement.

On November 5, 2008, the Company amended Mr. Courter’s employment agreement. Pursuant to the amendment, Mr. Courter was granted 0.4 million restricted shares of the Company’s Class B common stock in lieu of a cash base salary from January 1, 2009 until October 21, 2009. The restricted shares vested on October 21, 2009, the last day of the term under the amended employment agreement. Total unrecognized

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IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

compensation cost on the grant date was $0.8 million. In fiscal 2009, the Company recognized $0.6 million of the compensation cost related to this amendment. In the first quarter of fiscal 2010, the Company recognized the remaining $0.2 million of the compensation cost related to this amendment.

A summary of the status of the Company’s nonvested shares as of July 31, 2009 and changes in fiscal 2009 is presented below:

(in thousands)	Number of Nonvested Shares		Weighted- Average Grant- Date Fair Value
Nonvested shares at July 31, 2008	131		$	39.67
Granted	2,452			2.60
Vested	(89	)		14.65
Forfeited	(1	)		35.61
Nonvested shares at July 31, 2009	2,493		$	4.11

As of July 31, 2009 and 2008, there was $5.9 million and $1.2 million, respectively, of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Company’s 2005 Stock Option and Incentive Plan. The unrecognized compensation cost as of July 31, 2009 is expected to be recognized over a weighted-average period of 2.5 years. The total grant date fair value of shares vested in fiscal 2009 and fiscal 2008 was $1.3 million and $5.5 million, respectively. The total cost of non-vested restricted shares granted by the Company that was recognized as compensation during fiscal 2009 and fiscal 2008 was $2.8 million and $2.3 million, respectively.

Employee Stock Purchase Plan

The Company maintained an Employee Stock Purchase Plan (“ESPP”) which offered eligible employees of the Company the ability to purchase shares of the Company’s Class B common stock through payroll deductions, not to exceed fifteen percent of the participant’s base wages or salary for a pay period, at eighty-five percent of the lesser of (a) the fair market value of the Company’s Class B common stock on the offering date, as defined, or the fair market value of the Company’s Class B common stock on the second offering date, as defined, if the employee was not a participant on the offering date; or (b) the fair market value of the Company’s Class B common stock on the purchase date, as defined. Participant purchases of Class B common stock under the ESPP were limited to a fair market value of $25,000 or 2,000 shares of Class B common stock each calendar year. The Company’s ESPP was terminated as of January 1, 2009. In fiscal 2009 and fiscal 2008, the Company received less than $0.1 million and $1.2 million, respectively, in proceeds and issued less than 0.1 million and 0.1 million shares, respectively, of the Company’s Class B common stock under the ESPP.

Note 14—Accumulated Other Comprehensive Income (Loss)

The accumulated balances for each classification of comprehensive income (loss) were as follows:

(in thousands)	Unrealized gain (loss) in available-for- sale securities			Foreign currency translation			Accumulated other comprehensive income (loss)
Balance at July 31, 2007	$	(377	)	$	11,127		$	10,750
Change during the period		(2,616	)		(1,380	)		(3,996	)
Balance at July 31, 2008		(2,993	)		9,747			6,754
Change during the period		3,173			(8,974	)		(5,801	)
BALANCE AT JULY 31, 2009	$	180		$	773		$	953

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IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 15—Restructuring Charges

The Company’s restructuring charges consist of the following:

Year ended July 31 (in thousands)	2009		2008
Telecom Platform Services	$	4,777	$	22,810
Consumer Phone Services		—		1,127
IDT Energy		23		97
All Other		1,616		3,208
Corporate		3,612		7,371
TOTAL	$	10,028	$	34,613

The restructuring charges in fiscal 2009 and fiscal 2008 consisted primarily of severance related to a company-wide cost savings program and reduction in force. As of July 31, 2009, these programs resulted in the termination of approximately 1,570 employees since the third quarter of fiscal 2006. The restructuring charges in fiscal 2009 also included costs for the shutdown or consolidation of certain facilities of $0.5 million in Corporate and $0.7 million in IDT Telecom. In fiscal 2009, IDT Telecom reversed accrued severance of $2.6 million as a result of modifications to retention and/or severance agreements with certain employees. In fiscal 2008, IDT Spectrum reversed $0.4 million of restructuring charges recorded in fiscal 2006 for a contract termination.

The following tables summarize the changes in the reserve balances related to the Company’s restructuring activities (substantially all of which relates to workforce reductions):

(in thousands)	Balance at July 31, 2008		Charged to expense		Payments			Non-cash charges			Balance at July 31, 2009
IDT Telecom(a)	$	10,854	$	5,452	$	(13,388	)	$	—		$	2,918
IDT Energy		—		23		(23	)		—			—
All Other		526		1,616		(2,126	)		—			16
Corporate		7,076		3,612		(7,066	)		—			3,622
TOTAL	$	18,456	$	10,703	$	(22,603	)	$	—		$	6,556
	Balance at July 31, 2007		Charged to expense		Payments			Non-cash charges			Balance at July 31, 2008
IDT Telecom	$	8,711	$	23,937	$	(21,502	)	$	(292	)	$	10,854
IDT Energy		—		97		(97	)		—			—
All Other		834		3,208		(2,612	)		(904	)		526
Corporate		8,250		7,371		(8,680	)		135			7,076
TOTAL	$	17,795	$	34,613	$	(32,891	)	$	(1,061	)	$	18,456

(a) IDT Telecom restructuring charges in fiscal 2009 included $0.7 million that is included in “Loss from discontinued operations” in the consolidated statement of operations.

Note 16—Arbitration Award Income

On November 4, 2004, Net2Phone entered into cable telephony license agreements with three Altice One cable properties (collectively “Altice”), to enable Altice to offer Net2Phone VoIP communications services to its subscribers in Belgium, Luxembourg and France. The agreements with Altice provided that, in the event of a change in control to any of Altice’s cable systems, Altice was required to either terminate the agreements and remit a predetermined buyout payment to Net2Phone, or cause the acquirer of a controlling interest to be bound by the agreements. On November 15, 2005, Altice notified Net2Phone that a third party had acquired a controlling interest in Altice, that the third party would not agree to be bound by all of Altice’s obligations under the agreements, and that therefore, the agreements were being terminated. As a result, in fiscal 2006 Altice wired an $18.8 million buyout payment to Net2Phone. This amount was materially less than the predetermined buyout payment required by the agreements. Net2Phone initiated arbitration proceedings in

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IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accordance with the agreements, and in fiscal 2008, Net2Phone was awarded approximately €23 million, plus interest from November 2005, in the arbitration proceeding. The Company recorded income of $40.0 million for this arbitration award, including accrued interest, in fiscal 2008. The Company received €29.3 million in March 2008, which included interest from November 2005.

Note 17—Legal Proceedings

On July 2, 2009, Southwestern Bell Telephone Company and nine of its affiliates, all local exchange carriers (collectively, “Plaintiffs”), filed a complaint in the United States District Court for the Northern District of Texas seeking an accounting as well as declaratory, injunctive and monetary relief from the Company’s subsidiaries IDT Telecom, Inc., Entrix Telecom Inc. and several as of yet unidentified entities affiliated with the Company. The complaint alleges that the Company’s subsidiaries failed to pay hundreds of thousands, and potentially millions of dollars of “switched access service” charges for calls made by consumers using the Company’s subsidiaries’ prepaid calling cards. The complaint alleges causes of action for (i) violation of federal tariffs, (ii) violation of state tariffs, and (iii) unjust enrichment. On October 9, 2009, the Company filed a motion to stay or in the alternative to dismiss the complaint. At this stage of the proceedings, the Company is unable to estimate its potential liability for Plaintiffs’ claim.

On May 15, 2009, a complaint (which was subsequently amended) was filed by T-Mobile USA, Inc. (“T-Mobile”) against a subsidiary of the Company, IDT Domestic Telecom, Inc. (“Domestic Telecom”), in the Superior Court of the State of Washington, King County. The complaint alleges that Domestic Telecom breached a Wholesale Supply Agreement entered into between T-Mobile and Domestic Telecom in February 2005, as amended, by failing to purchase at least $75 million in services from T-Mobile (T-Mobile claims that Domestic Telecom purchased only approximately $31 million of services). T-Mobile is seeking monetary damages, including interest and costs, in an amount to be determined at trial. The Company answered the complaint and asserted various counterclaims arising from T-Mobile’s interference with the sales efforts of the Company’s prepaid wireless unit, TuYo. T-Mobile answered the counterclaims. T-Mobile filed a motion for judgment on the pleadings, seeking an order awarding T-Mobile damages in the amount of approximately $44 million or in the alternative an order granting partial summary judgment on the issue of liability. The Company filed its opposition to the motion on October 21, 2009 and a hearing is scheduled for November 24, 2009. The Company believes that it has valid defenses to T-Mobile’s allegations and intends to conduct a vigorous legal defense. This matter is in its early stages and therefore the Company is unable to form an estimate of any potential liabilities to the Company related to this matter.

On August 27, 2003, Aerotel, Ltd., Aerotel U.S.A., and Aerotel U.S.A., LLC (“Aerotel”) filed a complaint against the Company in the United States District Court, Southern District of New York, seeking damages for alleged infringement of a patent. The parties reached a settlement and pursuant to a stipulation of dismissal, all claims and counterclaims have been dismissed. The settlement provided for a payment of $15 million in cash to Aerotel, which the Company paid in the first quarter of fiscal 2008. The settlement also required the Company to make available to Aerotel calling cards or PINs over time with potential termination costs of up to $15 million, subject to certain other conditions. In connection with this settlement, the Company accrued an expense of $24 million in the fourth quarter of fiscal 2007. On May 13, 2008, Aerotel, Ltd. filed a complaint against the Company in the United States District Court Southern District of New York related to a dispute concerning the settlement agreement between the Company and Aerotel. The complaint alleged Breach of Contract, Anticipatory Breach, and Breach of Covenant of Good Faith and Fair Dealing. The parties reached a settlement and on June 26, 2009 finalized a Settlement Agreement, the terms of which are subject to a confidentiality provision. The lawsuit was dismissed. In connection with this matter, the Company accrued an additional expense of $6 million in the fourth quarter of fiscal 2008.

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

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IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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. On August 19, 2008, the Appellate Division issued a decision and order reversing the trial court’s grant of partial summary judgment on the issue of liability to the Company and granted the portion of defendants’ cross motion seeking summary judgment dismissing the complaint and remanded the matter to the Supreme Court for further proceedings. On September 18, 2008, the Company filed its request for reargument, or in the alternative, for leave to appeal to the Court of Appeals. On December 30, 2008, the Appellate Division granted the Company’s request for leave to appeal to the Court of Appeals. On May 18, 2009, the parties submitted the briefs on that appeal and oral argument was held on September 15, 2009. On October 22, 2009, the Court of Appeals issued an Order affirming the Appellate Division’s order.

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 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 participated in non-binding mediation on December 15, 2008, which was not successful. Fact discovery is complete and the parties are now engaged in expert discovery.

On 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 (“DOJ”), the SEC 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, 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, which the SEC and DOJ have confirmed are still ongoing.

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IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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 and asserted counterclaims. The parties have exchanged expert reports, are completing pre-trial discovery and submitted a final pre-trial order to the Court in December 2008. A request has been filed with the United States Patent and Trademark Office (“USPTO”) to reexamine the patents in question. Subsequently, Skype filed a motion to stay the New Jersey litigation pending the USPTO’s decision on the request for reexamination. The motion to stay was denied. Efforts to reach a settlement of this matter are ongoing. 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 UTA 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 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, denied all wrongdoing and asserted counterclaims. The Court held a claim construction hearing on February 24-25, 2009. Fact discovery closed on September 25, 2009. The parties have mutually agreed to continue all prior noticed depositions and reserve the right to supplement discovery in accordance with the Federal Rules of Procedure. On October 22, 2009, the parties filed a Joint Motion to Continue the Case Deadlines by 120 days in both the New Jersey litigation and the Arkansas litigation, and the trial date of March 15, 2010 has been vacated.

On March 8, 2007, IDT Telecom, Inc. and UTA 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. On May 9, 2007, the judge 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. In 2007, the Company settled with five of the defendant groups. The litigation is continuing against the non-settling STi defendants. On February 11, 2009, the STi defendants filed motions for summary judgment, which the Company opposed. These motions are pending with the Court. The parties are scheduled to participate in non-binding mediation on November 10, 2009. The trial is expected to begin on March 1, 2010.

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 other legal proceedings to which the Company is a party will have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Note 18—Commitments and Contingencies

FCC Notice of Apparent Liability

On July 10, 2008, the FCC released a Notice of Apparent Liability (“NAL”) of $1.3 million related to one of the Company’s international telecommunications service agreements. The NAL claimed that the Company violated section 220 of the Telecom Act, and section 43.51 of the FCC’s rules by willfully and repeatedly failing to file with the FCC, within thirty days of execution, a copy of an agreement with Telecommunications

F-41

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

D’Haiti S.A.M. and each of four amendments thereto governing, among other things, the exchange of services, routing of traffic, accounting rates, and division of tolls on the U.S.-Haiti route. On October 29, 2008, the FCC released an order adopting an October 29, 2008 Consent Decree entered into between the Company and the FCC’s Enforcement Bureau resolving the matter. As part of the Consent Decree, in November 2008 the Company made a voluntary contribution to the United States Treasury in the amount of $0.4 million and, in fiscal 2009, the Company implemented a revised FCC compliance plan.

Value Added Tax

The Company is subject to value added tax (“VAT”) audits from time-to-time in various jurisdictions. On September 4, 2008, a Swedish court granted an application made by the Swedish Tax Agency to seize SEK 100 million ($13.4 million) of assets owned by one of the Company’s subsidiaries, Inter Direct Tel Ltd., as security for payment of VAT. Inter Direct Tel appealed the seizure order and on October 6, 2008, the appellate court reversed the lower court’s seizure order. On December 17, 2008, the Swedish Tax Agency sent Inter Direct Tel an Audit Memo describing its reasoning for a VAT assessment of approximately SEK 112 million ($15.1 million) and SEK 22 million ($3.0 million) in penalties. On March 27, 2009, Inter Direct Tel responded to the comments in the Audit Memo. On June 5, 2009, Inter Direct Tel received a re-assessment from the Swedish Tax Agency in the same amounts assessed in the Audit Memo with the payment due on July 13, 2009. Inter Direct Tel received a suspension of the payment obligation until the matter is addressed by the appropriate court. On September 30, 2009, Inter Direct Tel filed an appeal of the re-assessment. The Company cannot be certain of the ultimate outcome of this matter at this time. Imposition of assessments as a result of VAT audits could have an adverse affect on the Company’s results of operations, cash flows and financial condition.

Other Taxes

The Company is subject to audits in various jurisdictions for various other taxes, including sales and use tax, payroll tax, gross receipts tax and property tax. Two of the more significant audits relate to sales and use tax in New Jersey and payroll tax in Newark, New Jersey, for which the Company has accrued an aggregate of $5.6 million as of July 31, 2009. Management of the Company believes that it has adequately provided for all of the obligations for these taxes, however amounts asserted by taxing authorities could be greater than the accrued amounts. Accordingly, additional provisions may be recorded in the future as revised estimates are made or underlying matters are settled or resolved. Imposition of assessments as a result of audits related to these other taxes could have an adverse affect on the Company’s results of operations, cash flows and financial condition.

Lease Commitments

The future minimum payments for capital and operating leases as of July 31, 2009 are as follows:

(in thousands)	Operating Leases		Capital Leases
Year ending July 31:
2010	$	6,201	$	7,873
2011		3,871		5,517
2012		2,556		269
2013		1,764		97
2014		423		35
Thereafter		—		—
Total payments	$	14,815		13,791
Less amount representing interest				(774	)
Less current portion				(7,280	)
Capital lease obligations—long-term portion			$	5,737

Rental expense under operating leases was $4.3 million and $9.5 million in fiscal 2009 and fiscal 2008, respectively. In addition, connectivity charges under operating leases were $35.4 million and $49.0 million in fiscal 2009 and fiscal 2008, respectively.

F-42

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Commitments and Contingencies

The Company had purchase commitments and other obligations of $2.1 million as of July 31, 2009.

In connection with the sale of IDT Entertainment to Liberty Media Corporation in the first quarter of fiscal 2007, the Company is 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, for which $3.5 million is included in “Other long-term liabilities” in the consolidated balance sheet.

IDT Telecom in the U.S. is required to pay various regulatory agency fees including: Telecommunications Relay Services Fund, FCC, North American Numbering Plan, Local Number Portability and USF. As of July 31, 2009 and 2008, the accrued expense balance for these fees was $19.8 million and $22.9 million, respectively. In April 2008, the Universal Service Administration Corporation completed an audit of the Company’s Form 499-A filings for calendar years 2005 and 2006, and as a result, in fiscal 2009 and fiscal 2008 the Company reduced its accrued expense balance for these fees by an aggregate of $3.3 million and $16.7 million, respectively.

As of July 31, 2009, the Company had letters of credit outstanding totaling $70.4 million, the majority of which expire by July 31, 2010. As of July 31, 2009 and 2008, cash and cash equivalents of $65.0 million and $4.1 million, respectively, that serve as collateral were restricted against such letters of credit, and were included in “Restricted cash and cash equivalents” in the Company’s consolidated balance sheets. Also, as of July 31, 2009 and 2008, marketable securities of $5.1 million and $78.7 million, respectively were restricted primarily against letters of credit, and were included in “Marketable securities” in the Company’s consolidated balance sheets. The letters of credit outstanding at July 31, 2009 and 2008 were primarily collateral for IDT Energy’s purchases of natural gas through wholesale bilateral contracts with suppliers and various utility companies and electric capacity, energy and ancillary services through the wholesale markets, as well as to secure equipment financing and mortgage repayments on various buildings.

As of June 29, 2009, IDT Energy entered into a Preferred Supplier Agreement with BP Energy Company and BP Corporation North America Inc. (collectively “BP”), pursuant to which BP will be IDT Energy’s preferred provider of electricity and natural gas in New York State. The agreement allows for purchases of electricity and natural gas for customers in areas where the utilities have purchase of receivable programs, and includes a one-time inclusion of existing IDT Energy customers not covered by a purchase of receivable program. IDT Energy will purchase electricity and natural gas from BP and pay a fee based on volumetric loads in accordance with the agreement. IDT Energy’s obligations to BP are secured by its receivables from its customers and under certain circumstances the posting of letters of credit. The term of this agreement is two years, with an automatic renewal for an additional year unless either party objects. IDT Energy’s ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. As a result of this agreement, as of October 28, 2009, an aggregate of $57.0 million in letters of credit outstanding at July 31, 2009 that were collateral for IDT Energy have been reduced to $7.8 million.

F-43

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 19—Related Party Transactions

See Note 2 for a description of the IDT Global Israel transaction under “IDT Global Israel” and Note 12 for descriptions of the Zedge and Israel Energy Initiatives, Ltd. transactions under “Sales of Stock of Subsidiaries.”

The Company provides certain connectivity and other services to Jonas Media Group (formerly Jonas Publishing), a publishing firm owned by the Company’s Chairman and Chief Executive Officer, Mr. Jonas. Billings for such services were $0.2 million and $0.2 million in fiscal 2009 and fiscal 2008, respectively. The net balance owed to the Company by Jonas Media Group was $0.3 million and $0.5 million as of July 31, 2009 and 2008, respectively.

The Company, through its former subsidiary CTM Media Group (see Note 22) distributed brochures for a distribution firm controlled by Mr. Jonas. Billings by CTM Media Group for such distribution services were less than $0.1 million in each of fiscal 2009 and fiscal 2008. The distribution firm also distributes brochures for CTM Media Group. Billings to CTM Media Group for such services were $0.1 million in each of fiscal 2009 and fiscal 2008. The net balance owed to CTM by the distribution firm was less than $0.1 million at July 31, 2009 and 2008.

The Company obtains insurance policies from several insurance brokers. Some of the policies were arranged through a company affiliated with individuals related to both Mr. Jonas and the General Counsel of the Company. The aggregate premiums paid by the Company with respect to these policies in fiscal 2009 and fiscal 2008 were $0.1 million and $1.5 million, respectively. The Company also paid premiums of $0.7 million and $1.4 million in fiscal 2009 and fiscal 2008, respectively to certain third party brokers that in turn shared commissions with respect to these premiums with the affiliated company. Other third party brokers wrote policies without the affiliated company receiving or sharing in any of the commissions. An outside insurance consultant reviews all insurance coverage of the Company to ensure that its insurance policies and their related costs are both necessary and reasonable.

The Vice-Chairman and former Chief Executive Officer of the Company, Mr. Courter, is a partner in the law firm of Courter, Kobert & Cohen, P.C., which has served as counsel to the Company since July 1996. Fees paid to this law firm by the Company were less than $0.1 million in fiscal 2009 and $0.3 million in fiscal 2008.

Beginning in August 2009, UTA, a subsidiary of the Company, leases space in a building in the Bronx, New York. Mr. Jonas and Mr. Samuel Jonas, the Company’s Vice President of Operations and the son of Mr. Jonas, are members of the limited liability company that owns the building. UTA is renting 3,304 square feet for two years for $0.1 million per year and incurred costs of less than $0.1 million to build-out the space. In August 2009, UTA paid the limited liability company an aggregate of $0.3 million for the lease and the build-out costs.

In 2006, the Company, as managing member of 494 Broad, LLC, engaged Atlantic C&P, Inc., a company owned by Mr. Samuel Jonas, to build-out and run a cafeteria on the property located at 494 Broad Street in Newark, New Jersey. Atlantic C&P paid $0.2 million to build-out the space, including the cost of equipment. On March 8, 2007, the Company entered into a Purchase and Sale Agreement for 494 Broad Street, pursuant to which the buyer required the removal of all of the improvements. In August 2009, the Company reimbursed Atlantic C&P for its $0.2 million loss for the build-out. The Company recorded the $0.2 million expense in fiscal 2009.

The Company had loans receivable outstanding from employees aggregating $0.5 million and $2.2 million as of July 31, 2009 and 2008, respectively, which are included in “Other current assets” in the accompanying consolidated balance sheets.

F-44

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 20—Defined Contribution Plans

The Company maintains a 401(k) Plan (the “Plan”) available to all employees meeting certain eligibility criteria. The Plan permits participants to contribute up to 20% of their salary, not to exceed the limits established by the Internal Revenue Code. The Plan provides for discretionary matching contributions of 50%, up to the first 6% of compensation, to be invested in the Company’s Class B common stock. The discretionary matching contributions vest over five years. The Plan permits the discretionary matching contributions to be granted as of December 31 of each year. All contributions made by participants vest immediately into the participant’s account. In fiscal 2009 and fiscal 2008, the Company’s contributions to the Plan were $0.4 million and $1.9 million, respectively. The Company’s common stock and Class B common stock are not investment options for the Plan’s participants.

Note 21—Business Segment Information

The Company has the following three reportable business segments: Telecom Platform Services, Consumer Phone Services and IDT Energy. All other operating segments that are not reportable individually are included in All Other. Telecom Platform Services and Consumer Phone Services comprise the IDT Telecom division. The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker.

The Telecom Platform Services segment provides various telecommunications services including prepaid and rechargeable calling cards, a range of VoIP communications services, and wholesale carrier services. The Consumer Phone Services segment provides consumer local and long distance services in the United States. The IDT Energy segment operates the Company’s Energy Services Company, or ESCO, in New York State. All Other includes Zedge (which provides a web-based, worldwide destination for free, user-generated mobile content distribution and sharing), Alternative Energy (which consists of AMSO, which manages the Company’s 50% interest in AMSO, LLC, the Company’s U.S. oil shale initiative, and Israel Energy Initiatives, Ltd., the Company’s Israeli alternative energy venture), certain real estate investments and other smaller businesses. Corporate costs include certain services, such as corporate executive compensation, consulting fees, treasury and accounts payable, tax and accounting services, human resources and payroll, corporate purchasing, 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, as well as depreciation expense on corporate assets. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

On September 14, 2009, the Company completed the CTM Spin-Off (see Notes 1 and 22). CTM Holdings’ businesses, principally CTM Media Group, IDW Publishing and WMET, were included in All Other during fiscal 2009 and fiscal 2008.

In fiscal 2008, the telecommunications termination network services and costs incurred by IDT Telecom on behalf of all of its segments were treated as belonging to the Wholesale Telecommunications Services segment, which then recovered a portion of such services and costs, plus an agreed-upon mark-up profit, through an inter-segment billing process. IDT Telecom’s senior management changed in the second half of fiscal 2008, and began to treat such termination network services and costs as a pass-through shared cost to all its segments rather than a profit center within Wholesale Telecommunications Services. As such, beginning in the first quarter of fiscal 2009, Wholesale Telecommunications Services ceased charging for the telecommunications services it provides to other segments, and the allocation of such services and related costs within IDT Telecom was revised accordingly. Beginning in the second quarter of fiscal 2009, the Prepaid Products segment and the Wholesale Telecommunications Services segment were combined into the Telecom Platform Services segment, and consumer phone services outside the United States were transferred from the Consumer Phone Services segment to Telecom Platform Services. The changes in delineating the segments made in the second quarter of fiscal 2009 reflect the overlap in the methods used to provide consumer phone services outside the United

F-45

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

States, prepaid products and wholesale telecommunications services, as well as the way the operating results are reported and reviewed by the Company’s chief operating decision maker. In addition, in the first quarter of fiscal 2009, certain real estate investments that were historically included in Corporate were transferred to All Other. To the extent possible, comparative historical results have been reclassified and restated as if the fiscal 2009 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 accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on operating income (loss). IDT Telecom depreciation and amortization are allocated to Telecom Platform Services and Consumer Phone Services because the related assets are not tracked separately by segment. There are no other significant asymmetrical allocations to segments.

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

(in thousands)	Telecom Platform Services			Consumer Phone Services		IDT Energy		All Other			Corporate			Total
Year ended July 31, 2009
Revenues	$	1,180,723		$	53,677	$	264,709	$	39,501		$	—		$	1,538,610
Operating (loss) income		(45,789	)		18,627		45,364		(58,355	)		(33,306	)		(73,459	)
Depreciation and amortization		42,383			479		118		5,035			1,270			49,285
Impairments		29,063			—		—		41,905			—			70,968
Restructuring charges		4,777			—		23		1,616			3,612			10,028
Year ended July 31, 2008
Revenues	$	1,379,152		$	80,483	$	248,890	$	47,001		$	—		$	1,755,526
Operating (loss) income		(48,523	)		21,817		6,046		(71,493	)		(69,935	)		(162,088	)
Depreciation and amortization		53,672			2,868		74		7,412			1,660			65,686
Impairments		24,656			—		—		3,655			—			28,311
Restructuring charges		22,810			1,127		97		3,208			7,371			34,613

Loss from operations in All Other in fiscal 2009 is net of a gain of $2.6 million from the sale of a 50% interest in AMSO, LLC (see Note 8). The Telecom Platform Services segment’s loss from operations in fiscal 2008 is net of arbitration award income of $40.0 million (see Note 16). Loss from operations in All Other in fiscal 2008 includes an aggregate $9.6 million loss on the disposal of businesses (see Note 2).

Total assets for the reportable segments are not provided because a significant portion of the Company’s assets are servicing multiple segments and the Company does not track such assets separately by segment.

Revenues from customers located outside of the United States represented 34% and 36% of total revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively. Western Europe represented 24% and 23% of total revenues from continuing operations in fiscal 2009 and fiscal 2008, respectively. In fiscal 2009, the United Kingdom represented approximately 11% of total revenues from continuing operations. In fiscal 2008, there was no single foreign country that represented more than 10% of total revenues from continuing operations. Revenues by country are determined based on selling location. Net long-lived assets and total assets held outside of the United States, primarily in Western Europe, totaled approximately $29.8 million and $124.9 million, respectively, as of July 31, 2009 and $33.9 million and $152.0 million, respectively, as of July 31, 2008.

F-46

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 22—CTM Spin-Off

On September 14, 2009, the Company completed the CTM Spin-Off. Prior to completing the CTM Spin-Off, the following subsidiaries of the Company were transferred to CTM Holdings: (i) CTM Media Group, Inc.; (ii) IDT Local Media, Inc.; (iii) IDT Internet Mobile Group, which holds a majority interest in Idea and Design Works, LLC (IDW Publishing); and (iv) Beltway Acquisition Corporation, which holds the broadcast license of the WMET-AM radio station.

The CTM Spin-Off was accomplished through a pro rata distribution of CTM Holdings’ common stock to the Company’s stockholders. As of September 14, 2009, each of the Company’s stockholders of record as of the close of business on the record date of August 3, 2009 received: (i) one share of CTM Holdings Class A common stock for every three shares of the Company’s common stock held on the record date; (ii) one share of CTM Holdings Class B common stock for every three shares of the Company’s Class B common stock held on the record date; (iii) one share of CTM Holdings Class C common stock for every three shares of the Company’s Class A common stock held on the record date; and (iv) cash in lieu of a fractional share of all classes of CTM Holdings’ common stock.

CTM Holdings met the criteria to be reported as a discontinued operation on September 14, 2009, therefore the assets, liabilities, results of operations and cash flows of CTM Holdings and its subsidiaries will be classified in discontinued operations in the first quarter of fiscal 2010.

The assets and liabilities of CTM Holdings and subsidiaries at July 31, 2009 consist of the following:

(in thousands)
ASSETS
Cash and cash equivalents	$	6,480
Trade accounts receivable, net		3,908
Prepaid expenses		980
Investment-short-term		1,024
Other current assets		1,408
Property, plant and equipment, net		4,243
Licenses and other intangibles, net		588
Other assets		159
TOTAL ASSETS	$	18,790
LIABILITIES
Trade accounts payable	$	1,024
Accrued expenses		1,433
Deferred revenue		1,731
Capital lease obligations-current portion		222
Other current liabilities		563
Due to affiliates		31,897
Capital lease obligations-long-term portion		526
Other liabilities		3
Minority interests		1,967
TOTAL LIABILITIES AND MINORITY INTERESTS	$	39,366

In September 2009, prior to the CTM Spin-Off, the Company funded CTM Holdings with an additional $2.0 million in cash.

F-47

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Note 23—Selected Quarterly Financial Data (Unaudited)

The table below presents selected quarterly financial data of the Company for its fiscal quarters for fiscal 2009 and fiscal 2008:

Quarter Ended (in thousands, except per share data)	Revenues		Direct cost of revenues		(Loss) income from operations			(Loss) income from continuing operations			Net (loss) income			(Loss) income per share —basic						(Loss) income per share —diluted
														From continuing operations			Net (loss) income			From continuing operations			Net (loss) income
2009:
October 31(a)	$	412,059	$	316,159	$	(11,155	)	$	(35,500	)	$	(37,258	)	$	(1.46	)	$	(1.53	)	$	(1.46	)	$	(1.53	)
January 31(b)		410,582		313,165		(8,322	)		(26,707	)		(61,986	)		(1.17	)		(2.71	)		(1.17	)		(2.71	)
April 30(c)		363,371		274,776		(55,827	)		(57,469	)		(63,436	)		(2.61	)		(2.88	)		(2.61	)		(2.88	)
July 31(d)		352,598		269,454		1,845			12,715			7,231			0.61			0.35			0.61		$	0.35
TOTAL	$	1,538,610	$	1,173,554	$	(73,459	)	$	(106,961	)	$	(155,449	)	$	(4.75	)	$	(6.90	)	$	(4.75	)	$	(6.90	)
2008:
October 31(e)	$	438,922	$	343,695	$	4,861		$	11,624		$	6,780		$	0.44		$	0.26		$	0.43		$	0.25
January 31(f)		445,195		351,514		(37,342	)		(44,921	)		(62,469	)		(1.80	)		(2.50	)		(1.80	)		(2.50	)
April 30(g)		421,873		335,606		(70,433	)		(81,805	)		(82,211	)		(3.27	)		(3.29	)		(3.27	)		(3.29	)
July 31(h)		449,536		345,329		(59,174	)		(64,754	)		(86,430	)		(2.59	)		(3.46	)		(2.59	)		(3.46	)
TOTAL	$	1,755,526	$	1,376,144	$	(162,088	)	$	(179,856	)	$	(224,330	)	$	(7.09	)	$	(8.84	)	$	(7.09	)	$	(8.84	)

(a) Included in loss from continuing operations is other expense, net of $21.9 million. Other expense, net included losses on investments of $12.7 million, other than temporary decline in value of auction rate securities of $6.3 million and realized losses on marketable securities of $1.8 million.

(b) Included in loss from operations are impairments of $10.6 million and restructuring charges of $6.2 million. Included in loss from continuing operations is other expense, net of $12.2 million and provision for income taxes of $6.2 million. Other expense, net included losses on investments of $8.8 million. Included in net loss is loss from discontinued operations of $35.3 million, which was primarily due to a loss of $34.3 million on the sale of IDT Carmel’s debt portfolios.

(c) Included in loss from operations is impairments of $60.1 million.

(d) Included in income from continuing operations is a reversal of income taxes payable of $16.0 million. Included in net income is loss from discontinued operations of $3.1 million and loss on disposal/sale of discontinued operations of $2.4 million.

(e) Included in income from operations is income from an arbitration award of $40.0 million.

(f) Included in net loss is loss from discontinued operations of $15.3 million, which was primarily due to IDT Carmel’s bad debt expense of $16.1 million.

(g) Included in loss from operations is research and development expense of $8.9 million and restructuring charges of $16.5 million. Research and development expense included $5.5 million related to the acquisition of approximately 90% of the equity interests in AMSO, LLC.

(h) Direct cost of revenues is net of a reversal of accrued regulatory fees of $10.9 million. Included in loss from operations are impairments of $28.0 million, restructuring charges of $14.2 million and loss on disposal of businesses of $9.6 million. Included in loss from continuing operations is other expense of $7.2 million from an other than temporary decline in the value of auction rate securities. Included in net loss is loss from discontinued operations of $21.3 million, which was primarily due to IDT Carmel’s bad debt expense of $15.6 million.

F-48

EX-10.19

Exhibit 10.19

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (the “Agreement”) made this 16^th day of June, 2009 by and among IDT DOMESTIC TELECOM, INC., a Delaware corporation (“Domestic”), and IDT TELECOM, INC., also a Delaware corporation and the parent of Domestic (“Telecom” and collectively with Domestic, “IDT”), on the one hand, and UTCG HOLDINGS, LLC, a Delaware limited liability company (“UTCG”), and CARLOS GOMEZ (“Gomez”), on the other hand.

WHEREAS, Gomez was one of the founders of Union TeleCard Alliance, LLC, a Delaware limited liability company (the “Company”), and is the grantor of the Trust which is the holder of the beneficial interests in UTCG;

WHEREAS, UTCG owns of record and beneficially 49% (the “UTA Interests”) of the issued and outstanding membership interests in the Company;

WHEREAS, IDT, through its subsidiary, owns of record and beneficially the remaining 51% of the issued and outstanding membership interests in the Company;

WHEREAS, Gomez is the owner of record of substantially all of the ownership interests (the “UTA DR Interests”) in Union Telecard Dominicana, S.A. (“UTA DR”), which the Company, Gomez and IDT and its affiliates agree he holds for the benefit of UTA (in which Domestic together with its affiliate IDT Corp. hold a 51% membership interest), commensurate with that certain Reconocimiento de Inversion sworn to by Gomez on June 7, 2005 (the “DR Affirmation”);

WHEREAS, UTCG desires to sell, and Domestic desires to purchase, the UTA Interests upon the conditions set forth herein; and

WHEREAS, the transfer of the UTA Interests is restricted by that certain Securities Purchase Agreement dated April 24, 2002, by and among IDT Corporation, Gomez and the Company, as amended by that certain Amendment No. 1 dated April 24, 2002, by and among UTCG, IDT Corporation and the Company (the “Securities Purchase Agreement”); that certain Amended and Restated Operating Agreement of Union Telecard Alliance LLC dated as of April 24, 2002, by and among the Company, IDT Domestic-Union, LLC (“Domestic Union”), IDT Corporation and UTCG (the “Operating Agreement”); that certain LLC Interest Pledge and Security Agreement dated as of April 24, 2002, between UTCG and Gomez and, with respect to Section 18, IDT Corporation (the “Pledge and Security Agreement”); and that certain Transfer Restriction Agreement dated as of April 24, 2002, by and among The Gomez Family Trust, Gomez, Domestic Union and IDT Corporation (the “Transfer Restriction Agreement”).

NOW, THEREFORE, in consideration of the premises and mutual covenants, agreements, representations and warranties contained in this Agreement, the parties agree as follows:

1. PURCHASE AND SALE OF UTA INTERESTS

1.1 Sale of UTA Interests. Upon the terms and subject to the conditions set forth herein, UTCG hereby agrees to sell the UTA Interests to Domestic, and Domestic hereby agrees to purchase the UTA Interests from UTCG. For the avoidance of doubt, IDT, both for itself and its affiliates, hereby expressly consents to all of the transactions contemplated by the Transaction Documents (as hereafter defined) for all purposes of the Securities Purchase Agreement, the Operating Agreement, the Pledge and Security Agreement and the Transfer Restriction Agreement, and all other agreements and instruments executed by IDT and its affiliates in connection with any of the foregoing.

1.2 Preliminary Matters. Prior to the Closing (as hereinafter defined), the following actions shall be taken:

(a) IDT will (and will cause its affiliates to) take such steps as are necessary to cause any intercompany debt between IDT (and its affiliates) and UTA DR or Ethnic Grocery Brands LLC (“EGB”) to be no longer deemed to be outstanding by contributing such intercompany debt to the capital of UTA DR and EGB, respectively, immediately prior to the transfers of the UTA DR Interests and the EGB Interests described in the following paragraphs (b) and (c) of this Section 1.2, effective at and as of the Closing Date (as hereafter defined);

(b) The Company will file an election with respect to UTA DR, pursuant to U.S. Treasury Regulation Section 301.7701-3(c) on Internal Revenue Service Form 8832, effective as of the day before the Closing Date, to treat UTA DR as an entity disregarded from its beneficial owner, UTA.

The parties will terminate all of the Company’s interests in the UTA DR Interests (whether arising by virtue of the DR Affirmation or otherwise) and agree that such termination shall be treated for all United States Federal, state and local tax purposes as if the Company had distributed the shares of UTA DR to UTCG, pursuant to the Termination and Distribution of UTA DR Interests Agreement in the form of Exhibit A; and

(c) IDT and UTCG will cause the Company to distribute and assign to UTCG an 80% ownership interest (the “EGB Interests”) in EGB pursuant to the Assignment of EGB Interests in the form of Exhibit B (it being understood that the Company will retain a 10% ownership interest (the “EGB Retained Interest”) in EGB).

1.3 Purchase of UTA Interests. The purchase and sale of the UTA Interests shall take place as follows, and the consideration therefor is as set forth in Sections 1.3 (a), (b), (c), (d), (e) and (f):

(a) Upon execution and delivery of this Agreement, as a non-refundable portion of the consideration, Domestic will wire to UTCG One Million Dollars ($1,000,000) and Telecom will treat the indebtedness (including interest) evidenced by that certain Promissory Note, dated December 17, 2007 (the “Loan”), by UTCG in favor of Telecom in the aggregate principal amount of One Million Dollars ($1,000,000) as satisfied (the “Loan Satisfaction”), and will return to UTCG a copy of the Note representing the Loan marked cancelled. Contemporaneously with the execution and delivery of this Agreement, Domestic will deposit Four Million One Hundred and Thirty Eight Thousand Three Hundred and Forty Two Dollars ($4,138,342) in immediately available funds into

2

escrow with Kent, Beatty & Gordon, LLP (the “Escrow Agent”) pursuant to the Escrow Agreement in the form of Exhibit F executed by the Escrow Agent, Domestic and UTCG. $3,638,342 will be delivered to UTCG at the Closing as provided in Sections 1.3(b)(ii) and 5, and the remaining $500,000 will be disbursed upon finalization of the Final Statement (as hereafter defined).

(b) At the Closing (as hereafter defined):

(i) Effective immediately following completion of the distribution to UTCG of the UTA DR Interests and the EGB Interests, UTCG shall sell and convey the UTA Interests to Domestic;

(ii) The Escrow Agent (as hereafter defined) will wire to UTCG Three Million Six Hundred and Thirty Eight Thousand Three Hundred and Forty Two Dollars ($3,638,342); and

(iii) Domestic will execute and deliver to UTCG a promissory note in the aggregate principal amount of One Million Two Hundred Forty Five Thousand Three Hundred and Fifty Four and 70/100 Dollars ($1,245,354.70) (the “Note”) (and guaranteed by IDT Corporation) in substantially the form of Exhibit C.

(c) *

(d) In addition, as part of the consideration for the UTA Interests, IDT will either (as IDT may determine in its discretion) purchase and/or reimburse UTCG or its affiliate for the purchase (the “Terminal Purchase”) of an aggregate total of two thousand eight hundred (2,800) new or used terminals; provided that (i) the price per terminal purchased by any party (or for which IDT provides reimbursement) will not exceed One Hundred Fifty Dollars ($150), and (ii) the purchase by IDT, UTCG or its affiliate will be completed within ninety (90) days of the Closing. IDT is not making, and shall not be deemed to have made, any representations or warranties regarding any of these terminals, express, implied or otherwise, but (to the extent permitted) shall assign to UTCG or its affiliate any warranties from the seller running in its favor as purchaser, and will cooperate as reasonably requested by UTCG (at UTCG’s expense) in enforcing for the benefit of UTCG or its affiliate any warranties which may not be so assigned. Any such terminals purchased by IDT must be (or be reprogrammed, at no cost to UTCG, UTA DR or their affiliates, to be) compatible with the systems currently used by UTA DR and Touch-N-Buy, LLC.

(e) Additionally, as part of the consideration for the UTA Interests, for an eighteen (18) month period following the Closing (the “Use Term”), UTA DR and EGB shall continue to have use and access to the software identified on Schedule A (the “Software”), which Software is licensed by IDT, to use in connection with their respective businesses to the same extent and in the same manner used prior to the Closing. The use and access of the Software will terminate automatically upon any termination of IDT’s license for such Software (or as the licensor of the Software may otherwise determine). To the extent reasonably practicable, IDT will give UTCG at least six (6) months’ prior written notice of any anticipated termination of the license for such Software. UTCG acknowledges that UTA DR and EGB will have no rights to use or access the Software upon the termination of such use and access. Nothing contained in this Agreement shall be construed to be a grant of a license or sublicense or otherwise transfer or convey any rights in or to the Software where such license, sublicense or transfer would be a violation of any agreement to

3

which IDT or its affiliates is a party. UTCG shall promptly reimburse IDT for any out-of-pocket incremental costs (including penalties) incurred by IDT or its affiliates in connection with such use and access to the Software. IDT is not making, and shall not be deemed to have made, any representations or warranties regarding the Software (or such use and access), express, implied or otherwise, and UTA DR and EGB shall use the Software at its own risk. As reasonably requested by UTCG, IDT will assist UTCG in the migration of UTA DR and EGB from the Software after the Use Term, such assistance not to exceed, in the aggregate, ten (10) man-hours (it being understood that any assistance in excess of such time will be reimbursed by UTCG upon a time and materials basis reasonably calculated by IDT, and that IDT shall not be required to incur any out-of-pocket costs and expenses in connection with any such assistance). In addition, during the Use Term, IDT shall provide such support for closing the monthly accounts of UTA DR and EGB and maintenance of the functionality of the Software as UTCG may reasonably request (in each case to the same extent and in the same manner as provided prior to the Closing) without charge for nine (9) months, and thereafter in exchange for a monthly fee, payable in advance on or prior to the first business day of each month during the remainder of the Use Term, of $1,500. IDT shall designate such personnel as it may deem appropriate to provide such support and maintenance, and shall not be required to hire or retain any personnel in connection therewith.

(f) Lastly, as part of the consideration for the UTA Interests, if Gomez elects to continue the Company’s group health insurance in accordance with federal COBRA law following the termination of his employment with the Company on the Closing Date, so long as he is entitled to COBRA coverage, during the eighteen (18) months following the Closing Date, Gomez’s premiums for the Company’s group health insurance under COBRA shall be the same amount that an active employee contributes for such benefit coverage (e.g., if there is a difference in the amount an active employee contributes for the Company’s group health coverage and the published rate for the group health insurance under COBRA, then the Company shall pay the difference (such difference being referred to herein as the “COBRA Amount”). In the event Gomez does not so continue the Company’s group health insurance for this eighteen (18) month period, during such period the Company will instead pay Gomez a monthly amount equal to the COBRA Amount to be applied to another health insurance for Gomez and his family.

1.4 Closing. The closing (the “Closing”) of the sale of the UTA Interests by UTCG to Domestic shall take place at the offices of IDT, 520 Broad Street, Newark, NJ 07102 at 10 a.m. on June 24, 2009 (the “Closing Date”) or at such other time and place as IDT, UTCG and Gomez shall mutually agree upon. The Operating Agreement, the Securities Purchase Agreement, the Pledge and Security Agreement, the Transfer Restriction Agreement, the Consulting Agreement between the Company and Gomez dated August 1, 2004, and that certain Letter Agreement dated May 3, 2002, between Gomez and IDT Corporation relating to that certain letter agreement among North Fork Bank, UTCG and Gomez shall be terminated as of the Closing.

1.5 Intentionally deleted.

1.6 Post Closing Adjustment.

(a) Within 45 days after the Closing, IDT will deliver to UTCG (with a copy to Escrow Agent), a final statement setting forth certain agreed upon information concerning the Company’s business for the period from August 1, 2009 through the Closing Date (the “Final Statement”) as well as directions for the disbursement of funds, if any, to UTCG, from the escrow in

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accordance with previously agreed upon criteria (the “Adjustment Payment”) with the remainder to be disbursed to IDT. The Final Statement will be final and binding upon the parties for all purposes, unless UTCG notifies IDT, not later than fifteen (15) days after UTCG’s receipt of the Final Statement, of a good faith disagreement with the Final Statement (the “Disagreement”). Such notice of Disagreement will specify all items as to which there is a Disagreement and an explanation of the basis for any Disagreement. UTCG’s failure to timely notify IDT in writing of the existence of such a Disagreement will be deemed as, for all purposes, UTCG’s acceptance of the Final Statement.

(b) UTCG and IDT will attempt, in good faith, to resolve any Disagreement. If the parties are unable to resolve any such Disagreement within thirty (30) days from the date of receipt by IDT of notice from UTCG of the Disagreement, either party may request, by delivering written notice to the other, that such Disagreement be resolved by an independent accounting firm jointly selected by the parties that has not provided material services to either party or their respective affiliates during the three (3) years immediately prior to its retention for such matter (the “Accountants”). If UTCG and IDT do not agree on the Accountants within ten (10) days after either requests that the Disagreement be submitted to the Accountants for resolution, then each of UTCG and IDT will nominate its selection to serve as the Accountants and those two nominated accountants will select a third accountant within ten (10) days, which third accountant will serve as the Accountants. If either party does not notify the other in writing of its selection to serve as the Accountants within ten (10) days after either requests that the Disagreement be submitted to the Accountants for resolution, then the accountants nominated by the other will serve as the Accountants. Each of UTCG and IDT will submit to the Accountants within ten (10) days after selection of the Accountants is completed its proposal concerning what the Final Statement should be and all relevant financial data supporting its proposal. After completing their review of the Disagreement, the Accountants will resolve each item in dispute in accordance with the terms of this Agreement and will confirm their conclusion in writing to the parties within thirty (30) days after the Accountants receive any proposals and supporting information timely submitted in accordance with this paragraph (b), and the decision of the Accountants will be final and binding upon the parties for all purposes and enforceable in any court of competent jurisdiction, absent manifest error. The fees and costs of the Accountants, if any, in connection with resolving the Disagreement will be paid one-half by UTCG and one-half by IDT.

(c) Within five (5) days from the earliest to occur of (A) the acceptance in writing, provided to the Escrow Agent, of Gomez and IDT of the determination set forth in the Final Statement, (B) the written notification of IDT to the Escrow Agent that UTCG did not provide notice to IDT of its Disagreement within the time period set forth in sub-section (a) above, or (iii) the delivery to the parties by the Accountants of their written conclusion pursuant to sub-section (b) above, the Escrow Agent will disburse to UTCG the Adjustment Payment (which amount shall in no event exceed $500,000, or be a negative number), (i) in accordance with the written instructions provided pursuant to the Final Statement, or (ii) as determined pursuant to the procedure set forth in sub-section (b) above, in either case with the remainder of the amount held by the Escrow Agent being disbursed to IDT. The parties agree that in the event the Litigation Payment is made to UTCG (pursuant to Section 1.3(c) above) prior to disbursement of an Adjustment Payment to UTCG under this Section 1.6, the Adjustment Payment, when and if due, shall be reduced by one-half (1/2).

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2. REPRESENTATIONS AND WARRANTIES OF UTCG AND GOMEZ

Each of UTCG and Gomez, jointly and severally, represents and warrants to IDT as follows:

2.1 Authority. Each of UTCG and Gomez has full power and authority to execute and deliver this Agreement and any certificate or other document delivered pursuant to this Agreement or in connection with the transactions contemplated by this Agreement (the “Transaction Documents”) to which it/he is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents to which UTCG is a party and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary company action. This Agreement and the other Transaction Documents to which UTCG and/or Gomez is a party have been (or will be, as the case may be) duly executed and delivered by UTCG and/or Gomez and constitute (or will constitute, as the case may be) legal, valid and binding obligations of UTCG and/or Gomez, enforceable in accordance with their respective terms.

2.2 Organization and Qualification. UTCG is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, and has the company power and authority to own, operate and lease its assets and to carry on its business and activities.

2.3 Consents and Approvals; No Violations. Neither the execution, delivery or performance by UTCG or Gomez of this Agreement or the other Transaction Documents to which it/he is a party nor the consummation by such parties of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the operating agreement and other organizational documents of UTCG, (b) require any filing with or notification to, or permit, authorization, consent or approval of, any governmental authority or other entity, (c) conflict with or violate any law, rule or regulation applicable to UTCG or Gomez, or any of their respective assets, business or affairs, or (d) conflict with, result in a violation or breach of, constitute a default (or an event that with notice or lapse of time or both could become a default) or give rise to or result in any loss of benefit or right of termination, amendment or acceleration under any note, bond, mortgage, lien, indenture, lease, license, contract, agreement or other instrument or obligation (written or oral) to which UTCG or Gomez is a party or by which any of their respective assets, business or affairs may be bound.

2.4 UTA Interests. There are no outstanding options, warrants or agreements of any kind for the issuance or sale of, or outstanding securities convertible into, any of the UTA Interests. Except as restricted by the rights of IDT and its affiliates under the Securities Purchase Agreement, the Operating Agreement, the Pledge and Security Agreement, the Transfer Restriction Agreement and the other agreements and instruments executed by IDT or its affiliates in connection with the foregoing, UTCG has complete and unrestricted power to sell, convey, assign, transfer and deliver the UTA Interests to IDT (it being understood that UTCG has obtained all other consents and approval required under the above-referenced agreements and instruments, other than any consents and approvals of IDT and its affiliates). Upon delivery of the UTA Interests to IDT at the Closing pursuant to this Agreement, IDT will have good, valid and marketable title to the UTA Interests, free and clear of any and all liens, pledges, encumbrances, charges and claims (other than any created or imposed by IDT and its affiliates).

2.5 Affiliate Transactions. Except as set forth on Schedule 2.5 , neither UTCG nor Gomez or any of their respective affiliates: (a) has borrowed money from, or loaned money to, the Company, (b) except as referenced elsewhere in this Agreement, is a party to any contract with the Company, (c) has asserted or threatened to assert any claim against the Company, (d) is engaged in any transaction with the Company, or (e) owns, directly or indirectly, in whole or in part, or has any other interest in, any tangible or intangible property or other assets of the Company which the Company uses or has used or proposes to use in the conduct of its business or otherwise.

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2.6 Absence of Certain Practices. To the Knowledge of UTCG and Gomez, neither Gomez nor the Company (or any of its employees) or other person acting on behalf of Gomez has given or agreed to give any gift or similar benefit of more than nominal value to any customer, supplier, dealer, distributor, governmental employee or official or any other person who is or may be in a position to help or hinder the Company or assist the Company in connection with any proposed transaction involving the Company, which gift or similar benefit, if not given in the past or not continued to be given in the future, could have adversely affected (or may adversely affect) the business, operations or prospects of the Company. To the Knowledge of UTCG and Gomez, neither Gomez nor the Company (or any of its employees) or other person acting on behalf of Gomez has (a) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to, or on behalf of, government officials or others, or (b) accepted or received any unlawful contributions, payments, gifts or expenditures.

2.7 Taxes.

(a) For purposes of this Agreement, “Tax or Taxes” shall mean all federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, gross receipts, occupation, windfall profits, sales, use, ad valorem, value-added, profits, license, withholding, payroll, employment, excise, premium, real property, personal property, customs, net worth, capital gains, transfer, stamp, documentary, social security, disability, environmental, alternative minimum, recapture and other taxes, and including all interest, penalties and additions imposed with respect thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any person, and any liability in respect of any Tax as a result of being a member of any affiliated, combined, consolidated, unitary or similar group; and “Tax Return” shall mean any return, declaration, report, claim for refund, information return, or other document or statement relating to Taxes, including any schedule or attachment thereto and any amendment or supplement thereof.

(b) UTCG has timely filed, or caused to be timely filed, all Tax Returns in respect of the Company required to be filed by it under applicable Tax laws; all such Tax Returns were, when filed, and continue to be, true, correct and complete; and all Taxes due and owing by UTCG in respect of the Company have been timely paid.

2.8 Full Disclosure. To the Knowledge of UTCG and Gomez, there is no fact material to the business or operations of the Company which has not been disclosed to IDT.

2.9 UTA DR and EGB. With respect to the transfer to UTCG of the UTA DR Interests and EGB Interests as provided in Section 1.2, UTCG and Gomez are informed and sophisticated investors and acknowledge that IDT makes no representation or warranty as to either UTA DR or EGB or their respective businesses, operations, condition (financial or otherwise), or prospects, except as expressly set forth in this Agreement. UTCG is accepting the UTA DR Interests and EGB Interests based on its own inspection, examination, and determination with respect thereto as to all matters, and without reliance upon any express or implied representations or warranties of any nature, whether in writing, orally or otherwise, made by or on behalf of or imputed to IDT, except as expressly set forth in this Agreement.

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2.10 Investment Representation. Each of UTCG and Gomez understands, and has been advised by counsel, that the UTA DR Interests and EGB Interests have not been registered under the Securities Act of 1933 (the “Securities Act”), or any applicable state securities laws and are being transferred in reliance upon an exemption from registration. UTCG is, therefore, acquiring the UTA DR Interests and EGB Interests solely for its own account, for investment purposes, and not with a view to, or for sale or resale in connection with, any distribution thereof. Each of UTCG and Gomez understands that the UTA DR Interests and EGB Interests must be held by UTCG indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Each of UTCG and Gomez acknowledges that the UTA DR Interests and EGB Interests may not be freely transferable and that UTCG may have to bear the economic risk of its investment in the UTA DR Interests and EGB Interests for an indefinite period of time.

The representations and warranties of UTCG and Gomez contained herein are true and correct in all material respects as of the date hereof and shall be true and correct in all material respects as of the Closing Date as though made at that time.

“Knowledge” as used with respect to UTCG and Gomez means the actual knowledge, after due inquiry, of any officer of UTCG, Antonio Gomez or Carlos Gomez.

3. REPRESENTATIONS AND WARRANTIES OF IDT

IDT represents and warrants to UTCG and Gomez as follows:

3.1 Authority. IDT has full power and authority to execute and deliver this Agreement and the other Transaction Documents. The execution and delivery of this Agreement and the other Transaction Documents to which IDT is a party and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action. This Agreement and the other Transaction Documents to which IDT is a party have been (or will be, as the case may be) duly executed and delivered by IDT and constitute (or will constitute, as the case may be) legal, valid and binding obligations of IDT, enforceable in accordance with their respective terms.

3.2 Organization and Qualification. Each of Domestic and Telecom is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the corporate power and authority to own, operate and lease its assets and to carry on its business and activities.

3.3 Consents and Approvals; No Violations. Neither the execution, delivery or performance by IDT of this Agreement or the other Transaction Documents to which it is a party nor the consummation by it of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of the Certificate of Incorporation or By-laws of Domestic or Telecom, (b) require any filing with or notification to, or permit, authorization, consent or approval of, any governmental authority or other entity, (c) conflict with or violate any law, rule or regulation applicable to IDT or its assets, business or affairs, or (d) conflict with, result in a violation or breach of, constitute a default (or an event that with notice or lapse of time or both could become a default)

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or give rise to or result in any loss of benefit or right of termination, amendment or acceleration under any note, bond, mortgage, lien, indenture, lease, license, contract, agreement or other instrument or obligation (written or oral) to which IDT is a party or its assets, business or affairs may be bound. No representations and warranties are being made with respect to the transfer of the UTA DR Interests and EGB Interests to UTCG (including, without limitation, as to any consents and approvals required under their formation or operating agreements, under applicable law, rule or regulation, or otherwise).

3.4 Full Disclosure. Neither IDT nor any of its affiliates (a) have entered into any agreement with any third party for the sale or similar disposition of the Company or any material portion of its equity or assets, or (b) have entered into any settlement agreement with any of the Defendants with respect to the Calling Card Litigation, in each case that has not been disclosed in writing by IDT to UTCG or Gomez.

3.5 Investment Representation. IDT understands, and has been advised by counsel, that the UTA Interests have not been registered under the Securities Act, or any applicable state securities laws and are being transferred in reliance upon an exemption from registration. IDT is, therefore, acquiring the UTA Interests solely for its own account, for investment purposes, and not with a view to, or for sale or resale in connection with, any distribution thereof. IDT understands that the UTA Interests must be held by it indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. IDT acknowledges that the UTA Interests may not be freely transferable and that IDT may have to bear the economic risk of its investment in the UTA Interests for an indefinite period of time.

The representations and warranties of IDT contained herein are true and correct in all material respects as of the date hereof and shall be true an correct in all material respects as of the Closing Date as though made at that time.

4. ADDITIONAL COVENANTS AND AGREEMENTS

In addition to the agreements set forth elsewhere in this Agreement, the parties covenant and agree as follows:

4.1 Further Assurances. From time to time, at and after the Closing, at any party’s reasonable request, without further consideration and without otherwise affecting the indemnities set forth in Section 6, the other party shall execute and deliver at its expense such additional instruments and take such other action (excluding the bringing of suit), as the requesting party may reasonably require to further the purposes and intent of this Agreement.

4.2 Non-Competition and Non-Solicitation.

(a) Each of UTCG and Gomez, severally and jointly, hereby agree, effective on and as of the Closing Date, and continuing for a period of three (3) years from and after that date, not to, directly or indirectly:

(i) either as an employee, employer, consultant, independent contractor, agent, broker, principal, partner, stockholder, member, officer, director or in any other individual or representative capacity, engage in an IDT Competitive Business (as defined below), or become

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employed by, or otherwise in any way assist or encourage any entity’s or person’s IDT Competitive Business, or either as a broker, principal, partner, stockholder, member or in any other individual or representative capacity, invest in any entity or person which engages in an IDT Competitive Business (provided that investments shall be permitted in any class of securities listed on any national or regional stock exchange or traded on the National Association of Securities Dealer Automated Quotation System, or registered under Section 12(g) of the Securities Exchange Act of 1934, as amended, if (x) such securities do not exceed 2% of the issued and outstanding shares of such class of securities and (y) the value of such securities (based on the closing per share price of such securities, as reported in the New York City edition of the Wall Street Journal or, if not reported thereby, another authoritative source) does not at any time exceed $10,000,000):

(ii) influence or attempt to influence, or assist or advise any person attempting to influence, customers, distributors, partners or suppliers of IDT, the Company or their respective affiliates or subsidiaries: (x) to divert any part of their business away from such company, (y) to cause damage to the business of any such company, or (z) to do any material business with any competitor of any such company; and

(iii) solicit or recruit any employee, officer, partner or consultant of IDT, the Company or their respective affiliates or subsidiaries to leave the employment of such company or terminate his/her relationship with such company; and will not advise or otherwise assist any other person to solicit or recruit any employee, officer, partner or consultant of IDT, the Company or their respective affiliates or subsidiaries.

For purposes of this Agreement, an “IDT Competitive Business” shall mean:

(1) the provision in the United States (and its territories) or Canada of international long distance calling services with respect to traffic that originates in the United States (and its territories) or Canada;

(2) the wholesale provision of (x) termination services to any carrier or other entity in the United States (and its territories) or Canada (which, for the avoidance of doubt, shall not include the provision of such services to a PTT (defined below) headquartered outside of the United States (and its territories) and Canada), or (y) termination services with respect to traffic that terminates into the United States or Canada to any carrier or other entity; and

(3) the offer, sale or distribution in the United States (and its territories) or Canada of (x) any other telecommunications services, products or equipment, including, without limitation, transmission of voice, data, video or image signals through wireline, wireless, satellite and so-called Voice-over-Internet Protocol or any other form of telephony, prepaid or post-paid debit phone cards, wireless top-up products and services, data transfer, paging, messaging, video conferencing and Internet access, (y) any money, funds or credits wiring or transfer products, equipment or services, or (z) stored value products or services, including, without limitation, open and closed loop gift cards and debit cards.

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The foregoing sentences notwithstanding, (A) the business of UTA DR as currently conducted, (B) a money/funds transfer business where the transfer is originated outside of the United States (or its territories) or Canada, (C) selling or dealing in products or services purchased by UTCG or Gomez or its or his affiliates directly from IDT or its wholly owned subsidiaries, and (D) the retail sale outside the United States (and its territories) and Canada of telecommunication services even if it may involve traffic that terminates in the United States (or its territories) or Canada, shall not be deemed an IDT Competitive Business.

As used in this Agreement the term “PTT” shall mean a telecommunications provider, which, when originally established, operated as a government owned and/or regulated monopoly. Examples of PTT’s include France Telecom, and British Telecom.

(b) IDT, for itself and on behalf of its corporate affiliates, hereby agrees, effective on and as of the Closing Date, and continuing for a period of three (3) years from and after that date, not to, directly or indirectly:

(i) either as an employer, consultant, independent contractor, agent, broker, principal, partner, stockholder, member or in any other individual or representative capacity, engage or participate, invest in or otherwise in any way assist or encourage any entity or person, which engages in an Gomez Competitive Business:

(ii) influence or attempt to influence, or assist or advise any person attempting to influence, customers, distributors, partners or suppliers of UTA DR or EGB or their respective affiliates or subsidiaries: (x) to divert any part of their business away from such company, (y) to cause damage to the business of any such company, or (z) to do any material business with any competitor of any such company; and

(iii) solicit or recruit any employee, officer, partner or consultant of UTA DR, EGB or their respective affiliates or subsidiaries to leave the employment of such company or terminate his/her relationship with such company; and will not advise or otherwise assist any other person to solicit or recruit any employee, officer, partner or consultant of IDT, the Company or their respective affiliates or subsidiaries (in each case other than an employee, officer, partner or consultant who is also employed or otherwise has a relationship with the Company and its affiliates as of the Closing Date).

For purposes of this Agreement, a “Gomez Competitive Business” shall mean the wholesale distribution in the United States (and its territories) or Canada of Hispanic or Latino food products or other comestibles.

(c) The parties agree that the provisions of this Section 4.2 shall be interpreted as broadly as possible to enforce such provisions; provided, however, that in the event that any provision of this Section 4.2 is held invalid or unenforceable or the provisions of this Section 4.2 are deemed to exceed the time, geographic or scope limitations permitted by applicable law, then such provisions shall be reformed to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable laws, and such other changes shall be made to give effect to the original intent of the parties. The failure to comply with the provisions of this Section 4.2 shall be deemed to be a material breach of this Agreement, and, upon any such breach, the aggrieved party shall be authorized to pursue all rights and remedies available in law or in equity, which rights and remedies may include, without limitation, the right to specific performance of this Agreement.

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4.3 Non-Disparagement. Each of UTCG and Gomez (and their respective officers, employees, agents and representatives), on the one hand, and IDT, the Company and their respective subsidiaries, on the other hand, agree that they will not, at any time, in any way, disparage the other party(ies) by making or soliciting any comments, statements or the like to the media or to others, either orally or in writing, that may be considered to be derogatory or detrimental, in any way, to the good name or business reputation of such a party, or engage in any conduct that is in any way injurious, or may be perceived to be injurious, to the reputation or interest of such a party, including, without limitation, encouraging or assisting others to bring any form of suit, claim or cause of action against such a party. IDT and the Company will use their reasonable efforts to cause their respective officers, employees, agents and representatives to abide by the covenant set forth in the foregoing sentence.

4.4 Release of Obligations.

(a) Release of Obligations of UTA DR and EGB. Each of UTCG and Gomez agrees, jointly and severally, to take all action necessary or desirable to release IDT, the Company, their respective subsidiaries and affiliates, and their respective businesses, operations and assets from all guarantees, endorsements, security agreements or other obligations (contingent or otherwise) it may have in respect of UTA DR or EGB, and their respective businesses, operations and assets from and after the Closing, including, without limitation, to terminate the guaranty by IDT Corporation (the “IDT Guaranty”) of the obligations of EGB under the Lease Agreement, dated as of January 8, 2007, between Orangewood Properties, Limited Partnership (the “EGB Lease”). In connection therewith, UTCG and Gomez will pay any and all termination fees and provide any substitute guaranty or collateral (including Letters of Credit) as may be required for any such release. Each of UTCG and Gomez agrees, jointly and severally, to fully and completely indemnify, defend and hold IDT, the Company and their respective subsidiaries and affiliates harmless from and against any and all Losses (as hereafter defined) which it, or any of them, may incur, suffer or sustain, which arise, result from or relate to any failure by UTCG and Gomez to effectuate any such release, including, without limitation for any and all Losses arising from the failure to terminate the IDT Guaranty (e.g., any amounts payable by IDT Corporation to the landlord under the IDT Guaranty). The parties further agree that until the termination of the IDT Guaranty, the prior written consent of IDT Corporation shall be required in order to extend the term of the EGB Lease or otherwise amend or modify the terms of the EGB Lease.

(b) Release of Obligations of IDT and UTA. IDT, for itself and all of its direct and indirect affiliates, agrees to take all action necessary or desirable to release UTCG, Gomez, UTA DR and EGB, their respective subsidiaries and affiliates, and their respective businesses, operations and assets from all guarantees, endorsements, security agreements or other obligations (contingent or otherwise) it may have in respect of the business and operations of the Company from and after the Closing. IDT agrees to fully and completely indemnify, defend and hold UTCG, Gomez, UTA DR and EGB, their respective subsidiaries and affiliates, harmless from and against any and all Losses which it, or any of them, may incur, suffer or sustain, which arise, result from or relate to any failure by IDT to effectuate any such release. In addition, IDT, for itself and its direct and indirect affiliates, hereby irrevocably waives any and all present or potential claims, rights, demands, causes of action or liabilities whatsoever, whether known or unknown, liquidated or contingent, arising in the future or otherwise, of any kind and nature whatsoever that it or any of them may now or hereafter have against Gomez, UTCG or EGB involving the business, management or operation of EGB, or otherwise in respect or on account of the EGB Retained Interest; except that nothing herein shall be

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deemed to be (i) a waiver of any future claims or causes of action for fraud, or (ii) a waiver of any claims or causes of action relating to any breach of or other default under this Agreement and the transactions contemplated hereby, or (iii) a waiver of any rights and privileges under the Amended and Restated Operating Agreement of EGB (as the same may be amended, supplemented, modified or restated in accordance with its terms) with respect to (A) voting, (B) capital accounts, (C) transactions with EGB, (D) allocations and distributions, (E) rights of first refusal and tag-along rights, (F) repayment to the Company of EGB indebtedness, (G) examination of books and records of EGB, (H) ability to undertake other activities, and (I) indemnification and limitation of liability.

4.5 Cooperation.

(a) For a three (3) year period after the Closing, Gomez agrees to continue to use his skills, on an as-needed basis, to the best of his abilities for, subject to his availability, up to ten hours per month, or such greater amount of time as Gomez, in his discretion, shall agree, to provide the following services to the Company and its affiliates at no additional charge so long as Gomez does not incur any out-of-pocket expenses (it being understood that IDT shall only reimburse Gomez for out of pocket expenses pre-approved by IDT): (i) facilitate and participate in meetings between the Company’s management and customers, distributors and vendors; (ii) provide advice and guidance to the Company’s management relating to the operations of the Company, including with respect to personnel, facilities, channel expansion and credit policies for partners and distributors; (iii) at the reasonable request of the Company, attend promotional events; and (iv) such other assistance as the Company, or its affiliates, may reasonably request.

(b) In addition, each of Gomez and UTCG also agrees to cooperate (and cause its officers, employees, representatives and agents to cooperate), with no limitation as to the amount of time any such party will devote, with all requests for advice, cooperation and/or assistance made by IDT, at no charge so long as Gomez and UTCG do not incur any out-of-pocket expenses (it being understood that IDT shall only reimburse Gomez or UTCG for out of pocket expenses pre-approved by IDT), in connection with the business and operations of the Company and its affiliates and subsidiaries, including, without limitation, requests for information, interviews, depositions and/or participation at trial, related to any legal action arising from events which occurred while UTCG or Gomez (or their respective affiliates) was an owner of the Company, including without limitation, in connection with the Calling Card Litigation. IDT will cooperate (and will cause its directly and indirectly controlled affiliates and its and their officers, employees, representatives and agents to cooperate) with all reasonable requests for advice, cooperation and/or assistance made by UTCG or Gomez, at no charge so long as IDT does not incur any out-of-pocket costs, in connection with the businesses and operations of UTA DR and EGB and their affiliates and subsidiaries to the extent of their operations as of the Closing, provided, however, that (without derogating from the terms of Section 1.3(e)) any requests for information, data or records, shall be limited to information, data and records for the period prior to the Closing.

(c) Failure of a party to provide such cooperation shall be deemed a material breach of this Agreement.

4.6 Company Distributions. Each of UTCG and Gomez acknowledges and agrees that, from and after the Closing Date, UTCG shall not be entitled to any further distributions or other amounts from the Company or otherwise in respect of its ownership interest therein. Each of IDT and the Company acknowledges and agrees that, from and after the Closing Date, the Company shall not be entitled to any further distributions or other amounts from UTA DR or EGB or otherwise in respect of its ownership interests therein (other than in respect of the EGB Retained Interest).

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4.7 Vitarroz Branded Cards. Following the Closing, subject to customary wholesale terms and conditions (except for terms relating to credit which shall be subject to the full satisfaction of IDT and Gomez) for as long as Gomez holds a majority-in-interest of the outstanding equity of EGB, IDT agrees to sell to EGB prepaid calling cards branded with the Vitarroz brand, for sale by EGB in conjunction with and at retail locations (including Vitarroz branded websites) where other Vitarroz branded food products are sold, at a discount equal to the highest discount given by IDT in connection with similar private label cards sold by IDT to unrelated third parties purchasing similar volumes.

5. CLOSING AND DELIVERIES

5.1 Closing Condition. Prior (and as a condition) to the Closing, Gomez agrees to reimburse the Company for $16,989.37 of his personal expenses charged to the Company’s credit card and known as of the date of execution of this Agreement. In addition, prior (and as a condition) to the Closing, IDT and the Company shall have executed a settlement agreement with respect to certain outstanding legal fees and settlement costs, and the Company shall have paid IDT all amounts due thereunder.

5.2 Delivery of the Escrow Agent. At the Closing, the Escrow Agent will wire to UTCG Three Million Six Hundred and Thirty Eight Thousand Three Hundred and Forty Two Dollars ($3,638,342.00).

5.3 Deliveries of UTCG. At the Closing, UTCG and Gomez will deliver to IDT the following:

(a) A certificate of an executive officer of UTCG and Gomez confirming the accuracy of its representations and warranties;

(b) A certified copy of the resolutions adopted by the Managers of UTCG authorizing the transactions contemplated by this Agreement;

(c) An Assignment of the UTA Interests executed by UTCG in the form of Exhibit D;

(d) Resignations of all officers of the Company designated by UTCG (including, without limitation, Antonio Jose Gomez) and the termination of any agreement such officer may have with the Company or its affiliates (it being understood that any non-competition, confidentiality or other provisions that are to survive termination shall remain in full force and effect as provided therein) (and the return of all Company property, other than the furnishings of Gomez’s personal office, including identification cards, held by any such officer), (ii) the resignation of Gomez from all positions he may hold with IDT (including as consultant) and the termination of any agreement he may have with the Company or its affiliates, (and the return of all Company property other than the furnishings of Gomez’s personal office held by Gomez), and (iii) letters relinquishing all authority of any officers of the Company designated by UTCG (including, without limitation, Antonio Jose Gomez and Gomez) to sign checks or drafts or otherwise exercise any authority with respect to any of the Company bank or financial institution accounts;

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(e) The Mutual Release executed by UTCG and Gomez in the form of Exhibit E; and

(f) The Termination and Distribution of UTA DR Interests Agreement executed by UTCG and Gomez in the form of Exhibit A.

5.4 Deliveries by IDT. At the Closing, IDT will deliver to UTCG the following:

(a) A certificate of an executive officer of IDT confirming the accuracy of its representations and warranties;

(b) A certified copy of the resolutions adopted by the Board of Directors of IDT authorizing the transactions contemplated by this Agreement;

(c) The Termination and Distribution of UTA DR Interests Agreement executed by IDT and the Company in the form of Exhibit A;

(d) Subject to the approval of UTCG, an Assignment of the EGB Interests executed by the Company in the form of Exhibit B;

(e) The Note executed by Domestic (and guaranteed by IDT Corporation) in the form of Exhibit C;

(f) Letters relinquishing all authority of any officers of UTA DR or EGB designated by IDT or the Company (other than those excepted by UTCG in writing prior to the Closing) to sign checks or drafts or otherwise exercise any authority with respect to any UTA DR or EGB bank or financial institution accounts; and

(g) The Mutual Release executed by IDT Corporation in the form of Exhibit E.

6. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION

6.1 Survival. All representations and warranties shall survive the Closing for a period of eighteen (18) months from the Closing Date.

6.2 Indemnification by UTCG and Gomez. Each of UTCG and Gomez, jointly and severally, agrees to indemnify, defend and hold the Company and IDT and their respective subsidiaries and affiliates harmless from and against any and all claims, demands, losses, expenses, costs, obligations, damages, liabilities, including interest, penalties and reasonable attorneys fees and expenses (including appellate fees and costs)(“Losses”), which they, or any of them, may incur, suffer or sustain, which arise, result from or relate to (a) any breach of or failure by UTCG or Gomez to perform any of their representations, warranties, covenants or agreements under this Agreement, (b) the business and operations of UTA DR (whether before or after the Closing), and (c) the business and operations of EGB conducted after 5:00 p.m. on the Closing Date (it being understood that with respect to EGB, the term Losses shall be limited to any third party claims).

6.3 Indemnification by IDT. IDT agrees to indemnify, defend and hold UTCG, Gomez and their respective subsidiaries and affiliates harmless from and against any and all Losses which they, or any of them, may incur, suffer or sustain, which arise, result from or relate to (a) any breach

15

of or failure by IDT to perform any of its representations, warranties, covenants or agreements under this Agreement or (b) the business and operations of the Company and its subsidiaries, other than UTA DR and EGB, conducted after 5:00 p.m. on the Closing Date.

6.4 Indemnification Procedure. A party entitled to indemnification pursuant to this Section 6 (an “Indemnified Party”) shall provide written notice to the indemnifying party (the “Indemnifying Party”) of any claim of such Indemnified Party for indemnification under this Agreement promptly after the date on which such Indemnified Party has knowledge of the existence of such claim. Such notice shall specify the nature of such claim in reasonable detail and the Indemnifying Party shall be given reasonable access to any documents or properties within the control of the Indemnified Party as may be useful or necessary in the investigation of the basis for such claim. The failure to so notify the Indemnifying Party shall not constitute a waiver of such claim except to the extent that the Indemnifying Party is prejudiced by such failure.

6.5 If any Indemnified Party seeks indemnification hereunder based upon a claim asserted by a third party, then the Indemnifying Party shall have the right to defend such claim at its expense and through counsel of its own choosing (and reasonably acceptable to the Indemnified Party) if it gives written notice of its intention to do so no later than twenty (20) days following notice thereof by an Indemnified Party; provided, however, that, if, in the reasonable opinion of counsel to the Indemnified Party, separate counsel is required because a conflict of interest would otherwise exist, the Indemnified Party shall have the right to select separate counsel to participate in the defense of such action on its behalf, at the expense of the Indemnifying Party; provided further, however, that the Indemnified Party shall always have the right to select separate counsel to participate in the defense of such action on its behalf, at its own expense. If the Indemnifying Party does not so choose to defend any such claim asserted by a third party for which any Indemnified Party would be entitled to indemnification hereunder, then the Indemnified Party shall be entitled to recover from the Indemnifying Party all of the reasonable attorney’s fees and other costs and expenses of litigation incurred in the defense of such claim. It is understood that the Indemnifying Party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, in any case be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Parties. Notwithstanding the assumption of the defense of any claim by an Indemnifying Party, the Indemnified Party shall have the right to approve the terms of any settlement of a claim (which approval shall not be unreasonably withheld or delayed) if such settlement (a) does not include as an unconditional term the giving by the claimant or the plaintiff to the Indemnified Party of a release from all liability in respect to such claim or (b) requires anything from the Indemnified Party other than the payment of money damages which the Indemnifying Party has agreed to pay in full. The Indemnifying Party shall not be liable for any settlement of any proceeding affected without its prior written consent (not to be unreasonably withheld or delayed).

7. MISCELLANEOUS

7.1 Expenses. Each of the parties shall pay all costs and expenses incurred or to be incurred by it in negotiating and preparing this Agreement and in closing and carrying out the transactions contemplated by this Agreement. All stock transfer, real property transfer, documentary, registration, value-added and other similar taxes (including interest, penalties and additions thereto) incurred in connection with the transfer of the UTA Interests shall be paid by IDT and incurred in connection with the transfer of the UTA DR Interests and EGB Interests shall be paid by UTCG and Gomez. Gomez agrees to reimburse the Company for personal expenses not known as of the date of execution of this Agreement, promptly following the Company’s request and provision of proof of such expenses.

16

7.2 Headings. The subject headings of the paragraphs and subparagraphs of this Agreement are included for the purposes of convenience only and shall not affect the construction or interpretation of any of its provisions.

7.3 Entire Agreement. This Agreement and the Exhibits and Schedules hereto constitute the entire agreement between the parties pertaining to the subject matter contained in them and supersede all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by all of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver.

7.4 Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7.5 Successors and Assigns. This Agreement shall be binding on, and shall inure to the benefit of, the parties and their respective heirs, legal representatives, and permitted successors and assigns. This Agreement may not be assigned by any party without the consent of the other parties; provided, however, that IDT may assign the rights and privileges of, but not the obligations under, this Agreement to an affiliate.

7.6 Legal Expenses. If any legal action is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action or proceeding or any appeal therefrom, in addition to any other relief to which it may be entitled.

7.7 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally or by facsimile on the party to whom notice is to be given, or on the third day after mailing if mailed to a party to whom notice is to be given, registered or certified mail, postage prepaid, and properly addressed to the parties as set forth below:

Domestic:

IDT Domestic Telecom, Inc.

520 Broad Street

Newark, NJ 07102

Attn: President

Fax No.: (973) 438-1315

17

Telecom:

IDT Telecom, Inc.

520 Broad Street

Newark, NJ 07102

Attn: General Counsel

Fax No.: (973) 438-1315

In each case, with a copy to:

IDT Corporation

520 Broad Street

Newark, NJ 07102

Attn: Legal Department

Fax No.: (973) 438-1455

UTCG:

c/o Kent, Beatty & Gordon, LLP

425 Park Avenue, Penthouse

New York, New York 10022-3598

Attn: Harry C. Beatty Esq.

Fax No.: (212) 421-4303

Gomez:

One White Oak Circle

Purchase, New York 10577

With a copy to:

Kent, Beatty & Gordon, LLP

425 Park Avenue, Penthouse

New York, New York 10022-3598

Attn: Harry C. Beatty, Esq.

Fax No.: (212) 421-4303

Any party may change its address for purposes of this Section by giving the other party written notice of the new address in the manner set forth above.

7.8 New York Law. This Agreement shall be construed in accordance with, and governed by, the internal laws of the State of New York, without regard to any conflicts of law provisions.

7.9 Arbitration. IDT, on the one hand, and UTCG and Gomez, on the other hand, agree that any claim, controversy or dispute between them (including, without limitation, their respective shareholders, members, affiliates, officers, employees, representative or agents) arising out of or relating to this Agreement shall be submitted to and settled by commercial arbitration in a forum of the American Arbitration Association (“AAA”) located in the City, County and State of New York.

18

There shall be one arbitrator selected. In such arbitration: (a) the arbitrator shall agree to treat as confidential evidence and other information presented by the parties, (b) the arbitrator shall have no authority to amend or modify any of the terms of this Agreement, (c) the arbitrator shall have ten (10) business days from the closing statements or submission of post-hearing briefs by the parties to render his or her decision, and (d) the award of the arbitrator must allocate in favor of the prevailing party all costs of the arbitration, including the fee of the arbitrator and the fees and charges of the AAA, and must award to the prevailing party his or its reasonable attorneys’ fees, costs and expenses pursuant to this Section. Any arbitration award shall be final and binding upon the parties, and any state or federal court of competent jurisdiction located in the City, County and State of New York may enter a judgment on the award. Each of the parties hereby consents to the jurisdiction of the aforesaid courts. Nothing contained herein shall preclude a party from seeking from any such court of competent jurisdiction any provisional remedy in aid of arbitration, including, but not limited to, injunction, attachment or replevin, pending the determination of any claim or controversy in arbitration.

7.10 Publicity. The parties agree not to issue any announcement, press release, public statement or other information to the press or any third party with respect to this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other parties (which approval shall not be unreasonably withheld or delayed); provided, however, that nothing contained herein shall prevent any party, at any time, from furnishing any required information to any governmental authority or from issuing any announcement, press release, public statement or other information to the press or any third party with respect to the Agreement or the transaction contemplated hereby if required by law, rule or regulation, including, without limitation, the New York Stock Exchange (provided that the other parties shall be furnished with an advance copy of any such announcement or press release for comment, which shall not be unreasonably disregarded).

7.11 Interpretation. The parties hereto agree that in interpreting this Agreement there shall be no inferences against the drafting party.

7.12 Default. In the event any of the parties shall default in the performance of any of its/his obligations under this Agreement, then the other parties shall be entitled to exercise all of its/his rights and remedies available at law or in equity, including the right to specific performance of this Agreement by the other parties.

[Signature Page To Follow]

19

Executed as of the date first written above.

IDT TELECOM, INC.
By:
	Name:
	Title:
IDT DOMESTIC TELECOM, INC.
By:
	Name:
	Title:
UTCG HOLDINGS, LLC
By:
	Name:
	Title:
CARLOS GOMEZ

The undersigned hereby guarantees the prompt and complete payment (i) by Domestic of the Note in accordance with its terms and conditions, and (ii) by IDT of the Litigation Payment in accordance with the terms and conditions set forth in the Agreement.

IDT CORPORATION

By:

Name:

Title:

20

EX-10.20

Exhibit 10.20

EXECUTION COPY

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

PREFERRED SUPPLIER AGREEMENT

Dated as of June 29, 2009

by and among

BP ENERGY COMPANY,

BP CORPORATION NORTH AMERICA INC.

AND

IDT ENERGY, INC.

TABLE OF CONTENTS

		Page
ARTICLE 1     Definitions; Rules of Interpretation		1
1.1	Definitions	1
1.2	Rules of Interpretation	12
1.3	Relationship Among Transaction Documents	13
ARTICLE 2     Nature of Relationship; Credit Exposure		14
2.1	Nature of Relationship	14
2.2	Credit Requirement	15
ARTICLE 3     Purchase Contracts		15
3.1	Agreements between BP and IDT or between BPCNA and IDT	15
3.2	Transaction Execution Process	17
3.3	Permissible Transactions Not Subject to this Agreement	17
ARTICLE 4     Conditions Precedent		18
4.1	Closing Date	18
4.2	Conditions to Each Direct Transaction or Credit-Enabled Transaction	20
ARTICLE 5     Interface with Independent System Operators		22
5.1	Scheduling Agent	22
5.2	Scheduling Agent Designation	22
5.3	Compliance with ISO Rules and FERC Regulations	22
5.4	Specific Responsibilities by ISO	22
5.5	Financial Responsibilities	22
5.6	Transition Period	23
5.7	Post-Transition Period	24
5.8	Scheduling Discrepancies	24
ARTICLE 6     Supply Fee		24
ARTICLE 7     Sale Contracts		25
7.1	Sale Contract Terms	25
7.2	Transactions Outside Approved Retail Energy Business	25
7.3	Sale Contract Accounting	26
7.4	Modification to Sale Contracts	26
ARTICLE 8     Reporting Obligations		26
8.1	Obligations of BP	26
8.2	Obligations of IDT	27
8.3	Material Deviations	29
8.4	Audit	29

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

ARTICLE 9     Accounts		29
9.1	Deposit Account	29
9.2	Collateral Account	31
9.3	Independent Collateral Amount	32
9.4	Deposit Account Control Agreements	32
ARTICLE 10     Billing and Payment		33
10.1	Billing; Invoicing	33
10.2	Payment Extensions	33
10.3	Interest Accrual	34
10.4	Distribution from Collateral Account	35
10.5	ISO Billing Disputes	36
10.6	Disputed Invoices, etc.	36
ARTICLE 11     Regulatory Change		37
ARTICLE 12     Planned Term; Early Termination		38
12.1	Planned Term	38
12.2	Early Termination	38
ARTICLE 13     Tax and Bankruptcy		40
13.1	Taxes	40
13.2	Return of Documents and Information	40
13.3	Bankruptcy Provisions	40
ARTICLE 14     [RESERVED]		41
ARTICLE 15     Wind-Down Period		41
ARTICLE 16     Representations and Warranties		43
16.1	Representation and Warranties of IDT	43
16.2	Representation and Warranties of the BP Parties	48
ARTICLE 17     Covenants		49
ARTICLE 18     Events of Default		53
18.1	IDT Events of Default	53
18.2	BP Event of Default	55
18.3	MNA Default under Master Netting Agreement	57
ARTICLE 19     Miscellaneous		57
19.1	Amendments, Consents, Etc.	57
19.2	Notices, Etc.	57
19.3	No Waiver; Remedies	58

ii

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

19.4	Indemnification	58
19.5	Governing Law; Submission to Jurisdiction	59
19.6	Execution in Counterparts	60
19.7	WAIVER OF JURY TRIAL	60
19.8	Severability	60
19.9	Captions	60
19.10	Successors and Assigns	60
19.11	Integration	61
19.12	USA PATRIOT Act	61
19.13	Confidentiality	61
19.14	Imaged Agreement	63

iii

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

Exhibits and Schedules

Exhibit 1	Supply Fees
Exhibit 2	[reserved]
Exhibit 3	Material Terms of Sale Contract
Exhibit 4	[reserved]
Schedule 3.1	Existing Use of Pipelines and Storage Facilities	[New Request]
Schedule 3.3	Permitted Other Transactions	[Coming]
Schedule 5.4	ISO Interface Responsibilities
Schedule 16.1(c)	Required Filings	[Received]
Schedule 16.1(m)	List of Sales Contracts and Purchase Contracts	[Received]
Schedule 16.1(w)	Authorized Direct Pay Customers	[Received]

iv

THIS PREFERRED SUPPLIER AGREEMENT together with all exhibits and schedules (the “Agreement”) is made and entered into as of June 29, 2009 (the “Effective Date”), by and among BP Energy Company, a Delaware corporation (“BP”), BP Corporation North America Inc., an Indiana corporation, (“BPCNA” and together with BP, the “BP Parties”), and IDT Energy, Inc., a Delaware corporation (“IDT”). Each of BP, BPCNA and IDT may be referred to herein individually as a “Party” or collectively as the “Parties.”

WHEREAS, the BP Parties are engaged in the business of purchasing and selling at wholesale physical and financial Energy, and physical and financial Natural Gas; and

WHEREAS, IDT, directly and through its wholly owned subsidiary North American Energy, Inc., a Delaware corporation, is engaged in the business of marketing retail Energy and Natural Gas to commercial, residential, governmental and industrial Customers; and

WHEREAS, the Parties desire to enter into an arrangement, subject to all terms and conditions set forth in this Agreement and the Related Agreements, whereby the BP Parties will transact with IDT for the purchase, sale and delivery of physical and financial Energy, physical Natural Gas, and Related Services for IDT to use in connection with the Approved Retail Energy Business, and IDT will (i) pay specified fees to the BP Parties in consideration for the performance of obligations under this Agreement, (ii) grant the BP Parties a first-priority security interest in the Collateral (as defined herein) to secure its performance hereunder and under the Related Agreements, as more specifically described in the Security Documents, and (iii) provide BP with the information necessary to provide such services, all as described more fully herein.

NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1

DEFINITIONS; RULES OF INTERPRETATION

1.1 Definitions. Capitalized terms used herein shall have the following meanings:

“Account Bank” means (a) with respect to the Deposit Account, Wachovia Bank, N.A., or any of its successors, and (b) with respect to the Collateral Account, JPMorgan Chase Bank, N.A, or any of its successors.

“Affiliate” means, with respect to a Party, any entity that, directly or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, such Party. For this purpose, “control” means the direct or indirect ownership of fifty percent (50%) or more of the outstanding capital stock or other equity interests having ordinary voting power.

“Aggregate Customer Receivables” means, for any period, the sum of (a) the accounts receivable of all Authorized Direct Pay Customers that are invoiced during such period and that arise under any Sale Contract and (b) the aggregate of settled amounts that are payable during such period to IDT under all POR Programs and that arise under any Sale Contract.

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

“Agreement” has the meaning set forth in the introductory paragraph.

“Ancillary Services” means all services required of a Load-Serving Entity (as defined in any ISO Protocols) by the ISO or any other governmental or quasi-governmental agency with jurisdiction over Load Serving Entities operating in the markets covered by this Agreement or otherwise allocated by the ISO or any other governmental or quasi-governmental agency with jurisdiction to a Scheduling Agent with respect to such Scheduling Agent’s scheduled load to effectuate the delivery of Energy, including, without limitation: Capacity support services, energy imbalance services, pool operation services, scheduling services, system control services, reactive power services, voltage control services, operating reserve services (including spinning, non-spin, black start or other).

“Approved Retail Energy Business” means the retail business owned and operated by IDT of providing physical and financial Energy and physical Natural Gas to Customers in a Designated Region and services ancillary thereto.

“Authorized Direct Pay Customers” means those Non-POR Customers set forth in Schedule 16.1(w).

“Bankruptcy” has the meaning set forth in the Master Netting Agreement.

“Bankruptcy Code” has the meaning set forth in Section 13.3(a).

“BP” has the meaning set forth in the introductory paragraph.

“BP Event of Default” has the meaning set forth in Section 18.2.

“BP Parties” means BP and BPCNA, collectively, and “BP Party” means any of BP or BPCNA, individually.

“BPCNA” has the meaning set forth in the introductory paragraph.

“Business Day” means any day Monday through Friday that is not (a) a Federal Holiday, (b) or a state banking holiday in the state of New York, or (c) a BP corporate holiday for which BP provides at least ninety days’ prior written notice to IDT.

“Calculation Date” has the meaning set forth in the Master Netting Agreement.

“Capacity” means a reliability product required to be purchased by Load Serving Entities operating within certain ISO or RTO markets, designated as either Installed Capacity (ICAP), Unforced Capacity (UCAP), or a similar energy capacity product, in any such case, by the respective ISO or RTO.

2

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

“Carrying Cost” has the meaning set forth in Section 3.1(b).

“Close-Out” has the meaning set forth in the Master Netting Agreement.

“Closing Date” means the date on which all of the conditions precedent set forth in Section 4.1 shall have been fulfilled or properly waived in accordance with the terms of this Agreement.

“Collateral” has the meaning as set forth in the Pledge and Security Agreement.

“Collateral Account” has the meaning set forth in Section 9.2.

“Collateral Requirement” has the meaning set forth in the Master Netting Agreement.

“Collateral Value” has the meaning set forth in the Master Netting Agreement.

“Confirmation” and “Confirmations” have the meanings set forth in Section 3.1.

“Costs” has the meaning set forth in the Master Netting Agreement.

“Credit-Enabled Transaction” has the meaning set forth in Section 3.1.

“Creditworthy Assignee” has the meaning set forth in Section 15.2(a).

“Customer” means any retail, commercial, residential, governmental or industrial customer in a Designated Region that purchases Energy or Natural Gas from IDT.

“Defaulting Party” has the meaning set forth in the Master Netting Agreement.

“Delivery Month” has the meaning set forth in Section 10.1.

“Delivery Point” has the meaning set forth in the EEI Agreement or the NAESB Agreement, as applicable.

“Deposit Account” has the meaning set forth in Section 9.1.

“Deposit Account Control Agreement” has the meaning set forth in Section 9.4.

“Designated Customer” means (a) any existing Customer of IDT in a Designated Region as of the Effective Date, and (b) any Person that becomes a Customer of IDT in a Designated Region after the Effective Date and, in any such case, which has entered into a Sale Contract with IDT.

3

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

“Designated Region” means: (a) with respect to Energy, the geographic region in which NYISO operates, and (b) with respect to Natural Gas, the geographic region in which Niagara Mohawk, Orange & Rockland, Consolidated Edison Company of New York, National Fuel Gas Company, Rochester Gas & Electric, Central Hudson Gas & Electric Corporation and KeySpan (now National Grid), as applicable, operate.

“Direct Transaction” has the meaning set forth in Section 3.1.

“Disputed Amounts” has the meaning set forth in Section 10.6.

“Early Termination” has the meaning set forth in Section 12.2.

“Early Termination Net Payment” has the meaning set forth in Section 12.2.

“EEI Agreement” means that certain Edison Electric Institute form of Master Power Purchase and Sale Agreement, including any special provisions or addendums thereto, dated June 29, 2009, by and between IDT and BP.

“Effective Date” has the meaning set forth in the introductory paragraph.

“Eligible Collateral” has the meaning set forth in the Master Netting Agreement.

“Energy” means electric power and, where appropriate, shall include Capacity, Ancillary Services or other similar services relating to the production and delivery of electric power.

“Environmental Law” means any and all present and future United States Federal, state and local and all present and future foreign laws, rules or regulations, and any orders or decrees, in each case as now or hereafter in effect, relating to the regulation or protection of human health, safety or the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes into the indoor or outdoor environment, including, without limitation, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“Event of Default” has the meaning set forth in Section 18.1.

“Financial Products” means any hedge, swap or heat rate swap that is entered into for the purpose of hedging the price of Energy, Capacity or Related Electric Power Services that IDT purchases solely in connection with the Approved Retail Energy Business. BP will not provide similar products related to Natural Gas or Related Natural Gas Services, and such products will not constitute Financial Products under this Agreement.

4

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

“Financial Responsibility Period” has the meaning set forth in Section 5.5.

“FTP” means a file transfer protocol used to connect two computers over the internet so that the user of on computer can transfer files to and perform file commands on the other computer.

“Government Contract” means any prime contract, subcontract, teaming agreement, joint venture, basic ordering agreement, pricing agreement, letter contract, grant, cooperative agreement, or other mutually binding legal agreement between IDT and the United States Government, or any agency or division thereof.

“Governmental Authority” means any federal, state, municipal, county, regional or local government, administrative, judicial or regulatory entity operating under any applicable laws and includes any department, commission, bureau, board, council, including the ISO, administrative agency or regulatory body of the United States Government or any state or local body or division thereof which governs and controls or otherwise has authority over the Parties, as well as over any Transaction Document and the applicable Government Contract as defined herein.

“Guarantee” means a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, maintenance of net worth, working capital or earnings of any Person.

“Hazardous Material” means, collectively, (a) any petroleum or petroleum products, flammable materials, explosives, radioactive materials, asbestos, urea formaldehyde foam insulation, and transformers or other equipment that contain polychlorinated biphenyls (“PCBs”), (b) any chemicals or other materials or substances that are now or hereafter become defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials”, “extremely hazardous wastes”, “restricted hazardous wastes”, “toxic substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of similar import under any Environmental Law and (c) any other chemical or other material or substance, exposure to which is now or hereafter prohibited, limited or regulated under any Environmental Law.

“IDT” has the meaning set forth in the introductory paragraph.

“IDT Event of Default” has the meaning set forth in Section 18.1.

“Imaged Agreement” has the meaning set forth in Section 19.14.

5

CONFIDENTIAL PORTIONS HAVE BEEN OMITTED FROM THIS DOCUMENT BASED UPON A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934 AND HAVE BEEN SEPARATELY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE LOCATION OF OMITTED TEXT IS INDICATED BY AN ASTERISK (*)

“Indebtedness” means, for any Person:

(a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such property from such Person);

(b) obligations of such Person to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within 60 days of the date the respective goods are delivered or the respective services are rendered and such trade accounts payable are not 90 days or more past due;

(c) the amount of any prepayment received by IDT for Energy, Natural Gas or Related Services in connection with the sale and delivery of Energy, Natural Gas or Related Services that has not been delivered;

(d) indebtedness of others secured by a Lien on the property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person;

(e) obligations of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for account of such Person;

(f) capital lease obligations of such Person (as determined in accordance with GAAP);

(g) indebtedness or other obligations of others constituting a Guarantee by such Person; and

(h) the net liability of such Person under hedge agreements.

“Indemnified Party” has the meaning set forth in Section 19.4.

“Independent Collateral Amount” has the meaning set forth in Section 9.3.

“Information” has the meaning set forth in Section 19.13.

“Interest Rate” means the lesser of (a) * or (b) the maximum lawful rate.

“Invoice” has the meaning set forth in Section 10.1(a).

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“ISDA Agreement” means that certain International Swaps and Derivatives Association form contract, including any schedules or annexes thereto, dated June 29, 2009, by and between IDT and BPCNA.

“ISO” means an Independent System Operator that coordinates, controls and monitors the operation of the electrical power system, usually within a single State, but sometimes encompassing multiple states. As context requires herein, the ISO shall refer to NYISO.

“ISO Barred Issue” has the meaning set forth in Section 10.5.

“ISO Protocols” means the ISO Protocols adopted by the ISO (in effect at the time of the performance or non-performance of an action).

“Legal Requirement” means any applicable requirement arising out of any federal, state, local, municipal, or constitutional, law, ordinance, principle of common law, code, regulation, statute, statutory instrument or subordinate legislation, including ISO rules, protocols, or other ISO requirements.

“LIBOR” means the one-month LIBOR rate of interest in effect from time to time for large U.S. money center commercial banks as published under “Money Rates” by The Wall Street Journal (or any equivalent publication selected by BP, if such information is not available in The Wall Street Journal).

“Lien” means any legal claim against an asset, including any (a) any mortgage, deed of trust, hypothecation, lien, pledge, encumbrance, charge, or security interest in or on such asset, whether arising by contract or by operation of law, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease, or title retention agreement relating to such asset, (c) in the case of securities, any purchase option, call, or similar right of a third party with respect to such securities, and (d) the filing of any financing statement or similar instrument under the Uniform Commercial Code or similar applicable Legal Requirement.

“Load-Serving Entity” means any state-licensed retail selling company recognized by the jurisdictional ISO and local electric utility company to conduct business selling retail electricity to retail customers.

“Master Netting Agreement” means the Master Netting, Setoff, Security and Collateral Agreement, dated as of June 29, 2009, among IDT, BP, and BPCNA.

“Material Adverse Effect” means a material adverse effect on (a) the consolidated financial condition, assets, properties, or operations of a Party, (b) the ability of any Party to perform its obligations under this Agreement (including, in the case of IDT, the Obligations), any Transaction Document or a significant number (or value) of Sale Contracts to which it is a party, (c) the authorization, legality, validity or enforceability of

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this Agreement or any other Transaction Document, or (d) the validity, enforceability, perfection, or priority of the Liens granted in favor of BP under the Security Documents or this Agreement or the value of the Collateral subject to such Liens.

“MMBtu” means one million British thermal units.

“MNA Default” has the meaning set forth in the Master Netting Agreement.

“Monthly Distribution Date” has the meaning set forth in Section 10.4.

“Moody’s” means Moody’s Investor Services, Inc., or its successor.

“MWh” means a megawatt hour.

“NAESB Agreement” means that certain North American Energy Standards Board, Inc.’s Base Contract for Sale and Purchase of Natural Gas, including any special provisions or addendums thereto, dated June 29, 2009, by and between IDT and BP.

“Natural Gas” has the meaning ascribed for “Gas” under the NAESB Agreement.

“NERC” means the North American Electric Reliability Corporation.

“Net Exposure” has the meaning set forth in the Master Netting Agreement.

“Non-defaulting Party” has the meaning set forth in the Master Netting Agreement.

“Non-POR Customer” means any Designated Customer whose accounts receivable from IDT’s sale and delivery to such Designated Customer of Energy or Natural Gas are not subject to payment to IDT under a POR Program.

“NYISO” means New York Independent System Operator.

“Obligations” means, with respect to IDT, each and every present or future payment or performance obligation or liability of IDT under this Agreement, any Security Agreement, and, to the extent such obligation or liability arises out of a Transaction, under any Transaction Document.

“Party” and “Parties” have the meanings set forth in the introductory paragraph.

“Payment Extension” has the meaning set forth in Section 10.2.

“Payment Provision” has the meaning set forth in Section 7.1(a).

“Performance Assurance” has the meaning set forth in the Master Netting Agreement, including cash and Qualifying Letters of Credit.

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“Permitted Extension Period” has the meaning set forth in Section 10.2.

“Permitted Other Transactions” has the meaning set forth in Section 3.3.

“Person” means any individual, corporation, limited liability company, partnership or other legal entity.

“Planned Expiration Date” means June 30, 2011 or such later date upon renewal of the Planned Term in accordance with Section 12.1.

“Planned Term” has the meaning set forth in Section 12.1.

“Pledge and Security Agreement” means the Pledge and Security Agreement, dated as of June 29, 2009, by and among the BP Parties and IDT.

“POR Customer” means any Designated Customer whose accounts receivable from IDT’s sale and delivery to such Designated Customer of Energy or Natural Gas are payable to IDT under a POR Program.

“POR Program” means any purchase of receivables program established in accordance with applicable Legal Requirements of any electric utility or local gas distribution company in a Designated Region.

“Price Solicitation” has the meaning set forth in Section 3.2.

“Process Agent” has the meaning set forth in Section 19.5(d).

“Purchase Contract” means (a) the purchase of Energy or Related Electric Power Services, or Financial Products related thereto, by (i) IDT pursuant to a Direct Transaction with BP, under the EEI Agreement, or with BPCNA, under the ISDA Agreement, or such other power purchase and sale agreements as may be entered into by and between the Parties from time to time, or (ii) the BP Parties pursuant to a Credit-Enabled Transaction with a BP-enabled and an approved Third-Party Seller, and (b) for the purchase of Natural Gas or Related Natural Gas Services by (i) IDT pursuant to a Direct Transaction with BP, under the NAESB Agreement or such other Natural Gas purchase and sale agreements as may be entered into by and between any of the Parties from time to time, or (ii) by the BP Parties pursuant to a Credit-Enabled Transaction with a BP-enabled and approved Third-Party Seller.

“Qualifying Letter of Credit” means a letter of credit in the form of letter of credit set forth in the Master Netting Agreement and issued by a financial institution whose (a) short-term senior unsecured debt rating is “Prime-1” and its long-term, unsecured and unsubordinated debt obligations are rated “Aa2” or above by Moody’s, and (b) short-term senior unsecured debt rating is “A-1” or above and its long-term senior unsecured debt rating is “AA” or above.

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“Related Agreements” means, collectively, the following agreements entered into by the Parties hereunder: the EEI Agreement; the ISDA Agreement; the NAESB Agreement; the Master Netting Agreement; all Confirmations; and any other agreement between the Parties (other than this Agreement, and the Security Documents).

“Related Electric Power Services” means the products and services that BP agrees to provide pursuant to a Transaction to deliver electrical power to the Delivery Point(s) in the Designated Region, including all ISO services, Ancillary Services and Capacity.

“Related Natural Gas Services” means the products and services that BP agrees to provide pursuant to a Transaction to deliver Natural Gas to IDT at the Delivery Point(s).

“Related Services” means Related Electric Power Services or Related Natural Gas Services.

“Renewable Energy Credits” means a certificate, credit, allowance, green tag, or other transferable indicia, howsoever entitled, created by an RPS, renewable energy program, scheme or organization, adopted by a Governmental Authority or otherwise indicating generation of a particular quantity of energy, or Renewable Energy Credits associated with the generation of a specified quantity of energy from a “Renewable Energy Source” or “Renewable Energy Facility” as defined in the applicable RPS, renewable energy program or scheme. A Renewable Energy Credit may include some or all additional environmental attributes associated with the generation of electricity, and those environmental attributes may, but need not be, verified or certified by the same or different verification authorities or certification authorities, and disaggregated and retained or sold separately, all as the Parties may agree in a transaction confirmation. A Renewable Energy Credit is separate from the Energy produced and may be separately transferred or conveyed.

“RPS” means a renewable portfolio standard.

“RTO” means a regional transmission organization.

“S&P” means Standard & Poor’s Corporation, a division of The McGraw-Hill Companies, Inc. or its successor.

“Sale Contract” means an agreement, entered into by IDT solely in connection with the Approved Retail Energy Service, for the sale and distribution of Energy or Natural Gas by IDT to a Designated Customer.

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“Scheduling Agent” means any Person who acts on behalf of any other Person as agent for the purpose of scheduling the delivery of Energy or Related Electric Power Services in the ISO or RTO.

“Scheduling Agent Services” has the meaning set forth in Section 5.1.

“Security Documents” means the Pledge and Security Agreement, each Deposit Account Control Agreement, and all UCC financing statements and continuation statements and each other instrument or document delivered by IDT, in each case, to grant to the BP Parties a Lien on any Collateral or to perfect, assure, or preserve any such Lien or any rights or remedies created thereby.

“Solvent” means, with respect to any Person, that as of the date of determination both (a)(i) the then-fair saleable value of the property of such Person is (A) greater than the total amount of liabilities (including contingent liabilities but excluding amounts payable under intercompany loans or promissory notes) of such Person and (B) not less than the amount that will be required to pay the probable liabilities on such Person’s then-existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person, (ii) such Person’s capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due, and (b) such Person is “Solvent” within the meaning given that term and similar terms under applicable Legal Requirements relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“Storage Delivery Price” has the meaning set forth in Section 3.1(b).

“Storage Delivery Transaction” has the meaning set forth in Section 3.1(b).

“Supply Fee” has the meaning set forth in Article 6.

“Supply Fee Termination Payment” has the meaning set forth in Section 12.2.

“Term” has the meaning set forth in Section 12.1.

“Third-Party Seller” means an entity other than BP that is identified by IDT as a third-party seller of Energy, Natural Gas, Related Services or Financial Products and that agrees to sell Energy, Natural Gas, Related Services or Financial Products to BP or BPCNA for resale to IDT pursuant to a Transaction.

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“Transaction” means any transaction between IDT and the BP Parties for the purchase or sale of Energy, Natural Gas, Related Services or Financial Products to the extent that (a) such Energy, Natural Gas, Related Services or Financial Products are used by IDT in connection with Approved Retail Energy Business, and (b) such transaction is entered into in accordance with the terms and conditions of the EEI Agreement, the NAESB Agreement, or the ISDA Agreement, as applicable. All Transactions shall also be governed by the terms and conditions of this Agreement.

“Transaction Documents” means this Agreement, the Security Documents and the Related Agreements.

“Transfer” has the meaning set forth in the Master Netting Agreement.

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as presently in effect from time to time in the State of New York and any other jurisdiction (including the State of Texas and the State of Delaware), the laws of which control, among other things, the creation, perfection or priority of the Liens under the Security Documents.

“UMA Final Settlement Amount” has the meaning set forth in the Master Netting Agreement.

“Unrelated Contract” has the meaning set forth in Section 15.2(b).

“Unusual Load Profile” has the meaning set forth in Section 7.1(d).

“Wind-Down Commencement Date” has the meaning set forth in Section 15.1.

“Wind-Down End Date” has the meaning set forth in Section 15.1.

“Wind-Down Period” has the meaning set forth in Section 15.1.

Other capitalized terms used in this Agreement and not defined hereinabove shall have the meanings given them in this Agreement or the Pledge and Security Agreement.

1.2 Rules of Interpretation. In this Agreement, unless a clear contrary intention appears:

(a) the singular number includes the plural number and vice versa;

(b) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(c) reference to either gender includes the other gender;

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(d) reference to any agreement, document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof;

(e) reference to any Legal Requirement means such Legal Requirement as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Legal Requirement means that provision of such Legal Requirement from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision, in each case except to the extent that this would increase or alter the liability of the Parties under this Agreement;

(f) “hereunder,” “hereof,” “hereto,” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Article, Section or other provision hereof;

(g) with respect to the determination of any period of time, “from” means “from and including” and “to” means “to but excluding”;

(h) headings to Articles, Sections, Exhibits and Schedules are for convenience only and do not affect the interpretation of this Agreement;

(i) with respect to any capitalized term defined in the Master Netting Agreement that contains another capitalized term that is also defined in the Master Netting Agreement, such other capitalized term shall have the meaning given to such term in the Master Netting Agreement;

(j) the terms “Dollars” and “$” mean United States Dollars;

(k) unless otherwise specified, all times are Houston, Texas time;

(l) unless otherwise specified, references to Sections or Articles shall mean Sections or Articles in this Agreement; and

(m) unless otherwise specified, use of the word “including” shall mean “including, but not limited to,”.

1.3 Relationship Among Transaction Documents. In the event of any inconsistency among the Transaction Documents, the terms of the documents shall prevail in the following order (unless expressly stated otherwise in a Transaction Document): first, any Confirmation; second, the Master Netting Agreement; third, this Agreement; fourth, the Security Documents; and, fifth, the EEI Agreement, the ISDA Agreement and the NAESB Agreement.

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ARTICLE 2

NATURE OF RELATIONSHIP; CREDIT EXPOSURE

2.1 Nature of Relationship. The purpose of this Agreement is to establish a relationship between the Parties whereby the BP Parties will sell and deliver to IDT, and IDT will purchase and receive from the BP Parties, Energy, Natural Gas, Related Services (including without limitation ISO-related services), and Financial Products that IDT uses in connection with the Approved Retail Energy Business, all as described more fully herein. In exchange, IDT will (i) pay specified fees to the BP Parties in consideration for the performance of obligations under this Agreement, (ii) grant the BP Parties a first-priority security interest in the Collateral to secure its performance hereunder as more specifically described in the Security Documents, and (iii) provide BP with the information necessary to provide such services, all as described more fully herein. With respect to the relationship between the Parties:

(a) It is expressly understood and agreed by the Parties that the relationship between BP or BPCNA and IDT described herein or established hereby is not a joint venture, partnership, association or trust. This Agreement shall not be deemed or construed to authorize any Party to act as an agent, servant or employee for any other Party for any purpose whatsoever except as explicitly set forth in this Agreement. In their relations with each other under this Agreement, the Parties shall not be considered fiduciaries.

(b) IDT agrees that subject to the terms and conditions set forth herein it will be solely responsible for conducting and managing its day to day business activities.

(c) IDT shall be named as the contracting party in all Sale Contracts and IDT shall be solely responsible for the performance of its obligations under such Sale Contracts.

(d) Notwithstanding anything to the contrary contained herein, IDT acknowledges and agrees that the BP Parties are not providing and will not provide (and will not be deemed under any circumstances to have provided) IDT with any investment, regulatory or compliance advice, including, without limitation, any opinion or advice regarding the efficacy or advisability of any Transaction proposed by IDT hereunder. IDT shall make its own investment, regulatory and compliance decisions, or seek investment, regulatory and compliance advice from third party experts in each of these areas as IDT deems necessary.

(e) Unless otherwise agreed by the BP Parties, all Transactions entered into under this Agreement shall be for the sole purpose of enabling IDT to perform the Approved Retail Energy Business.

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2.2 Credit Requirement.

(a) IDT recognizes and agrees that the BP Parties’ credit exposure to IDT with respect to outstanding Transactions entered into under the EEI Agreement, NAESB Agreement or ISDA Agreement herewith, is governed by this Agreement, the Master Netting Agreement and the Security Documents for managing mark-to-market exposures.

(b) If, on any Calculation Date, the BP Parties have a Net Exposure to IDT, IDT shall, pursuant to the Master Netting Agreement, Transfer to the BP Parties Performance Assurance having a Collateral Value on the date of Transfer at least equal to IDT’s Collateral Requirement. Until IDT Transfers to the BP Parties such Performance Assurance, neither BP Party shall be required to enter into any new Direct Transactions or Credit-Enabled Transactions. The BP Parties shall return to IDT such Performance Assurance to the extent required under the Master Netting Agreement.

(c) Using its commercially reasonable judgment and in accordance with its credit risk management policies, BP shall determine the value of the Collateral Value for purposes of the Master Netting Agreement.

ARTICLE 3

PURCHASE CONTRACTS

3.1 Agreements between BP and IDT or between BPCNA and IDT.

(a) General. On or before the Closing Date, the BP Parties and IDT shall execute and deliver the Related Agreements. Subject to the terms hereof and the relevant Related Agreement, the BP Parties and IDT will enter into Transactions for the purchase and sale of Energy, Natural Gas, Related Services or Financial Products, under the EEI Agreement, NAESB Agreement, or ISDA Agreement pursuant to confirmations or other agreements (such confirmations or agreements, collectively, the “Confirmations” and each individually a “Confirmation”) as follows: (a) a Transaction between the BP Parties and IDT (a “Direct Transaction”); or (b) * (a “Credit-Enabled Transaction”)

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(b) Storage Delivery Transactions for Natural Gas. BP, in accordance with this Section 2.1(b), may sell Natural Gas to IDT for placement by IDT of such Natural Gas into storage with deferred payment for such Natural Gas (each, a “Storage Delivery Transaction”). BP will not be obligated to enter into any Storage Delivery Transactions, and in no case will BP be selling or otherwise providing storage for Natural Gas under the terms of this Agreement.

*

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3.2 *

(a) *

(b) *

(c) *

3.3 Permissible Transactions Not Subject to this Agreement. Except for Permitted Other Transactions, IDT will not enter into transactions under purchase contracts for Energy, Natural Gas, Related Services or Financial Products with counterparties other than the BP Parties. No fee shall be due from IDT to the BP Parties for any Permitted Other Transaction.

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A “Permitted Other Transaction” is each transaction (a) identified on Schedule 3.3 that is not modified, altered or extended after the Closing Date, (b) in which, regardless of the duration of the trade, (i) the counterparty must offer a price that is lower than the price the relevant BP Party offers for such transaction, (ii) the BP Parties are unable to enter into a Credit-Enabled Transaction with such counterparty, and (iii) the BP Parties will have no additional responsibilities under the Transaction Documents with respect to the Energy, Natural Gas, Related Services or Financial Products that are the subject of such transaction, and (c) for the virtual and transmission congestion contract markets in NYISO, so long as the BP Parties will have no additional responsibilities under the Transaction Documents with respect to the Energy, Natural Gas, Related Services or Financial Products that are the subject of such transaction.

ARTICLE 4

CONDITIONS PRECEDENT

4.1 Closing Date. The Closing Date shall occur upon the fulfillment, in form and substance satisfactory to BP, or waiver in writing by BP, of the following:

(a) Each of IDT, BP, and BPCNA shall have executed and delivered each of the following agreements to which it is a party:

(i) this Agreement;

(ii) the Pledge and Security Agreement;

(iii) the EEI Agreement;

(iv) the ISDA Agreement;

(v) the NAESB Agreement; and

(vi) the Master Netting Agreement;

(b) BP shall have received from IDT the following, each of which shall be in form and substance satisfactory to BP:

(i) a certificate of incumbency;

(ii) a certificate of good standing;

(iii) a certified copy of its certificate of incorporation and of its bylaws; and

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(iv) certified copies of resolutions or other actions or authorizations, duly adopted by its members or other authorized governing body, authorizing its execution, delivery, and performance of the Transaction Documents to which it is a party;

(c) BP shall have received written legal opinions, in form and substance satisfactory to BP, dated the Closing Date and addressed to the BP Parties, of Day Pitney LLP, counsel to IDT.

(d) The BP Parties shall have received, in form and substance satisfactory to them, (i) evidence that each document (including each UCC financing statement) required by applicable Legal Requirements, or reasonably requested by BP, to be filed, registered, or recorded in order to create for the benefit of the BP Parties a valid, enforceable, and perfected first-priority Lien on the Collateral (subject to no other Liens) shall have been properly filed, registered, or recorded in each jurisdiction in which the filing, registration, or recordation thereof shall be so required or requested, (ii) copies of the UCC search reports and Lien, judgment, and litigation search reports, dated not more than ten (10) Business Days before the Closing Date, made in respect of IDT in each jurisdiction in which IDT is located or in which assets of IDT are located, and (iii) any other consents reasonably requested by BP that are necessary to create, or acknowledge the creation of, a valid, enforceable, and perfected first-priority Lien on the Collateral for the benefit of the BP Parties;

(e) BP shall have received a copy, in form and substance satisfactory to BP, of the balance sheet of IDT as at July 31, 2008 and the related statements of income and cash flows of IDT for the fiscal year then ended, with the unqualified opinion thereon of IDT’s independent public accounting firms that is recognized by the American Institute of Certified Public Accountants, and the unaudited balance sheet of IDT and statements of income and cash flows of IDT for the period ending April 30, 2009;

(f) BP shall have received certificates, in form and substance satisfactory to BP, demonstrating that IDT has obtained and is maintaining the insurance polices that it is required to obtain and maintain under this Agreement and the other Transaction Documents;

(g) BP shall have received evidence, in form and substance satisfactory to BP, that (i) IDT has obtained all permits, licenses and other authorizations required under all Legal Requirements (including Environmental Laws) to execute, deliver and perform its obligations under the Transaction Documents to which it is a party and to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization has not had, or could not reasonably be expected to have, (either individually or in the

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aggregate) a Material Adverse Effect and (ii) each of such permits, licenses and authorizations is in full force and effect and IDT is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Legal Requirement or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith has not had, or could not reasonably be expected to have, (either individually or in the aggregate) have a Material Adverse Effect;

(h) BP shall have received at least five (5) Business Days prior to the Closing Date all documentation and other information that BP requests and is required by any Governmental Authority under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act;

(i) each of the representations and warranties made by IDT under any Transaction Document shall be true and correct in all material respects (and in all respects in the case of a those representations and warranties that are qualified by materiality or the occurrence or non-occurrence of any event that could have or would have a Material Adverse Effect);

(j) no Event of Default, and no event that after the giving of notice or the passage of time or both would result in an Event of Default, has occurred and is continuing or would occur upon the execution, delivery, or performance of this Agreement or the other Transaction Documents;

(k) no Material Adverse Effect in respect of IDT has occurred and is continuing or would occur upon the execution, delivery, or performance of this Agreement or any of the Transaction Documents; and

(l) BP shall have received a certificate, in form and substance satisfactory to BP, from an authorized officer of IDT that all of the conditions set forth in this Section 4.1 have been fulfilled or property waived by BP.

4.2 Conditions to Each Direct Transaction or Credit-Enabled Transaction. The obligation of BP to enter into any Direct Transaction or Credit-Enabled Transaction, as applicable, is subject to the fulfillment, in form and substance satisfactory to BP, or waiver in writing by BP, of the following:

(a) the Closing Date shall have occurred;

(b) each of the Collateral Account and the Deposit Account shall have been established;

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(c) IDT shall have (i) paid to BP in cash an amount equal to the Independent Collateral Amount, or (ii) established an irrevocable Qualifying Letter of Credit for the sole benefit of BP in an amount equal to the Independent Collateral Amount;

(d) BP shall have received written legal opinions, in form and substance satisfactory to BP, dated the Closing Date and addressed to the BP Parties, of (i) Day Pitney LLP, counsel to IDT, regarding the enforceability with respect to IDT and the perfection of applicable security interests, each under the Deposit Account Agreements, and (ii) in-house counsel to IDT regarding related corporate authority matters. The initial draft of each opinion will be provided to BP no later than five (5) Business Days prior to the execution of the last Deposit Account Agreement;

(e) with respect to Energy and Related Electric Power Services, BP shall have received, in form and substance satisfactory to BP, the designations necessary to act as IDT’s Scheduling Agent for the ISO in the Designated Region;

(f) except with respect to Storage Delivery Transactions, immediately following the Direct Transaction or Credit-Enabled Transaction, the Collateral Value is in excess of the BP Parties’ a Net Exposure to IDT;

(g) IDT has Transferred to the BP Parties, pursuant to Section 2.2 and the Master Netting Agreement, any Performance Assurance that the BP Parties has requested thereunder;

(h) each of the representations and warranties made by IDT under any Transaction Document shall be true and correct in all material respects (and in all respects in the case of a those representations and warranties that are qualified by materiality or the occurrence or non-occurrence of any event that could have or would have a Material Adverse Effect);

(i) no Event of Default, and no event that after the giving of notice or the passage of time or both would result in an Event of Default, has occurred and is continuing or would occur upon the execution, delivery, or performance of such Direct Transaction or Credit-Enabled Transaction, as applicable;

(j) no Material Adverse Effect in respect of IDT has occurred and is continuing or would occur upon the execution, delivery, or performance of such Direct Transaction or Credit-Enabled Transaction, as applicable; and

(k) BP has received proper exemption certificates issued by IDT as are required to exempt any Transaction under the Transaction Documents as exempt from state, city, and county level sales or use tax as “sales for resale” in the State of New Jersey and the State of New York.

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ARTICLE 5

INTERFACE WITH INDEPENDENT SYSTEM OPERATORS

5.1 Scheduling Agent. With respect to NYISO, on and after the effective date of the transfer of responsibility for scheduling and managing transmission from IDT to BP by NYISO and continuing throughout the Planned Term, subject to the provisions hereof, BP shall act as IDT’s designated Scheduling Agent. BP’s responsibilities as Scheduling Agent shall be limited to the scheduling of Energy and Related Electric Power Services for delivery hereunder (the “Scheduling Agent Services”), as defined in more detail in Section 5.2 below.

5.2 Scheduling Agent Designation. During the Planned Term, IDT shall authorize BP to act as the exclusive Scheduling Agent for IDT in NYISO (for purposes of this Article 5, the “ISO”) and to perform all scheduling and settlement with the ISO, with respect to IDT’s Customer load and the Energy and Related Electric Power Services purchased in accordance with this Agreement. IDT shall at all times grant BP all such authority necessary for BP to comply with the ISO’s Protocols as IDT’s Scheduling Agent during the Planned Term. IDT and BP shall submit to the ISO all such documentation as may be required to designate BP as IDT’s Scheduling Agent and to authorize BP to perform Scheduling Agent Services on IDT’s behalf. IDT acknowledges that BP shall have the right to file all such reports, subject to IDT’s prior review, as may be required by applicable Legal Requirements, including, without limitation, all reports as may be required by the ISO or the applicable regulatory agencies with respect to IDT’s Customer load and/or transactions consummated by BP on behalf of IDT in accordance with the terms and conditions of this Agreement.

5.3 Compliance with ISO Rules and FERC Regulations. Each of the Parties agrees to abide by all applicable Legal Requirements (including without limitation all ISO Protocols, ISO operating and other guidelines, and ISO rules and directives) in performance of its obligations hereunder, as well as with all applicable FERC rules and regulations.

5.4 Specific Responsibilities by ISO. Schedule 5.4 sets out the respective responsibilities of IDT and BP with respect to the ISO. This Schedule shall not be construed as exhaustive.

5.5 Financial Responsibilities. Relying upon IDT’s representations, warranties and covenants that there have been and are no outstanding claims, liabilities or other issues with the ISO regarding any material financial responsibilities on or before the date on which the conditions precedents in Section 4.2 of this Agreement are satisfied, BP agrees, to the extent permissible by the ISO taken independently, to accept financial credit responsibility under the terms of BP’s current credit relationship and account with the

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ISO arising after and relating solely to the period, in the case of the ISO, at and after the effective date of the transfer to BP of responsibility to act as IDT’s Scheduling Agent with respect to the ISO (a “Financial Responsibility Period”).

For the avoidance of doubt, BP does not accept ultimate financial responsibility for ISO charges or billings made in the future referencing time periods prior to the applicable Financial Responsibility Period, which pertain to IDT’s business. To the extent that BP is deemed by the ISO to be credit responsible for periods before the effective date of the applicable Financial Responsibility Period, it is agreed by IDT that IDT shall be solely responsible for such charges and billings and hereby indemnifies and holds BP harmless from any and all such liability with respect to any such charges and billings should BP be obligated as the financially responsible party to make payment to the ISO.

IDT shall require any successor to BP as the responsible party to the ISO to accept credit responsibility for transactions after the appointment of such person with the ISO as the successor financially responsible party; provided that nothing herein shall require BP to continue to act as the financially responsible party for IDT following an IDT Event of Default. To the extent that BP is deemed by the ISO to be credit responsible for periods after (x) the successor financially responsible party has been recognized by the ISO, (y) termination of this Agreement or (y) an IDT Event of Default, it is agreed by IDT that IDT shall be solely responsible for such charges and billings and hereby indemnifies and holds BP harmless from any and all such liability with respect to any such charges and billings should BP be obligated as the financially responsible party to make payment to the ISO.

In the event that the ISO invoices BP for charges attributable to IDT’s business related to transactions that occurred during the Planned Term, but after the conclusion of Energy deliveries hereunder, as applicable, then BP shall bill and IDT shall pay for such charges even though these accounting adjustments or resettlements may occur after the expiration or Early Termination of this Agreement without any limitation as to time. The obligations of IDT under this Section 5.5 shall survive expiration or termination of this Agreement.

5.6 Transition Period. Until such time as the ISO recognizes the commencement of the Financial Responsibility Period applicable to it, IDT acknowledges that (i) all financial transactions that are Credit-Enabled Transactions, as well as physical transactions, contain terms as between BP and IDT that are equivalent to the terms as between BP and the Third-Party Seller and (ii) BP will schedule such physical bilateral transactions with respect to Energy, Natural Gas or Related Services, for delivery to IDT at receipt points, and IDT shall be obligated to pay for such physical Energy. IDT is and will be obligated to accept and pay for delivery (physical or financial) of these products and volumes and any associated ISO charges or fees on the same terms accepted by BP and/or BPCNA.

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5.7 Post-Transition Period. Upon commencement of any Financial Responsibility Period, all physical transactions that are Credit-Enabled Transactions shall be scheduled to BP and subsequently scheduled by BP on behalf of IDT under applicable ISO rules and procedures for ultimate delivery by IDT to Customers. Additionally, BP will submit, on behalf of IDT, all schedules required to be submitted to the ISO necessary to deliver the Energy or Related Electric Services to be sold to IDT pursuant to any outstanding Transaction. IDT is and will be obligated to accept and pay for delivery (physical or financial) of these products and volumes and any associated ISO charges or fees on the same terms accepted by BP and/or BPCNA.

5.8 Scheduling Discrepancies. An IDT Event of Default will occur if IDT's actualized delivered power volumes by individual ISO load zone and customer class hourly load profile shape applicable to ISO settlements in any given one month period exceeds * percent (*%) for any two individual months in a given consecutive twelve (12) month time period. If the actualized delivered power volumes by ISO load zone and customer class hourly load profile shape applicable to ISO settlements in any given one month period exceeds * percent (*%) then the penalty would be $* payable to BP for each monthly occurrence. If there were extenuating circumstance that caused the scheduling deviation, and both parties, acting reasonably, mutually agreed that the event was an extenuating circumstance, then the event would not be considered an IDT Event of Default.

ARTICLE 6

SUPPLY FEE

In compensation of BP’s services, duties, responsibilities and obligations hereunder, BP shall be entitled to receive a fee for each calendar month (or portion thereof) during the Planned Term, payable by IDT to BP each month equal to the applicable amount for each MWh or MMBtu, as applicable, of Energy, Natural Gas or Related Services (whether such delivery is a physical delivery or a financial transaction constituting a deemed delivery of Energy) purchased and sold in each Credit-Enabled Transaction and Direct Transaction as set forth in the Exhibit 1 (in either case, the “Supply Fee”). The Supply Fee shall be considered for all purposes under the EEI Agreement and NAESB Agreement, as applicable, to be in lieu of any other similar fee (not a separate and additional fee or cost) in respect of any Credit-Enabled Transaction or Direct Transaction (unless separately agreed to in a Transaction under the EEI Agreement or NAESB Agreement, as applicable).

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ARTICLE 7

SALE CONTRACTS

In order to sell Energy, Natural Gas or Related Services, IDT may enter into Sale Contracts, subject to the following terms and conditions:

7.1 Sale Contract Terms. With respect to Sale Contracts entered into during the Term, IDT shall, at a minimum, include the terms and conditions listed hereinafter.

(a) Either (i) all Sale Contracts contain a provision requiring the Customers to make payment for all sums due thereunder directly and exclusively to the Deposit Account (the “Payment Provision”), or (ii) IDT shall give legally binding written instructions consistent with such Payment Provision to any Customer which is not a party to a Sale Contract already containing such a Payment Provision. Each new Sale Contract will have provisions substantially similar to the material terms set forth in Exhibit 3 to this Agreement. A breach of this sub-section may constitute an Event of Default under Section 18.1(c).

(b) If Customer makes payment for amounts due to IDT at IDT’s place of business, IDT shall ensure that these payment amounts are deposited into the Deposit Account within three (3) Business Days from date of receipt of payment, but in any case as soon as possible. IDT shall deposit all such amounts into the Deposit Account, and shall make no other use or disposition thereof.

(c) No Customer contracted by IDT shall be a * with any utility or ISO sponsored program without the prior written consent of BP; provided that a Customer may be * if such Customer’s demand (i) is established on a day ahead load shape basis and (ii) does not require real-time metering and associated technological infrastructure to monitor and control such Customer’s demand real time.

(d) No customer contracted by IDT shall knowingly have an Unusual Load Profile without written approval from BP. A customer has an “Unusual Load Profile” if such customer exceeds 7 MW of demand during any calendar year and has a daily, monthly, or annual load factor of less than *%.

(e) The aggregate of settled amounts that are payable from fixed price Sale Contracts for any calendar month will not exceed *% of the Aggregate Customer Receivables.

7.2 Transactions Outside Approved Retail Energy Business. IDT shall not sell and deliver Energy, Natural Gas or Related Services to any Person on a retail basis under the terms of this Agreement if such sale and delivery would not constitute an Approved Retail Energy Business unless (a) a BP Party provides its prior written consent to such sale and delivery and (b) such sale and delivery is made pursuant to agreements and contracts approved by a BP Party; provided, however, that nothing in this Agreement precludes IDT from selling and delivering Energy, Natural Gas or Related Services on a retail basis to any Person outside the scope of this Agreement, subject to the option described in the immediately succeeding sentence. The BP Parties shall have the option, but not the obligation, to include such new Sale Contracts under the terms hereof with such deemed charges as may be necessary to include such Sales Contract. Within the Designated Region, IDT shall not make sales at wholesale of Energy, Natural Gas or Related Services except to the BP Parties.

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7.3 Sale Contract Accounting. IDT shall be responsible for all volumetric and financial accounting with respect to the Sale Contracts entered into pursuant to this Agreement. Billing under any Sale Contracts shall be in accordance with such Sale Contracts. IDT shall provide or cause to be provided upon request of BP, in addition to any other disclosure requirements hereunder, all information and data reasonably required by BP to verify the accounting pertaining to the Sale Contracts activity, including copies of the Customer Sale Contract if requested.

7.4 Modification to Sale Contracts. IDT will not modify, to the extent extant, any of the material terms set forth in Exhibit 3, remittance address, account number, payment instructions and contract delivery point under any Sale Contract without the prior written consent of BP.

ARTICLE 8

REPORTING OBLIGATIONS

8.1 Obligations of BP.

(a) Daily Settlement Reports. BP will provide on a daily basis all the settlement data associated with the IDT DUNS number as provided by the ISO in the daily Settlement Extract in its raw format (CSV, HTTP or xml format). BP will post the daily files in a secure website site that IDT can access remotely.

(b) Settlement Summary Reports. Two (2) Business Days after the ISO’s settlement period, BP will provide to IDT a settlement summary including day-ahead and real time volumetric and price data, as well as any other cost component including Capacity, ancillaries, etc. In the case of the other cost components, BP will provide to IDT with sufficient detail, including any allocation formulas, to allow IDT to verify the nature and the amounts charged or credited to IDT.

(c) ISO Reports. On a continuous basis, BP will provide IDT online access to view and download reports regarding activity with the ISO, including daily settlements reports. IDT’s access will be limited to data regarding transactions in which the BP’s and IDT’s data is not commingled together. With respect to transactions where IDT’s and BP’s data is commingled, BP will provide to IDT with its apportionment of the related transaction within three (3) Business Days from the availability of the data to BP. In such cases, BP will provide IDT with sufficient detail, including any allocation formulas, to allow IDT to verify the nature and the amounts charged or credited to IDT. If IDT reasonably requests additional

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relevant information, BP shall exercise commercially reasonable efforts to provide such information. BP will not be required to provide on line direct access in instances where the access cannot be restricted to IDT’s specific data only.

8.2 Obligations of IDT.

(a) Scheduling reports. On a weekly basis, IDT will provide to the regional trade desks at BP a week ahead scheduling forecast by ISO, delivery zone and by hour. The scheduling report will be delivered electronically in a form and mechanism mutually acceptable to the Parties.

(b) Forecasting reports. On a quarterly basis, IDT will provide to the trade control group at BP a weekly, rolling 3-month and rolling 12-month forecast by ISO delivery zone. The forecasting report(s) will be delivered electronically in a form and mechanism mutually acceptable to the Parties.

(c) Systems Reports. On a continuous basis, IDT shall make available to the trade control group at BP via online access at a secure website, reports of its Customer obligations, projections, incremental business changes, including specific customer contracts if requested by ISO, ISO zone or specific location and by month for Energy, Natural Gas or Related Services, RPS Renewable Energy Certificates and other similar information as reasonably requested, including, but not limited to, its monthly load forecast report and monthly load forecast variance report (Any exceptions shall not be sustained without written approval from BP).

(d) Environmental Reporting. On a monthly basis, IDT shall provide and reconcile with BP any environmental reporting that BP is required to do in connection with a Direct Transaction or a Credit-Enabled Transaction.

(e) NERC Reports; Notice of Non-compliance. IDT shall be responsible for providing, on a timely basis, to NERC all reports and other information that is required to be provided by a Load Serving Entity under NERC’s Reliability Standards. IDT shall provide prompt notice to BP of any IDT failure to comply with NERC’s Reliability Standards.

(f) Other Information. IDT promptly shall provide to the trade control, risk management, credit, compliance and legal groups at BP all other information, reports, and data reasonably requested by BP in order for BP to comply with all ISO and other reporting requirements under applicable laws, rules and regulations relating to the services, including the QSE services, being provided by BP hereunder. IDT agrees to indemnify and hold BP harmless from all penalties, liabilities, costs and expenses (including reasonable attorney fees) incurred by BP for being non-compliant with any reporting requirements on account of the failure of IDT in timely providing to BP any of the information and reports set forth in this Agreement. The provisions of this Section 8.2 shall survive termination or expiration of this Agreement.

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(g) Aged Accounts. Within five (5) Business Days after the end of each month, a report setting forth IDT’s Non-POR Customer aged accounts receivable (e.g., 1-30 days outstanding, 31-60 days outstanding, 61-90 days outstanding, etc.), including the amount outstanding for each account receivable listed and the number of days each such account receivable is past due.

(h) Cash Flow Projections. Within two (2) Business Days prior to the end of each calendar month, a projection of IDT’s cash flow for the immediately succeeding 7ninety (90)-day period, such projections to be developed by IDT in good faith and based on IDT’s best judgment as to the performance of the Approved Retail Energy Business during such period.

(i) Financial Reports. IDT promptly shall provide to the credit department at BP:

(i) as soon as available and in any event within 50 days after the end of each quarterly fiscal period of each fiscal year of IDT, statements of income of IDT for such period and for the period from the beginning of the respective fiscal year to the end of such period, and the related balance sheet of IDT as at the end of such period, setting forth in each case in comparative form the corresponding figures for the corresponding periods in the preceding fiscal year, accompanied by a certificate of a senior financial officer of IDT, which certificate shall state that (A) said financial statements fairly present the financial condition and results of operations of IDT, in accordance with generally accepted accounting principles, consistently applied, as at the end of, and for, such period (subject to normal year end audit adjustments), and (B) no Event of Default occurred during such period and is continuing;

(ii) as soon as available and in any event within 90 days after the end of each fiscal year of IDT, statements of income and cash flows of IDT for such fiscal year and the related balance sheet of IDT as at the end of such fiscal year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an unqualified opinion thereon of independent certified public accountants recognized by the Public Company Accounting Oversight Board, which opinion shall state that said financial statements fairly present the financial condition and results of operations of IDT as at the end of, and for, such fiscal year in accordance with generally accepted accounting principles, consistently applied accompanied by a certificate of a senior officer of IDT, which certificate shall state that (A) said financial statements fairly present the financial condition and results of operations of IDT, in accordance with

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generally accepted accounting principles, consistently applied, as at the end of, and for, such period (subject to normal year end audit adjustments), and (B) no Event of Default occurred during such period and is continuing;

(iii) a notification as soon as IDT knows or has reason to believe that a material adverse claim had been made against any of the Collateral or any substantial and adverse change in the value of the Collateral has occurred; and

(iv) from time to time such other information regarding the financial condition, operations, business or prospects of IDT, or regarding any of the transactions contemplated hereby or by any of the Related Agreements as BP may reasonably request.

8.3 Material Deviations. A party shall notify the other of any material deviation from any of the provisions in this Article 8 within two (2) Business Days of its knowledge of such deviation.

8.4 Audit. BP shall have the right at its expense and upon reasonable advance notice to audit and examine the books and records of the IDT to the extent reasonably necessary to verify the accuracy of any information pertaining to the Obligations, a Credit-Enabled Transaction or a Direct Transaction, or any statement, invoice, payment, calculation or determination made hereunder or any Related Agreement; provided that BP may not conduct more than three such audits or examinations within any calendar year. To the extent that BP appoints a professional audit firm to conduct any such audit, such audit firm shall be bound by confidentiality obligations. The entity being audited shall fully cooperate with any such audit. Such right shall extend for a period of twelve (12) months after the end of the Planned Term of the Agreement, or solely with respect to the case of a Transaction that extends beyond the end of the Planned Term of this Agreement for a period of twelve (12) months after the end of the term of the extended Transaction. If any such audit shall reveal any error or inaccuracy in the information, statements, invoices, payments, calculations or determinations made by the entity being audited, then adjustments and corrections shall be made as promptly as practicable thereafter.

ARTICLE 9

ACCOUNTS

9.1 Deposit Account.

(a) IDT, prior to the initial date on which a Direct Transaction or Credit-Enabled Transaction is effected, shall maintain a single remittance, non-interest bearing deposit account (the “Deposit Account”), which shall be governed by the Deposit

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Account Control Agreement, for the deposit of funds received from Customers, including payments made to BP pursuant to any POR Program. The Deposit Account shall be in the name of IDT, but the BP Parties shall have a first-priority Lien in the Deposit Account. The Deposit Account Control Agreement entered into with respect to the Deposit Account shall provide that funds that have been deposited into the Deposit Account shall be remitted automatically on a daily basis to BP for deposit into the Collateral Account. Notwithstanding anything to the contrary contained in any Transaction Document, IDT shall be responsible solely for all fees and service charges relating to the Deposit Account and IDT shall make any and all payments to the Account Bank to ensure that no charges are made by the Account Bank against the Deposit Account, none of which shall b7e debited against the Deposit Account.

(b) The Deposit Account and the Deposit Account Control Agreement related thereto shall be maintained and remain in effect with an effective date prior to the first transaction during the Planned Term and until all Obligations under this Agreement and any other Transaction Documents are satisfied. After the Deposit Account and the Deposit Account Control Agreement are no longer needed, BP shall take all reasonable actions necessary to terminate them. BP and IDT shall take such actions as may be reasonably necessary to ensure that each Party has access to information in reasonable detail indicating the amounts transferred into the Deposit Account. If the Account Bank makes an error in the amount transferred from (or to) the Deposit Account, the Parties shall take prompt action, in good faith, to reconcile and correct any such errors.

(c) Once the Deposit Account has been established, IDT shall not change the details thereof or the designated administrators without the prior written consent of BP (which consent shall not be unreasonably withheld or delayed). IDT shall cause the Deposit Account to be, and the Deposit Account shall be, separate from all other accounts held by or under the control or dominion of IDT or any other Person (other than BP, any Affiliate of BP, or any designee or assignee of BP). IDT shall deliver or cause to be delivered to BP as soon as practicable after the end of each calendar month following the Effective Date, copies of the account statements for the Deposit Account for such month. Such account statements shall indicate deposits, credits and transfers, and closing balances. IDT shall provide any additional information or reports relating to the Deposit Account and the transactions therein reasonably requested from time to time by BP. Each reference herein to funds held in the Deposit Account shall be deemed to be a reference to the aggregate amount of U.S. Dollars credited to the Deposit Account on the date of determination.

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9.2 Collateral Account.

(a) BP, prior to the initial date on which a Direct Transaction or Credit-Enabled Transaction is effected, shall establish a non-interest bearing deposit account (the “Collateral Account”) with the applicable Account Bank, and in respect of which employees of BP are identified as account administrators. The Collateral Account shall be in the name of BP. BP shall cause the Collateral Account to be, and the Collateral Account shall be, separate from all other accounts held by or under the control or dominion of BP or any other Person. BP shall provide IDT a schedule of fees associated with the Collateral Account, and BP shall promptly notify IDT in writing of any changes to such fees occurring after the Closing Date.

The Deposit Account Control Agreement entered into with respect to the Collateral Account shall (i) permit an authorized representative of IDT to provide payment instructions to the applicable Account Bank on any Business Day to make payments in the manner specified in Section 10.4, and (ii) expressly state that no funds may be disbursed from the Collateral Account without the written authorization of an authorized representative of BP. Such Deposit Account Control Agreement shall provide that if IDT fails to submit payment instructions timely to the Account Bank and such payment instructions are related to undisputed amounts due, then the Account Bank shall make disbursements as directed in writing by the authorized representative of BP.

(b) The financial assets and other property and balances credited to the Collateral Account shall constitute part of the Collateral and shall not constitute payment of any Obligation until applied thereto as provided in this Agreement and the other Transaction Documents. Notwithstanding anything to the contrary contained in any Transaction Document, IDT shall be responsible solely for all fees and service charges relating to the Collateral Account and BP may invoice IDT for any such fee or service charge.

(c) BP shall deliver or cause to be delivered to IDT as soon as practicable after the end of each calendar month following the Effective Date, copies of the account statements for the Collateral Account for such month. Such account statements shall indicate deposits, credits and transfers, and closing balances. BP shall provide any additional information or reports relating to the Collateral Account and the transactions therein reasonably requested from time to time by IDT.

(d) Each reference herein to funds held in the Collateral Account shall be deemed to be a reference to the aggregate amount of U.S. Dollars credited to the Collateral Account on the date of determination. If the Account Bank makes an error in the amount transferred from (or to) the Collateral Account, the Parties shall take prompt action, in good faith, to reconcile and correct any such errors.

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(e) If, following the delivery of the cash flow projections by IDT to BP pursuant to Section 8.2(h), BP determines that its financial exposure for the following month based on its supply to IDT of Energy and Natural Gas under this Agreement and the Related Agreements exceeds the projected cashflow into the Collateral Account for the following month, BP shall notify IDT of such deficiency. IDT may elect to not receive or, if requested by BP, shall not receive any portion of the distribution of funds on deposit in the Collateral Account on the next Monthly Distribution Date pursuant to Section 10.4(v).

(f) IDT may deliver funds to BP for deposit into the Collateral Account at any time during normal business hours.

9.3 Independent Collateral Amount.

(a) IDT, prior to the initial date on which a Direct Transaction or Credit-Enabled Transaction is effected, shall (i) pay to BP in cash an amount equal to the Independent Collateral Amount (as defined below), or (ii) establish an irrevocable Qualifying Letter of Credit for the sole benefit of BP in an amount equal to the Independent Collateral Amount (as defined below), which shall be maintained until all Obligations of IDT have been satisfied at the end of this Agreement, including any extension necessary for any Transaction that extends beyond the end of the Planned Term of this Agreement. For the purposes of this Agreement, the “Independent Collateral Amount” shall be defined as an independent amount of at least *. Such amount shall be in addition to any other amounts received in the Collateral Account. The Independent Collateral Amount may be drawn by BP to satisfy an Obligation due and owing if a default or an Event of Default occurs under this Agreement or any other Transaction Document. If at any time the Independent Collateral Amount is drawn upon by BP, IDT must deliver to BP within one (1) Business Day the amount necessary to cause the aggregate amount of (x) cash held by BP and (y) any the Qualifying Letter of Credit, each provided pursuant to this provision, to equal the Independent Collateral Amount. The Independent Collateral Amount will not be taken into consideration (or used) for calculation of a Payment Extension or in the calculation of Net Exposure under the Master Netting Agreement.

(b) The financial assets and other property and balances comprising the Independent Collateral Amount shall constitute part of the Collateral and shall not constitute payment of any Obligation until applied thereto as provided in this Agreement and the other Transaction Documents.

9.4 Deposit Account Control Agreements. BP and IDT will execute one or more deposit account control agreements with the Account Bank (or such other bank which may from time to time maintain the Collateral Account or the Deposit Account for receipt of funds hereunder) governing the deposit of funds into, and the withdrawal of funds from, each of the Collateral Account and the Deposit Account, as applicable (each, a “Deposit Account

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Control Agreement”). If any Deposit Account Control Agreement is modified or amended from time to time, such Deposit Account Control Agreement, as modified or amended, shall for all purposes be deemed to be a Deposit Account Control Agreement referred to herein.

ARTICLE 10

BILLING AND PAYMENT

10.1 Billing; Invoicing. Each applicable month during the Planned Term in which BP delivers Energy, Natural Gas or Related Services, or any month in which IDT incurs an obligation to make a payment to BPCNA with respect to any Financial Product, as contemplated herein, may be referred to herein as a “Delivery Month.”

(a) For each Delivery Month during the Planned Term, the BP Parties shall deliver to IDT an invoice under the terms of the relevant Related Agreement and this Agreement with respect to any outstanding Transaction thereunder (each such invoice, an “Invoice”). With respect to any Delivery Month, IDT may receive more than one Invoice from the BP Parties. Subject to clause (b), IDT shall make the payment due under each such Invoice on the date required under the Related Agreement pursuant to which such Invoice was delivered to IDT, except for any invoice or portion of an invoice that IDT disputes in accordance with Section 10.6 of this Agreement.

(b) IDT hereby acknowledges and agrees that, if information necessary for BP to prepare the Invoice (including without limitation information from the ISO, local gas distribution company, or the applicable transmission and distribution provider) is not available to BP on the date on which the Invoice is required to be delivered to IDT, then BP may reasonably estimate such amounts based on best available information for purposes of the Invoice and that the actual numbers shall be trued up on the next Invoice following the date on which such information is made available to BP. If BP sends an Invoice based on estimates, BP shall state in writing that the Invoice is based on estimates.

10.2 Payment Extensions. In connection with Related Electric Power Services performed by BP under this Agreement, BP will be deemed to have provided to IDT an Invoice for immediate payment in respect of any payments made to the ISO. If funds on deposit in the Collateral Account are not sufficient to pay the amount of such Invoice, then BP shall, at IDT’s request, extend the payment date for such deficient amount for a period of 30 days after the extension is made (“Permitted Extension Period”) to the extent reasonably necessary to enable funds to be deposited into the Collateral Account to cover such deficient amount (any such payment extension, a “Payment Extension”).

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(a) Notwithstanding the foregoing, BP shall not be required to give any such Payment Extension if:

(i) after giving effect to such Payment Extension, (A) a Collateral Requirement of IDT would arise under the Master Netting Agreement or (B) the total aggregate amount of Payment Extensions outstanding would exceed * to IDT under any POR Program;

(ii) the insufficiency of funds in the Collateral Account is due to Customers that are not covered by a POR Program failing to make direct payments to IDT when due as of the date IDT requests the Payment Extension;

(iii) such insufficiency of funds in the Collateral Account has been caused, or contributed to, by actions or inactions on the part of IDT or any Affiliates of IDT; or

(iv) the conditions that must be satisfied prior to BP’s entering into any Direct Transaction have not been fulfilled to the satisfaction of, or have not been waived by, BP as of the date IDT requests such Payment Extension.

(b) To the extent not reimbursed from future funds in the Collateral Account, IDT will pay all amounts subject to a Payment Extension in full on the last day of the applicable Permitted Extension Period.

(c) All amounts subject to a Payment Extension shall bear interest from the original payment due date for the amount included in the Payment Extension until the date when the amount is paid in full at a per annum interest rate of LIBOR plus * basis points. Such accrued interest due on the Payment Extension amount shall be paid to BP on the earlier of the date on which the amount included in the Payment Extension is paid in full or the last day of the applicable Payment Extension Period.

(d) Failure to pay the Payment Extension amount, including accrued interest, as and when due would constitute an Event of Default.

10.3 Interest Accrual.

(a) Any outstanding, unpaid amounts owed by IDT to BP, including any Payment Extension amount plus accrued interest thereon as provided in Section 10.1 not paid when due, shall accrue (simple, not compounded) interest pursuant to the applicable Related Agreement, beginning on the applicable due date until the date upon which any such outstanding amount is paid; provided, however, that, in calculating such interest, interest shall accrue only on that portion of the amount owed as may be outstanding from time to time.

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(b) Any and all interest which may accrue pursuant to Section 10.3(a) shall be included on the next applicable Invoice delivered by BP hereunder, and any such interest accrued shall be due and payable in accordance with the payment terms applicable to such next Invoice.

(c) Notwithstanding the foregoing, the Parties acknowledge and agree that settlement and resettlement information received by BP from the ISO: (i) shall be treated as incurred during the month in which BP receives such settlement or resettlement information from the ISO; (ii) shall be included on the applicable Invoice covering the month in which BP receives such settlement or resettlement information from the ISO; (iii) shall be due and payable on the applicable due date with respect to such Invoice in accordance with the terms of this Agreement as applicable to such Invoice; and (iv) shall not accrue interest unless and until such amounts remain outstanding and unpaid as of such due date, unless BP is subject to interest by the billing ISO.

10.4 Distribution from Collateral Account. On (a) the Monthly Distribution Date, (b) any date on which an Event of Default has occurred and is continuing, (c) the date payment set forth in an Invoice is due under the terms of the relevant Related Agreement or (d) the date identified in any written disbursement request submitted by IDT to BP (which date will be at least two Business Days after BP receives such written disbursement), BP shall submit instructions to the Account Bank holding the Collateral Account to withdraw the applicable amount and transfer such amount (i) to an account of a BP Party to satisfy any Obligations or (ii) to that account of IDT that is identified in Exhibit 16.1(m) as IDT’s general account. On any date, funds in the account will be applied in the following order of priority, without duplication, as follows:

(i) first, to pay any sales taxes or transmission/distribution expenses for the transmission of Energy or Natural Gas transportation or storage expenses due and payable by IDT to any third party (that is not an Affiliate of IDT) incurred in connection with any Direct Transaction or Credit-Enabled Transaction;

(ii) second, to BP to pay any and all fees, expenses and other amounts due and owing (including amounts due and owing from a prior Delivery Period that remain unpaid) to BP or BPCNA under the Transaction Documents, including amounts due and owing under the relevant Related Agreement(s) that, in any such case, are incurred in connection with any Direct Transaction or Credit-Enabled Transaction, and the Supply Fee due and owing to BP under this Agreement, and any charges, fees returned checks or other amounts charged by the Account Bank that are paid from or debited against the Deposit Account or the Collateral Account (other than Payment Extensions);

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(iii) third, to reimburse BP for any Payment Extensions due and owing together with accrued interest thereon;

(iv) fourth, if an IDT Event of Default has occurred and is continuing, all proceeds from the exercise of BP’s rights on account of such Event of Default on the part of IDT, to be paid to BP for any and all Obligations which became due and payable immediately on account of such Event of Default, with any excess proceeds thereafter to be retained in the Collateral Account as collateral security for the Obligations, and such amount reserved under this priority shall be unavailable for distribution pursuant to any lower priority under this Section 10.4 on such distribution date; and

(v) fifth, provided (A) that no IDT Event of Default, and no event or occurrence that with the passage of time or the giving of notice or both would constitute an IDT Event of Default, has occurred and is continuing and (B) no Payment Extension Period is in effect, on the last Business Day of each month (the “Monthly Distribution Date”), after application of available amounts to items first through fourth above, at the written request of IDT and subject to any retention of funds in accordance with Section 9.2(e), any remaining funds shall be distributed solely to IDT and IDT shall have the right to use such cash as it chooses.

10.5 ISO Billing Disputes. It is recognized by the Parties that the ISO may have established time periods for disputing certain matters and the Parties will be subject to such periods in their performance under this Agreement. Therefore, notwithstanding any provisions in this Agreement, in the event a Party is barred from disputing and correcting or adjusting with the ISO any matter of any nature whatsoever affecting any matter covered by this Agreement because the time period for such dispute has expired such that a Party would not have been able to file a dispute with the ISO prior to such expiration (a “Barred Issue”), then the other Party shall be barred for all purposes from disputing any portion of any statement, invoice, notice or other matter hereunder to the extent that the first Party is unable to receive adjustment from or dispute such matter with the ISO because it is a Barred Issue. BP shall be responsible for promptly reviewing the accuracy of all ISO settlement statements for the IDT related accounts and shall promptly notify the ISO and IDT in writing of any errors it finds in accordance with the ISO’s applicable rules and procedures for disputes over ISO settlements.

10.6 Disputed Invoices, etc. If either Party discovers, any error or inaccuracy in its own or the other Party’s invoice, payment, calculation, measurement or determination, then proper adjustment and correction thereof will be made as promptly as practicable thereafter;

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provided, that no adjustments or corrections will be made with respect to errors or inaccuracies unless reasonably specific written notice of such error or inaccuracy is given to the other Party within one (1) year of the date of such erroneous or inaccurate invoice, payment, calculation, measurement or determination. IDT may, in good faith, dispute the correctness of any invoice (or of any adjustment to any invoice), at any time within one (1) year after the date of such invoice. In either such event, a Party shall deliver to the other Party a notice of dispute, stating the basis for the dispute or adjustment and setting forth the amount disputed in good faith (the “Disputed Amounts”). The Parties will use commercially reasonable efforts to promptly resolve any dispute. Upon resolution of the dispute, any required payment shall be made within one (1) Business Day of such resolution along with (i) simple (not compounded) interest accrued at the Interest Rate from the original due date until paid in full, if IDT is making such required payment and (ii) the amount of simple (not compounded) interest accrued at the Interest Rate from the original due date until paid in full, if BP is making such required payment.

ARTICLE 11

REGULATORY CHANGE

11.1 In the event of any change in applicable laws, rules or regulations during the term of this Agreement by a Governmental Authority that (a) makes it illegal for a Party to continue to perform, either in whole or in material part, under this Agreement, or (b) result in a materially adverse change in a Party’s economics under this Agreement (a “Regulatory Event”), in each case which cannot be avoided by such Party upon the exercise of its best efforts, then such Party (the “Affected Party”) may provide the other Party (the “Non-Affected Party”) written notice of the Regulatory Event. The Parties shall for thirty (30) Business Days after such notice is delivered attempt in good faith to reach mutual agreement to resolve the material adverse economic impact on the Affected Party or the inability of the Affected Party to continue to perform or to amend the terms of this Agreement in light of the Regulatory Event to give effect to the original intention of the Parties, consistent with the original economic expectations of both Parties.

11.2 If, despite good faith negotiations on the part of the Parties, the Parties are unable to reach agreement within thirty (30) days, then the Affected Party shall have the right to terminate this Agreement and any affected Transactions, with settlement payment to be determined in accordance with the early termination provisions of the Master Netting Agreement.

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ARTICLE 12

PLANNED TERM; EARLY TERMINATION

12.1 Planned Term. Unless terminated earlier in accordance with this Agreement, this Agreement shall remain in full force and effect beginning on the Effective Date and continue until the Planned Expiration Date (such period being the “Planned Term”); provided that this Agreement will renew automatically for a term of one (1) year following the prior Planned Expiration Date unless a Party has provided written notice to the other Parties at least six (6) months prior to the next Planned Expiration Date that it will not renew this Agreement; provided further that this Agreement will not renew after June 30, 2012; provided further that if this Agreement renews after June 30, 2011, the Early Termination fee specified in Section 12.2(c) shall no longer apply. The Planned Expiration Date shall not affect or excuse the performance of either Party under any provision of this Agreement that by its terms survives such expiration. Further, this Agreement shall continue to apply to, and any such expiration of the Planned Term shall not affect or excuse the performance by either Party under, this Agreement or any agreement between the Parties entered into pursuant hereto related to obligations which were undertaken prior to such expiration and which remain unperformed at the time of such expiration. Termination of this Agreement pursuant to this Section 12.1 shall not affect the continued effectiveness of the EEI Agreement, the NAESB Agreement, the ISDA Agreement, and any Transactions confirmed under any of the foregoing, or the Master Netting Agreement.

12.2 Early Termination. Each of the Parties may terminate this Agreement prior to the end of the Planned Term (any such termination, an “Early Termination”) as follows:

(a) Early Termination by IDT. Upon sixty (60) days’ prior written notice to BP, IDT may terminate this Agreement at its election for convenience.

(b) Early Termination by BP. Upon four (4) months prior written notice to IDT, BP may terminate this Agreement if the long-term, unsecured indebtedness of BPCNA is rated less than BBB- by S&P or less than Baa3 by Moody’s.

(c) Effect of Early Termination.

(i) On a Business Day that is no sooner than five (5) Business Days prior to the date on which the terminating Party has proposed, in its notice of termination delivered pursuant to Section 12.2(a) or (b), as applicable, that this Agreement terminate, the non-terminating Party shall, using the terms of the Master Netting Agreement, calculate the UMA Final Settlement Amount as of such Business Day. In determining the UMA Final Settlement Amount, (A) the non-terminating Party shall be deemed to be the Non-defaulting Party, and (B) the calculating Party shall include in the calculation of the UMA Final Settlement Amount only those Direct Transactions or Credit-Enabled Transactions that will be terminated on the date of Early Termination pursuant to Article 15. Upon completing such calculation of the UMA Final Settlement Amount, such amount shall constitute the “Early Termination Net Payment” hereunder. If the Early Termination Net Payment is positive, IDT shall pay to BP when due the Early Termination Net Payment. If the Early Termination Net Payment is negative, BP shall pay to IDT when due the Early Termination Net Payment.

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(ii) If IDT elects an Early Termination pursuant to Section 12.2(a), IDT shall be obligated to pay to BP, in addition to any Early Termination Net Payment that it may owe upon an Early Termination, an amount equal to the greater of (A) * or (B) *% of the Supply Fees that, but for such Early Termination, IDT would owe to BP from the date of Early Termination through the end of the Planned Term (the “Supply Fee Termination Payment”). BP shall calculate the Supply Fee Termination Payment. BP shall utilize the forecasted quantities of Natural Gas and Energy that, but for such Early Termination, BP would have sold and delivered to IDT in connection with any Direct Transaction or Credit-Enabled Transaction from the date of Early Termination through the end of the Planned Term. If BP must pay to IDT when due the Early Termination Net Payment, BP may offset the Supply Fee Termination Payment against the Early Termination Net Payment it owes.

(iii) As soon as practicable after completing the calculation of the Early Termination Net Payment and, if any, the Supply Fee Termination Payment, the calculating Party shall provide notice to the other Party of (A) the Early Termination Net Payment and, if any, the Supply Fee Termination Payment, (B) whether such Early Termination Net Payment is owed by the terminating Party or the non-terminating Party and (C) the date on which such Early Termination Net Payment and, if any, the Supply Fee Termination Payment is due (which payment date shall be no sooner than two (2) Business Days following the date of Early Termination). If IDT owes any amounts to BP under this Section 12.2, IDT also shall pay to BP in full, on the same day it is obligated to pay any Early Termination Net Payment or Supply Fee Termination Payment, any other outstanding Obligations (including amounts that remain unpaid as a result of any Payment Extension and any outstanding Supply Fees). If the Party that owes such payment fails to make payment when due, the unpaid amount shall accrue interest at the Interest Rate from the payment date until such amount is paid.

(iv) Following such Early Termination, all Transactions that were included in the calculation of the Early Termination Net Payment shall be terminated and shall have no further force and effect. With respect to Transactions that were not terminated upon such Early Termination, the provisions of Article 15 shall apply to such Transactions.

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(v) Any amount that IDT is obligated to pay to BP under this Section 12.2 shall constitute one of the Obligations.

ARTICLE 13

TAX AND BANKRUPTCY

13.1 Taxes. Each Party shall be responsible for reporting and discharging its own tax measured by the profit or income of the Party. Each Party shall protect, defend and indemnify the other Party from any and all loss, cost or liability arising from the indemnifying Party’s failure to report and discharge such taxes or satisfy such obligations.

13.2 Return of Documents and Information. Upon the termination or expiration of this Agreement, each Party shall destroy or return to the other all documents, data, and Information belonging to the other Party and shall cooperate fully to ensure that the termination or expiration of this Agreement and the transition is accomplished in an efficient and businesslike manner. If such documents are destroyed, such destruction shall be certified to the Party owning the Information by an officer of the Party destroying the same. The foregoing notwithstanding, neither Party shall be obligated to return or destroy any such documents, data or information that such Party is retaining pursuant to a document retention policy established in connection with any civil or criminal investigations or litigation, in which event the documents, data and information shall be retained by the Party until such time as the document retention policy is no longer in effect, at which time the documents, data and information shall be returned to the other Party or destroyed as aforesaid. To the extent that a Party’s computer back-up procedures create copies of any such documents, data or information, such Party may retain such copies in its archival or back-up computer storage for the period the Party normally archives backed-up computer records. Any such documents, data or information so retained and not destroyed will be kept confidential.

13.3 Bankruptcy Provisions.

(a) The Parties acknowledge and agree that (i) this Agreement and each Transaction made under this Agreement or any Related Agreement constitute “forward contracts” and/or a “swap agreement” and/or “master netting agreement” as defined under Title 11 of the United States Code (the “Bankruptcy Code”), (ii) each Party is a “forward contract merchant” or “swap participant” as defined under the Bankruptcy Code, (iii) the rights of the Parties under the termination provisions of this Agreement or any Related Agreement will constitute contractual rights to liquidate, net and setoff Transactions, (iv) any payment related to or setoff related to this Agreement or any Related Agreement shall constitute a “settlement payment” as defined in Section 101(51A) of the Bankruptcy Code; and (v) the Parties are entitled to and desire enforcement of the rights under, and protections afforded by, Sections 362, 546, 553, 556, 560, 561, and 562 of the Bankruptcy Code.

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(b) Under this Agreement, the term “setoff” means, without limitation, offset, combination of accounts, netting, right of retention or withholding, contractual right to liquidate transactions, or comparable right or requirement to which a Party is entitled or subject to (whether arising under this Agreement, any Related Agreement, any other Transaction Document, or other agreements between the Parties, under law or otherwise) that is exercised by, or imposed on, the other Party. Further, the Parties acknowledge and agree that, pursuant to Sections 362 and 546 of the Bankruptcy Code, transfers and payments made in connection with this Agreement or any Related Agreement are not enjoined or otherwise precluded by the automatic stay imposed by the Bankruptcy Code and are not subject to avoidance under the Bankruptcy Code.

ARTICLE 14

[RESERVED]

ARTICLE 15

WIND-DOWN PERIOD

15.1 The period commencing on the day immediately following the last day of the Planned Term or the date selected by the terminating Party in connection with an Early Termination (the “Wind-Down Commencement Date”) to the date of the satisfaction in full of all obligations under the Agreement and the other Related Agreements, including, without limitation, all Direct Transactions and all Credit-Enabled Transactions (the “Wind-Down End Date”) will be referred to as the “Wind-Down Period.”

15.2 No later than 90 days before the last day of the Planned Term or no later than the date that is fifteen (15) days before the effective date of Early Termination, as applicable, IDT will have the right and obligation to deliver to BP in writing a plan to wind-down BP’s exposure with respect to the Agreement and the Related Agreements. If IDT fails to deliver to BP such a plan by the date due, BP may create the plan for winding-down its exposure, which plan shall be binding on IDT. Any such plan may include one or more of the following options:

(a) “Assignment Option”: IDT may request BP to assign to one or more Creditworthy Assignees (as defined below) any of BP’s positions under Credit-Enabled Transactions or Direct Transactions on price, terms and conditions acceptable to BP.

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(i) In connection therewith BP shall be responsible for effecting the assignment of transactions, so long as a Creditworthy Assignee is available to take assignment and assume all obligations under the assigned transactions going forward.

(ii) Either the Creditworthy Assignee or IDT must accept all responsibility in respect of the position with the ISO or RTO.

(iii) As used herein, “Creditworthy Assignee” shall mean a counterpart(ies) whose long-term unsecured debt is rated at least “A” by Moody’s or “A” by S&P and the ability to perform on the applicable assigned transactions.

(b) “Termination Option”: IDT may Close-Out any Credit-Enabled Transaction or Direct Transaction by paying to, or receiving from, BP an amount equal to the UMA Final Settlement Amount, calculated under the Master Netting Agreement for the Direct Transactions and Credit-Enabled Transactions being Closed-Out.

(c) “Hold Option”: IDT may leave in place any Credit-Enabled Transaction or Direct Transaction. However, until all Transactions have been finally assigned under the Assignment Option, terminated under the Termination Option, expired under the Hold Option, or defeased under the Defease Option (as defined below), the Liens under the Security Documents securing this Agreement and the Related Agreements shall remain in place and this Agreement shall remain in full force and effect solely with respect to such Credit-Enabled Transactions or Direct Transactions whose term extends beyond the Planned Term or effective date of the Early Termination of this Agreement.

(d) “Defease Option”: IDT may provide guaranties of Creditworthy Assignees or letters of credit, surety bonds, or cash in amounts and on terms reasonably satisfactory to BP with respect to any Direct Transactions or Credit-Enabled Transactions left in place under the Hold Option, and for each transaction so guaranteed or secured, BP shall release its liens and security interests securing such transaction.

15.3 During the Wind-Down Period in all cases, (i) IDT will not be permitted to enter into any Purchase Contracts or Sale Contracts that would affect BP’s rights and obligations under this Agreement, and BP will be under no obligation to enter into Direct Transactions or Credit-Enabled Transactions and (ii) all provisions of the Agreement and the other Transaction Documents will remain in full force and effect, except as described in clause (a) of Section 15.2.

(a) In the event that all transactions under the Agreement have been finally assigned under the Assignment Option, terminated under the Termination Option, expired under the Hold Option, or defeased under the Defease Option, BP shall within three (3) Business Days, terminate all of BP’s liens and security interests securing the Agreement.

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ARTICLE 16

REPRESENTATIONS AND WARRANTIES

16.1 Representation and Warranties of IDT.

IDT represents and warrants to the BP Parties as follows:

(a) It (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, (ii) is duly qualified and in good standing as a foreign corporation and has all governmental licenses in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure so to qualify or be licensed and be in good standing has had, or could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(b) The execution, delivery and performance by it of each Transaction Document to which it is a party and the grant by it of the security interest pursuant to the Security Documents and the Master Netting Agreement, and the consummation of the other transactions contemplated hereby and thereby, are within its powers, have been duly authorized by all necessary corporate action, and do not (i) contravene its organizational documents, (ii) violate any applicable law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan, indenture, mortgage, deed of trust, lease or other instrument binding on it or any of its properties or (iv) except for the Liens granted in favor of BP hereunder and under the Security Documents and the Master Netting Agreement, result in or require the creation or imposition of any Lien upon or with respect to any of its properties.

(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for:

(i) the due execution, delivery, recordation, filing or performance by it of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby; or

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(ii) the exercise by the BP Parties of their rights under the Transaction Documents, except, as set forth in Schedule 16.1(c), for (A) authorization to provide retail electricity and Natural Gas services and Related Services in the applicable jurisdictions which authorization has been obtained and is in full force and effect, (B) filings in respect of the Liens created under the Security Documents or the Master Netting Agreement, including but not limited to notices and other filings in connection with the Assignment of Claims Act of 1940 in the case of any Government Contract, and (C) in the event of a foreclosure by BP on the Collateral, filings with and approvals by any Government Authority and regulatory body, including but not limited to the Federal Energy Regulatory Commission.

(d) Each Transaction Document to which it is a party has been duly and validly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the rights of creditors generally, and except as enforcement may be limited by general equitable principles (regardless of whether enforcement is sought in a court of law or equity).

(e) The balance sheet of IDT as at July 31, 2008 and the related statements of income and cash flows of IDT for the fiscal year then ended, with the unqualified opinion thereon of IDT independent public accounting firms that is recognized by the Public Company Accounting Oversight Board, and the unaudited balance sheet of IDT and statements of income and cash flows of IDT for the period ending April 30, 2009, copies of which have been furnished to BP, present fairly the financial condition of IDT as at such respective dates and the results of the operations of IDT for the respective periods ended on such dates, all in accordance with generally accepted accounting principles applied on a consistent basis. Since April 30, 2009, no event or circumstance has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect.

(f) There is no action, suit, litigation or proceeding against it or any of its property pending before any court, Government Authority or arbitrator, or, to its knowledge, threatened, nor is there any investigation pending in respect of it that has had, or could reasonably be expected to have, a Material Adverse Effect.

(g) There are no material issues regarding it that arose prior to the date of this Agreement that could reasonably be expected to have an impact on BP’s credit or contracts with the ISO or RTO.

(h) It is not (i) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended or (ii) a “commodity pool operator” or a “commodity trading advisor” as defined in, or subject to regulation under the Commodities Exchange Act, as amended.

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(i) It is the sole beneficial owner of, and has good and legal title to the Collateral, free and clear of all Liens and other adverse claims and encumbrances. No Lien exists or will exist upon the Collateral at any time, except for the Lien in favor of BP created or provided for herein and under the Security Documents, which Lien created in favor of the BP Parties constitutes a valid first and prior perfected Lien on the Collateral, subject to no other Lien.

(j) Its full and correct legal name, type of organization, jurisdiction of organization, organizational ID number (if applicable) and mailing address as of the Effective Date are correctly set forth in Annex 1 to the Pledge and Security Agreement. There is no UCC financing statement or similar Lien filing describing IDT’s property or identifying IDT as a debtor in effect on the Effective Date except as set forth on Annex 1.

(k) It has not (i) within the period of four months prior to the Effective Date, changed its location (as defined in Section 9-307 of the UCC), (ii) heretofore changed its name, or (iii) heretofore become a “new debtor” (as defined in Section 9-102(a)(56) of the UCC) with respect to a currently effective security agreement previously entered into by any other Person.

(l) [Reserved]

(m) Other than what is set forth in the IDT financial statements through April 30, 2009, it does not have (i) any Indebtedness or (ii) other liabilities other than obligations under existing Sale Contracts and existing Purchase Contracts to which it is a party. Schedule 16.1(m) sets forth a complete and correct list of all such Purchase Contracts and Sales Contracts in effect as of the Effective Date.

(n) It has no subsidiaries other than North American Energy, Inc.

(o) It has delivered to BP a true and complete copy of its organizational documents. The only shareholder of IDT on the date this representation is made is IDT Capital, Inc., which is a wholly owned subsidiary of IDT Corp. As of the date this representation is made, (A) all equity interests in IDT have been duly authorized and validly issued and are outstanding, (B) there are no outstanding equity rights with respect to IDT, including (1) any securities convertible into or exchangeable for equity interests in IDT, or (2) any rights to subscribe for or to purchase, or any options, warrants, or other rights to acquire, equity interests in IDT, and (C) there are no outstanding obligations of IDT to repurchase, redeem, or otherwise acquire any partnership or other equity interests, or securities convertible into or exchangeable or exercisable for equity interests, in IDT, nor are there any outstanding obligations of IDT to make payments to any Person, such as “phantom stock” payments, where the amount thereof is calculated with reference to the fair market value or equity value of IDT.

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(p) It has obtained all environmental, health and safety permits, licenses and other authorizations required under all Environmental Laws to carry on its business as now being or as proposed to be conducted, except to the extent failure to have any such permit, license or authorization has not had, or could not reasonably be expected to have, (either individually or in the aggregate) a Material Adverse Effect. Each of such permits, licenses and authorizations is in full force and effect and it is in compliance with the terms and conditions thereof, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Law or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply therewith has not had, or could not reasonably be expected to have, (either individually or in the aggregate) a Material Adverse Effect. In addition, no notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened by any governmental or other entity with respect to any alleged failure by it to have any environmental, health or safety permit, license or other authorization required under any Environmental Law in connection with the conduct of the business of it or with respect to any generation, treatment, storage, recycling, transportation, discharge or disposal, or any release of any Hazardous Materials generated by it that, individually or in the aggregate, has had, or could reasonably be expected to have, a Material Adverse Effect. All environmental investigations, studies, audits, tests, reviews or other analyses conducted by or that are in the possession of it in relation to facts, circumstances or conditions at or affecting any site or facility now or previously owned, operated or leased by it and that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect, in each case, have been made available to BP.

(q) It is in compliance in all material respects with all laws, regulations and orders of any Governmental Authority applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, including, but not limited to, having obtained and maintained in full compliance all retail licenses and any other licenses and permits required from any Governmental Authority necessary to carry out its retail Energy business and retail Natural Gas business.

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(r) The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of IDT to the BP Parties in connection with the negotiation, preparation or delivery of the Transaction Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading.

(s) It has not been suspended, debarred or declared ineligible, or been proposed for suspension, debarment, or ineligibility, from or with respect to bidding on or performing Government Contracts or from doing business with any Government Authority. It has not been (and is not now being), within the past six years: (i) audited (outside the audits conducted in the ordinary course of business) or investigated; (ii) subject to any indictments or civil, administrative or criminal complaints by any Governmental Authority, or any contractor or subcontractor with a Governmental Authority; or (iii) threatened with any such audit or investigation or requested to provide information with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or any Government Bid. It has complied in all material respects with all laws and regulations applicable to Government Contracts governing or applicable to its Government Contracts and Government Bids, including the terms and conditions of all such Government Contracts and Government Bids. Each Government Contract performed or being performed by it was legally and properly awarded to it and, if performance is ongoing, each Government Contract is currently valid. It has not, in obtaining or performing any Government Contract, violated any laws, regulations, rules, directives, requirements or procedures of any Governmental Authority or any other applicable legal requirement.

(t) It has obtained liability insurance, in an amount not less than $10,000,000 per occurrence, with financially sound and reputable insurance companies (rated at least “A” by A M Best), and with respect to risks of a character usually maintained by companies engaged in the same or similar business similarly situated.

(u) It has paid and discharged all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in accordance with generally accepted accounting principles.

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(v) It is and, upon its incurrence of any Obligations and after giving effect to the transactions in connection herewith and the other Transaction Documents, will be, Solvent.

(w) Schedule 16.1(w) sets forth a complete and correct list of Authorized Direct Pay Customers.

16.2 Representation and Warranties of the BP Parties.

Each of the BP Parties represents and warrants to IDT as follows:

(a) It (i) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) is duly qualified and in good standing as a foreign corporation and has all governmental licenses in each other jurisdiction in which it owns or leases property or in which the conduct of its business requires it to so qualify or be licensed and where, in each case, failure so to qualify or be licensed and be in good standing could reasonably be expected to have a Material Adverse Effect and (iii) has all requisite power (corporate or other) and authority to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted.

(b) The making and performance by it of each Transaction Document to which it is a party, and the consummation of the other transactions contemplated hereby and thereby, are within its powers, have been duly authorized by all necessary corporate action, and do not (i) contravene its relevant organizational documents, (ii) violate any applicable law, rule, regulation, order, writ, judgment, injunction, decree, determination or award, or (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan, indenture, mortgage, deed of trust, lease or other instrument binding on it or any of its properties.

(c) No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other third party is required for (i) the due execution, delivery, recordation, filing or performance by it of the Transaction Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby or (ii) the exercise by BP of its rights hereunder for authorization to provide retail electricity services in the applicable jurisdictions which authorization has been obtained and is in full force and effect.

(d) Each Transaction Document to which it is a party has been duly and validly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as may be limited by bankruptcy, insolvency or other similar laws affecting the rights of creditors generally, and except as enforcement may be limited by general equitable principles (regardless of whether enforcement is sought in a court of law or equity).

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(e) There is no action, suit, litigation or proceeding against it or any of its property pending before any court, governmental agency or arbitrator, or, to the knowledge of BP, threatened, nor is there any investigation pending to the knowledge of BP in respect of it, that could reasonably be expected to have a Material Adverse Effect.

(f) The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of BP or BPCNA to IDT in connection with the negotiation, preparation or delivery of the Transaction Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in the light of the circumstances under which they were made, not misleading.

(g) BP has not been suspended, debarred or declared ineligible, or been proposed for suspension, debarment, or ineligibility, from or with respect to bidding on or performing Government Contracts or from doing business with any Government Authority. BP has complied in all material respects with all laws and regulations applicable to Government Contracts governing or applicable to its Government Contracts and Government Bids, including the terms and conditions of all such Government Contracts and Government Bids. Each Government Contract performed or being performed by BP was legally and properly awarded to BP and, if performance is ongoing, each Government Contract is currently valid. BP has not, in obtaining or performing any Government Contract, violated any laws, regulations, rules, directives, requirements or procedures of any Governmental Authority or any other applicable legal requirement.

ARTICLE 17

COVENANTS

17.1 Covenants of IDT. Until the Obligations have expired or been terminated and the amounts that remain unpaid as the result of any Payment Extension and all fees payable hereunder shall have been paid in full, IDT covenants and agrees with the BP Parties that:

(a) Notice of Event of Defaults. It will promptly give BP notice after it knows or has reason to believe that any IDT Event of Default has occurred, a notice of such IDT Event of Default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that it has taken or proposes to take with respect thereto.

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(b) Litigation. It will promptly give to BP notice of all legal or arbitral proceedings, and of all proceedings by or before any Governmental Authority, arbitration panel or regulatory agency, and any material development in respect of such legal or other proceedings, affecting it.

(c) Existence, Etc. IDT will:

(i) preserve and maintain all of its material rights, privileges, licenses and franchises;

(ii) comply in all material respects with the Legal Requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including without limitation the Reliability Standards of NERC, ERISA (if applicable) and all Environmental Laws);

(iii) maintain in full force and effect all retail operating licenses and all other licenses, permits, consents, approvals, and authorizations necessary to enter into and perform its Obligations under this Agreement and any other Transaction Document, and to continue its retail power business in the territory of NYISO;

(iv) pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in accordance with generally accepted accounting principles; and

(v) timely pay and discharge all of its other material obligations, including its obligations under this Agreement and the other Transaction Documents, except those that are being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in accordance with generally accepted accounting principles.

(d) Separateness and Going concern. IDT will:

(i) maintain its own separate books and records and bank accounts;

(ii) at all times hold itself out to the public and all other Persons as a legal entity separate from any other Person;

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(iii) conduct its business in its own name through its duly authorized officers and comply with all organizational formalities to maintain its separate existence;

(iv) comply with GAAP in all financial statements and reports required of it and issue such financial statements and reports separately from any financial statements or reports prepared for its members and Affiliates; provided that such financial statements or reports may be consolidated if the separate existence of IDT and its assets and liabilities, are clearly noted therein;

(v) account for and manage all of its liabilities separately from any other Person, and pay its own liabilities only out of its own funds;

(vi) use separate invoices and checks with its name and no other name;

(vii) correct any known misunderstanding regarding its separate identity;

(viii) maintain adequate capital for its business, transactions and liabilities as exist on the Closing Date;

(ix) subject to IDT Corporation’s risk management policies and procedures, make all decisions with respect to its business and daily operations independently, although its manager or officers making any particular decision may also be employees, officers, directors or managers of the Parent, its members or its Affiliates;

(x) remain Solvent, provided that the foregoing shall not be construed as imposing an obligation on its members or Affiliates to contribute additional capital to it;

(xi) maintain all of its assets used or useful in its business in good working order and condition, ordinary wear and tear excepted; and

(e) Liens. IDT will not create, incur, assume or suffer to exist any Lien upon any of the Collateral other than the Liens created under the Security Documents.

(f) Insurance. IDT will maintain liability insurance, in an amount not less than $10,000,000 per occurrence with financially sound and reputable insurance companies (rated at least “A” by A M Best), and with respect to risks of a character usually maintained by companies engaged in the same or similar business similarly situated.

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(g) Limitation on Sale Contracts. Absent BP’s prior written consent, which consent shall not be unreasonably withheld, IDT shall not enter into any Sale Contract to any Non-POR Customer or for a fixed-price to any POR Customer.

(h) Further Assurances. IDT will promptly from time to time do all such acts and things as may be required in the reasonable opinion of BP to give effect to this Agreement and the other Transaction Documents and to preserve and protect the rights of the BP Parties hereunder and thereunder, including with respect to any notices, assignments or other documents required to be completed under the Assignment of Claims Act of 1940.

(i) Payments. IDT shall require that any and all amounts owing to it under any Purchase Contract or Sale Contract (other than Government Contracts) or under or pursuant to any other agreement or instrument shall be paid directly to the Deposit Account, and shall include in each Sale Contract entered into after the Effective Date the Payment Provision.

(j) Copies of Representative Terms and Conditions. Upon BP’s written request, IDT shall provide BP with copies of its standard terms and conditions for retail sales.

(k) Information. All written information furnished after the Effective Date by IDT to BP or BPCNA in connection with this Agreement or the other Transaction Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect and will not contain any material omissions, or (in the case of projections) based on reasonable estimates and assumptions, on the date as of which such information is stated or certified.

(l) Transactions with North American Energy. Other than Permitted Other Transactions, IDT will not receive natural gas or Related Natural Gas Services from North American Energy without the express prior written consent of BP.

17.2 Covenant of BP Parties. Until the Obligations have expired or been terminated and the amounts that remain unpaid as the result of any Payment Extension and all fees payable hereunder shall have been paid in full, each of the BP Parties covenant and agree with IDT that it will promptly give IDT notice after it knows or has reason to believe that any BP Event of Default has occurred, a notice of such BP Event of Default describing the same in reasonable detail and, together with such notice or as soon thereafter as possible, a description of the action that it has taken or proposes to take with respect thereto.

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ARTICLE 18

EVENTS OF DEFAULT

18.1 IDT Events of Default. If any of the following events (each an “Event of Default”) shall occur and be continuing:

(a) IDT shall fail to pay any amount as and when such amount shall become due and payable to BP under this Agreement or any other Transaction Document, unless such amount is subject to a Payment Extension in which event a failure on the part of IDT to pay any amount that was not paid due solely to any Payment Extension when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; or

(b) IDT shall fail to pay any interest on any amount including any Payment Extension or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or under any other Transaction Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of three (3) Business Days or more; or

(c) any material failure of IDT to observe any provision, term, covenant or agreement (other than any term, covenant or agreement referred to in clause (a) or (b)) under (i) this Agreement, its organizational documents, or any other Transaction Document (including without limitation the EEI Agreement, the NAESB Agreement, or the ISDA Agreement) or (ii) Sale Contracts under which, individually or in the aggregate, the sale and delivery of Energy, Natural Gas or Related Services during any period would exceed 3% of IDT’s aggregate sales and deliveries of such products over such period, including any failure by IDT (A) to deliver requisite power or any other product or service under such Sale Contracts when due or (B) to provide timely billing invoices to Customers for power or any other product or service delivered by IDT under such applicable Sale Contracts, and, in the case of either clause (i) or (ii), such failure continues unremedied for a period of five (5) Business Days or more (or two (2) Business Days in respect of any payment default) after the date on which IDT has or should have knowledge of such failure or BP shall have given IDT notice of such failure and such failure is capable of being remedied within such five (5)-Business Day period (or two (2)-Business Day period, as applicable); or

(d) IDT shall fail to deliver to BP when due Performance Assurances, pursuant Section 2.2 and the Master Netting Agreement, and such failure continues for one (1) Business Day; or

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(e) any representation, warranty or certification made or deemed made by IDT in this Agreement or any other Transaction Document to which it is a party, or in any amendment or supplement hereto or thereto, or any certificate furnished to BP or BPCNA pursuant to the provisions hereof or thereof, shall prove to have been false or misleading as of the time made or furnished in any material respect, if such representation, warranty or certification shall remain false or misleading for 30 days after the date on which IDT has knowledge of such failure or BP shall have given IDT notice of such failure and such failure is capable of being corrected within such 30-day period; or

(f) a MNA Default where IDT is the Defaulting Party shall have occurred and shall be continuing; or

(g) a final judgment or judgments for the payment of money of $5,000,000 or more in the aggregate, or a final judgment or judgments for non-monetary relief that has had or could reasonably be expected to have a Material Adverse Effect, shall be rendered by one or more courts, administrative or arbitral tribunals or other bodies having jurisdiction against IDT and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and IDT shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal; or

(h) any of the Liens created by the Security Documents or the Master Netting Agreement shall at any time not constitute a valid first and prior perfected Lien on the Collateral purported to be covered thereby in favor of BP, free and clear of all other Liens (other than resulting from the failure of IDT to retain possession of the Collateral thereunder in the jurisdiction provided thereunder) and such Lien is not restored as a valid first and prior perfected Lien within ten (10) Business Days of such time, or any provision of any Security Document shall for whatever reason cease to be in full force and effect, or the enforceability thereof shall be contested by IDT; or

(i) the validity or enforceability of any Transaction Document shall be contested by IDT or any Transaction Document shall not be in full force and effect and enforceable in accordance with its terms against IDT;

(j) the total aggregate amount subject to one or more Payment Extensions exceeds 105% of the aggregate existing outstanding amounts due and owing to IDT (i) under any POR Program and (ii) from the Authorized Direct Pay Customers; or

(k) an Event of Default shall have occurred pursuant to Section 5.8 hereof

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then, and in every such event, and at any time thereafter during the continuance of such event, the BP Parties may take any or all of the following actions, at the same or different times:

(i) terminate any obligations of the BP Parties under this Agreement or any other Transaction Document and exercise the rights and remedies under the Master Netting Agreement of a Non-defaulting Party if a MNA Default has occurred and is continuing;

(ii) declare the Payment Extensions and all other Obligations then outstanding to be due and payable in whole (or in part, in which case any Payment Extension or other Obligation not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the Payment Extensions and other Obligations so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of IDT accrued hereunder or under any other Transaction Document, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by IDT; provided that, if the Event of Default occurs under the Master Netting Agreement due to the Bankruptcy of IDT, the Payment Extensions then outstanding, and all other Obligations then outstanding, together with accrued interest thereon and all fees and other Obligations of IDT shall become immediately due and payable in full without presentment, demand, protest or other notice of any kind, all of which are hereby waived by IDT; and

(iii) exercise its rights with respect to the Collateral under the Security Documents.

Any and all proceeds of the exercise of such rights (including amounts constituting the Independent Collateral Amount) shall be deposited to the credit of the Collateral Account to be distributed therefrom in the following order of priority: First, to pay to the BP Parties any and all fees, expenses and other Obligations due and owing to the BP Parties under this Agreement and the other Transaction Documents (including the EEI Agreement, the NAESB Agreement, and the ISDA Agreement), including any Supply Fee due and owing to the BP Parties under this Agreement, interest, and all fees, costs and expenses that the BP Parties incur to enforce its rights under this Agreement and the other Transaction Documents, and second, after applying such proceeds to the payment of all amounts described in priority first, any remaining amounts shall be paid in accordance with the remaining provisions of Section 10.4.

18.2 BP Event of Default. If any of the following events (each a “BP Event of Default”) shall occur and be continuing:

(a) any representation, warranty or certification made or deemed made by BP or BPCNA in this Agreement or any other Transaction Document to which it is a party, or in any amendment or supplement hereto or thereto, or any certificate furnished to IDT pursuant to the provisions hereof or thereof, shall prove to have been false or misleading as of the time made or furnished in any material respect, if such representation, warranty or certification shall remain false or misleading for 30 days after the date on which BP or BPCNA has knowledge of such failure or IDT shall have given BP or BPCNA notice of such failure and is capable of being corrected within such 30-day period; or

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(b) BP or BPCNA shall materially fail to perform or observe any provision, term, covenant or agreement of it contained in this Agreement or any other Transaction Document to which it is a party (including without limitation the EEI Agreement, the NAESB Agreement, or the ISDA Agreement), if such failure shall remain unremedied for 10 Business Days (or 2 Business Days in respect of any payment default) after the date on which any BP or BPCNA has knowledge of such failure or IDT shall have given BP notice of such failure and such failure is capable of being remedied within such ten (10) Business Day period (or two (2) Business Day period, as applicable);

(c) a MNA Default where BP or BPCNA is the Defaulting Party shall have occurred and shall be continuing; or

(d) a final judgment or judgments for the payment of money of $5,000,000,000 or more in the aggregate shall be rendered by one or more courts, administrative tribunals or other bodies having jurisdiction against BP or BPCNA and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 30 days from the date of entry thereof and the BP Parties shall not, within said period of 30 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal;

(e) the validity or enforceability of any Transaction Document shall be contested by BP or BPCNA or any Transaction Document shall not be in full force and effect and enforceable in accordance with its terms against BP or BPCNA as applicable; or

(f) either of the BP Parties withdraws funds in deposit in the Collateral Account in material violation of the terms of this Agreement or a Deposit Account Control Agreement;

then, and in every such event and at any time thereafter during the continuance of such event, IDT may (i) terminate any obligations of IDT under this Agreement or any other Transaction Document and exercise the rights and remedies under the Master Netting Agreement of a Non-defaulting Party if a MNA Default has occurred and is continuing, and (ii) exercise any of its rights under the Transaction Documents, including the rights and remedies under the Master Netting Agreement of a Non-defaulting Party if a MNA Default has occurred and is continuing, and all proceeds of the exercise of such rights shall be deposited to the credit of the Collateral Account to be applied in accordance with Section 10.4. IDT shall not be obligated to make any termination payment or other penalty in connection with the exercise of its rights under the Transaction Documents in connection with a BP Event of Default.

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18.3 MNA Default under Master Netting Agreement. If a MNA Default has been declared under the Master Netting Agreement, but the underlying event or condition that gave rise to such MNA Default is no longer outstanding and continuing, then no Event of Default shall be outstanding or continuing under Section 18.1 or 18.2 of this Agreement regardless of whether or not such MNA Default continues under the Master Netting Agreement.

ARTICLE 19

MISCELLANEOUS

19.1 Amendments, Consents, Etc. No amendment or waiver of any provision of this Agreement, nor any consent to any departure by IDT from any provision hereof, shall in any event be effective unless the same shall be in writing and signed by IDT, BP, and BPCNA and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

19.2 Notices, Etc. All notices and other communications provided for hereunder shall be in writing (including telecopy communication and electronic mail) and mailed, sent by telecopy or other means of electronic transmission approved in advance by the recipient party or delivered by hand or overnight courier service, as follows:

(a) if to IDT, at its address at:

IDT Energy, Inc.

550 Broad Street

Newark, NJ 07102

Attn: Geoff Rochwarger

Telephone number: 973-438-4434

Fax: 973-438-1285

E-mail address: geoff@idtenergy.com

With copies to

IDT Corporation

550 Broad Street

Newark, NJ 07102

Attn: Legal Department

Telephone: 973-438-4236

Fax: 973-438-1455

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(b) if to BP, at its address at:

BP Energy Company

501 Westlake Park Blvd

Houston, TX 77079

Attn: Power Contracts Administration

Telephone number: 281-366-1649

Fax: 281-366-4929

With copies to:

BP Energy Company

501 Westlake Park Blvd

Houston, TX 77079

Attn: Senior Attorney, Power

Fax: 281-366-7583

The foregoing designations for a Party may be changed by such Party in a written notice to the other Parties. All such notices and communications shall be effective upon receipt if received during ordinary business hours or, if received after ordinary business hours, at the commencement of the next Business Day.

19.3 No Waiver; Remedies. No failure on the part of BP, BPCNA or IDT to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

19.4 Indemnification.

(a) IDT will indemnify and hold the BP Parties, and their respective officers, directors, shareholders, Affiliates, employees and agents (for this Section 19.4(a), an “Indemnified Party”), harmless from and against any and all claims, damages, losses, liabilities, and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with or relating to any investigation, litigation, or proceeding or the preparation of any defense in connection therewith), in each case arising out of or in connection with or by reason of the transaction documentation or any breach thereof or any of the transactions contemplated thereby, including acts or omissions regarding the accounts provided for under Article 9, except to the extent such claim, damage, loss, liability, or expense resulted from such Indemnified Party’s gross negligence or willful misconduct.

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(b) The BP Parties will indemnify and hold IDT, and its officers, directors, shareholders, Affiliates, employees and agents (for this Section 19.4(b) an “Indemnified Party”), harmless from and against any and all claims, damages, losses, liabilities, and expenses (including, without limitation, reasonable fees and disbursements of counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with or relating to any investigation, litigation, or proceeding or the preparation of any defense in connection therewith), in each case arising out of or in connection with or by reason of the transaction documentation or any breach thereof or any of the transactions contemplated thereby, including acts or omissions regarding the accounts provided for under Article 9, except to the extent such claim, damage, loss, liability, or expense resulted from such Indemnified Party’s gross negligence or willful misconduct.

19.5 Governing Law; Submission to Jurisdiction.

(a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED FOR ALL PURPOSES, INCLUDING THE RESOLUTION OF ALL DISPUTES BETWEEN OR AMONG PARTIES, BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEW YORK, EXCLUSIVE OF ANY CONFLICTS OF LAWS PRINCIPLES THAT COULD REQUIRE THE APPLICATION OF ANY OTHER LAW.

(b) Submission to Jurisdiction. Each of the Parties hereto irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the courts of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such Federal court. Each of the Parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement shall affect any right that a party may otherwise have to bring any action or proceeding relating to any Related Agreement against the other party, or its properties in the courts of any jurisdiction.

(c) Waiver of Venue. Each Party hereto irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in clause (b) of this Section, and hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

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(d) Service of Process. IDT agrees that service of process in any action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to IDT Energy, Inc. c/o IDT CORPORATION, 1430 Broadway, Suite 1615, New York, New York 10018, Attention: General Counsel. Each of the BP Parties hereto irrevocably consents to service of process in the manner provided for notices in Section 19.2. Nothing in this Agreement will affect the right of any party hereto to serve process in any other manner permitted by applicable law.

19.6    Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of a manually executed counterpart of this Agreement.

19.7    WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT OR THE PERFORMANCE OR NONPERFORMANCE OR OBLIGATIONS ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

19.8    Severability. If any provision of this Agreement is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (a) the other provisions of this Agreement shall remain in full force and effect in such jurisdiction and shall be construed in order to carry out the intentions of the Parties hereto as nearly as may be possible and (b) the invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

19.9    Captions. The table of contents and captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.

19.10  Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns, provided, no Party may assign any of its rights or obligations hereunder without the prior written consent of the other Parties, which consent shall not be unreasonably withheld.

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19.11  Integration. This Agreement, together with the other Transaction Documents, constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral and written, relating to the subject matter hereof.

19.12  USA PATRIOT Act. BP hereby notifies IDT that pursuant to the requirements of the USA PATRIOT Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)), BP may be required to obtain, verify and record information that identifies IDT, which information includes the name and address of IDT, and other information that will allow BP to identify IDT in accordance with said Act.

19.13  Confidentiality.

Each Party agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers and employees, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, including in the case of BP the federally appointed monitor and his staff, (c) to the extent required by applicable laws, rules or regulations, including those with respect to securities laws (including any rules or regulations promulgated by a registered securities exchange), or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or any other Transaction Document or any suit, action or proceeding relating to this Agreement or any other Transaction Document or the enforcement of rights hereunder or thereunder, (e) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or participant in, or any prospective assignee of or participant in, any of its rights or obligations under this Agreement or any other Transaction Document or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to IDT and its obligations, (f) with the consent of the other Party or (g) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to such Party, on a non-confidential basis from a source other than the other Party.

For the purposes of this Section, “Information” means all information received from one Party relating to such Party or its business; provided, that all reports and information required to be delivered to a Party hereunder or any other Transaction Document shall be deemed to be Information without further action. Confidential Information does not include any information which (a) was know to the receiving Party prior to the date of its disclosure pursuant to this Agreement and to which there is no existing obligation of confidentiality, (b) is or becomes generally available to the public other than through the act or omission of the receiving Party or its Representatives, (c) becomes available to the receiving party on a non-confidential basis from a source other than the disclosing Party

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or its Representatives, provided that such source is not bound by a confidentiality agreement with the disclosing party or its Representatives or otherwise prohibited from transmitting such confidential Information to the receiving party or the receiving party’s Representatives by a contractual, legal or fiduciary obligation, or (d) is independently developed by the receiving Party or any of its Affiliates without the use of or reliance upon the confidential Information.

Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

No party shall disclose to any other third party or issue a press release or any other form of public information involving the other Party without the other Party’s prior approval and written consent except, following a reasonable opportunity by BP to comment, to the extent required by applicable laws, rules or regulations, including those with respect to securities laws (including any rules or regulations promulgated by a registered securities exchange).

The Parties acknowledge information provided by IDT or its Affiliates and BP and its Affiliates, including without limitation consumer information, as confidential and proprietary to IDT or BP and its Affiliates. The Parties will limit access to such information to members of its trade control, regulatory, compliance, risk management, credit and legal departments. BP front office personnel shall be limited on a need-to-know basis only. The BP Parties shall comply with applicable federal and state law with regard to consumer information with respect to Customers provided by IDT or its Affiliates to BP or BPCNA.

The Confidential Information shall remain the property of the disclosing Party, and the disclosing Party may demand the return thereof at any time, upon giving thirty (30) days prior written notice to the receiving Party. Upon receipt of such notice, the receiving Party shall return all of the Confidential Information and all copies in its possession to the disclosing Party as soon as is reasonably practical, but in no event shall the receiving Party have fewer than thirty (30) days to return such Confidential Information to the disclosing Party. In the event that the receiving Party has destroyed any copies, such receiving Party shall confirm the destruction of such copies in the letter accompanying the return of the documents and copies that were not destroyed. Notwithstanding the foregoing, (i) the receiving Party shall not be obligated to return or destroy any documents created by it that may reflect or refer to Confidential Information, (ii) the receiving Party may create .and retain an abstract describing the type of Confidential Information that it receives sufficient to document the nature and scope of the Parties’ discussions under this Agreement, (iii) the receiving Party shall not be obligated to return or destroy any Confidential Information that the receiving Party is retaining pursuant to a document retention hold established in connection with any civil or criminal

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investigations or litigation, in which event the Confidential Information shall be retained by the receiving Party until such time as the document retention hold is no longer in effect, at which time the Confidential Information shall be returned to the disclosing Party or destroyed as aforesaid, and (iv) to the extent that receiving Party’s computer back-up procedures create copies of the Confidential Information, the receiving Party may retain such copies in its archival or back-up computer storage for the period the receiving Party normally archives backed-up computer records. Any such documents or abstract so created will be retained subject to this Agreement until they are destroyed or erased.

In the event of any breach or threatened breach by a Party of the terms of this Section 19.13, the other Party shall be entitled to seek injunctive and other equitable relief and the Party shall not plead in defense thereto that there would be an adequate remedy at law. Such remedy shall be cumulative and in addition to all other remedies available. The Parties acknowledge that the Confidential Information is valuable and unique and that disclosure in breach of this Section 19.13 may result in irreparable injury to the disclosing Party.

19.14  Imaged Agreement. Any original executed copy of this Agreement, any Confirmation or any other Transaction Document may be photocopied and stored on computer tapes and disks (the “Imaged Agreement”). The Imaged Agreement, if introduced as evidenced on paper in automated facsimile form, and all computer records of the foregoing, if introduced as evidence in printed format, in any judicial, arbitration, mediation or administrative proceedings, will be admissible as between the Parties to the same extent and under the same conditions as other business records originated and maintained in documentary form. Neither Party shall object to the admissibility of the Imaged Agreement (or photocopies of the transcription of the Imaged Agreement) on the basis that such were not originated or maintained in documentary form under either the hearsay rule, the best evidence rule or other rule of evidence.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year set forth above.

IDT ENERGY, INC.

By:

Name:

Title:

BP ENERGY COMPANY

By:

Name:

Title:

BP CORPORATION NORTH AMERICA INC.

By:

Name:

Title:

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PREFERRED SUPPLIER AGREEMENT SIGNATURE PAGE

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Exhibit 1

Supply Fees

*

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Exhibit 3

Material Terms of Sale Contract

Price and Term: All Sale Contracts shall specify the price for energy or Natural Gas, as applicable, and the term of the agreement. The term of the Sale Contract binding on IDT may not extend beyond the Planned Term.

Payment Provision: Sale Contracts shall require that Customer to make all payments due to the Deposit Account

Assignability: Sale Contracts will be assignable by IDT to a lender institution or credit provider, which includes the BP Parties, without the consent of the Customer.

Force Majeure: Sale Contracts shall contain a standard force majeure provision excusing performance due to acts beyond the reasonable control of the parties.

Events of Default: Sale Contracts shall contain a provision which includes customary grounds for default, including, but not limited to, Customer’s failure to pay invoices.

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Schedule 3.1

Existing Use of Pipelines and Storage Facilities

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Schedule 3.3

Permitted Other Transactions

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Schedule 5.4

ISO Interface Responsibilities

BP will serve as the Principal Account Holder within the NYISO control area on behalf of IDT pursuant to this agreement. In the capacity of these roles for IDT, BP will be responsible for the following ISO/RTO activities:

ISO/RTO Communications

i. Maintain facilities and personnel required to coordinate operations with the ISO.

ii. Serve as the sole authorized communicator with the ISO for bidding, scheduling, tagging and settling transactions related to IDT’s load obligations.

iii. Serve as the Authorized Security Administrator to access the NYISO MIS applications on behalf of IDT’s load.

iv. Comply with the ISO directive (under an emergency condition or otherwise) that may require BP to modify an IDT schedule.

Credit and Settlements

i. Maintain sufficient credit with the ISO to transact on IDT’s behalf.

ii. Timely payment of bona fide ISO invoices applicable to transactions conducted for IDT’s account.

iii. Submission of invoices to IDT for all ISO settlement charges, accounting adjustments or resettlements, and credits related to IDT’s load transactions and obligations, including but not limited to energy, ancillary services, installed Capacity, auction revenue rights, and load related charges, make-whole payments assigned to loads for reliability services, day-ahead market purposes and other such charges.

iv. Submission of invoices to IDT regarding any resettlement of transactions related to IDT’s load obligation pursuant to this Agreement, BP reserves the right to pass-through the rebilled charges and/or credits to IDT.

v. The NYISO settlement system does not allow for multiple settlement accounts associated with a single legal entity. As such, for any settlement charge types that are not reported to BP by the NYISO at IDT’s Load Asset ID or can not be directly attributed to IDT’s load obligation, BP will pass-through to IDT in a relatively proportionate to IDT’s load obligation. Similarly, BP shall pass any credit through to IDT in a relatively proportionate amount to IDT’s load obligation.

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vi. If BP receives the ISO short pay due to a market participant default in the ISO in which BP has established stand alone settlement accounts for IDT’s transaction, BP will completely pass through the same ISO short pay to IDT in accordance with the relevant tariff or ISO rules and procedures. If BP is made whole by the ISO at some future date, then BP will completely pass through the same make whole amount. The exception to this is in reference to NYISO where a stand alone settlement account will not be utilized. If the NYISO is to short pay BP on an invoice, BP will use commercially reasonable means to mimic the same short pay methodology used by the ISO for IDT’s transactions.

vii. File, but not necessarily initiate, all commercially reasonable billing disputes with the ISO on IDT’s behalf.

Regulatory

i. IDT is responsible for its own regulatory or legislative monitoring, participation and advocacy to protect its interests. For clarification, BP is not responsible for communicating any regulatory, market rule, tariff change, NERC issues and standards, or RTO ISO stakeholder meetings or other such committee and working group information to IDT. IDT remains responsible for its own regulatory advocacy and interpretation.

ii. Nothing herein shall limit IDT’s rights to participate as a Market Participant in the ISO/RTO or NERC meeting or any regulatory proceeding to protect its interests. For clarification, if BP participates in the ISO/RTO or NERC meeting or regulatory meeting, BP shall vote independently to protect its interests without any obligation to coordinate its vote with IDT or its Affiliates.

iii. IDT will be responsible for any required state, federal or regional reports applicable to its licenses and business interests. For clarification, nothing herein shall obligate BP, as scheduling entity, to prepare or submit any regulatory or governmental reports including, but not limited to, IDT’s FERC Electronic Quarterly Reporting (EQR), ERCOT PUCT transactions report, or IDT’s Renewable Energy Credit (REC) reports.

IDT, as the Load-Serving Entity underneath a BP ISO Account ID, will be responsible for the following activities:

i. Provide timely load forecast data, demand bids, virtual transactions, bilateral transactions, energy schedules, Capacity requirements, auction revenue right nominations and bilateral ancillary service transactions with a third party and other such data requirements to BP so that BP is able to meet the ISO’s applicable day- ahead and real-time scheduling deadlines.

ii. Maintain the appropriate state licensing requirement as a Retail Energy Provider (REP) or Load-Serving Entity serving retail customers within each of the states in which BP is providing wholesale power to IDT and is acting as the scheduling agent.

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iii. Remain responsible for reporting IDT’s meter data to the ISO/RTOs either through its own operations or via agreements with the other entities.

iv. Advanced coordination with BP will be required if IDT has a desire to participate in any of the ISO’s FTR, CRR or TCR auctions. BP will need to ensure the proper amount of credit has been posted with the respective ISO and the appropriate security rights have been granted to BP as the Scheduling Agent for IDT.

v. Prior to enrolling any load into the ISO Demand Response type program or enlisting a Demand Resource in an ICAP or RA auction, IDT will coordinate with BP to ensure the proper metering and dispatch communication equipment is in place for BP to be compliant with the ISO’s technical requirements of the programs.

vi. IDT will timely respond to any data requests or reporting obligations directed to BP from the ISO, NERC or NERC Regional Entity, that is related to IDT’s load transactions, such as system planning studies, forecasted peak demand, or audit inquires and other necessary information.

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Schedule 16.1(c)

Required Filings

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Schedule 16.1(m)

List of Sales Contracts and Purchase Agreements

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Schedule 16.1(w)

Authorized Direct Pay Customers

EX-14.01

Exhibit 14.01

CODE OF BUSINESS CONDUCT AND ETHICS

Updated as of June 15, 2009

This Code of Business Conduct and Ethics (this “Code”) covers a wide range of business practices and procedures. It does not cover every issue that may arise, but it sets out basic principles to guide all employees of IDT Corporation and its subsidiaries and affiliates (collectively the “Company”). All of our employees (including, but not limited to, supervisors and managers) must conduct themselves accordingly and should seek to avoid even the appearance of improper behavior. This Code should be followed by the Board of Directors of the Company as well as all agents and representatives, including consultants, of the Company. This Code has been adopted by the Board of Directors and is reviewed on a regular basis.

If a law conflicts with a policy in this Code, you must comply with the law; however, if a local custom or policy conflicts with this Code, you must comply with the Code. If you have any questions about these conflicts, you should ask your supervisor or manager how to handle the situation.

Those who violate the standards set forth in this Code will be subject to disciplinary action. If you are in a situation that you believe may violate or lead to a violation of this Code, follow the guidelines described in Section XIV below.

I. COMPLIANCE WITH LAWS, RULES AND REGULATIONS

All employees must respect and obey the laws of the cities, states and countries in which the Company operates, including the rules and regulations of the Securities and Exchange Commission. Not all employees are expected to know the details of these laws, but it is important to know enough to determine when to seek advice from supervisors, managers or other appropriate personnel. The Company holds information and training sessions to promote compliance with laws, rules and regulations, including insider trading laws.

II. CONFLICTS OF INTEREST

Conflicts of interest are prohibited as a matter of Company policy. A “conflict of interest” exists when someone’s personal interest interferes in any way with the interests of the Company. Conflict situations may arise when an employee, officer or director takes action or has interests that may make it difficult to perform his or her work for the Company objectively and effectively. Conflicts of interest may also arise when a director, officer or employee, or a member of his or her family, receives improper personal benefits, including loans, as a result of his or her position in the Company.

It is almost always a conflict of interest for a Company employee to work simultaneously for a competitor, customer or supplier. Company employees are not allowed to work for a competitor as a consultant or board member. The best policy is to avoid any direct or indirect business connection with our customers, suppliers or competitors, except on behalf of the Company.

Conflicts of interest may not always be clear-cut. If you have a question, you should consult with higher levels of management, the Vice President, Legal and/or the General Counsel. Any director, officer or employee who becomes aware of a conflict or potential conflict should bring it to the attention of a supervisor, manager or other appropriate personnel or should consult the procedures described in Section XIV below.

III. INSIDER TRADING

Employees who have access to confidential information are not permitted to use or share that information for stock trading purposes or for any other purpose except the conduct of the business of the Company. All nonpublic information about the Company should be considered confidential. To use nonpublic information for personal financial benefit or to “tip” others who might make an investment decision on the basis of this information is not only unethical but also illegal. The Company has adopted an Insider Trading Policy, and you should have received a copy of this policy. If you have any questions, please consult the General Counsel.

IV. CORPORATE OPPORTUNITIES

Employees, officers and directors are prohibited, without the express consent of the Board of Directors, from taking for themselves personally opportunities that are discovered through the use of Company property, information or position. No employee may use Company property, information or position for improper personal gain and no employee may compete with the Company directly or indirectly. Directors, officers and employees owe a duty to the Company to advance the legitimate interests of the Company when the opportunity to do so arises.

V. COMPETITION AND FAIR DEALING

We seek to outperform our competition fairly and honestly. We seek competitive advantages through superior performance, never through unethical or illegal business practices. Stealing proprietary information, possessing trade secret information obtained without the owner’s consent or inducing the disclosures of proprietary information or trade secrets by past or present employees of other companies is prohibited. Each employee should endeavor to respect the rights of and deal fairly with the customers, suppliers, competitors and employees of the Company. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other intentional practice that may constitute unfair dealing.

To maintain the valuable reputation of the Company, compliance with our quality processes and safety requirements is essential. In the context of ethics, quality requires that our products and services be designed and manufactured to meet our obligations to customers.

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The purpose of business entertainment and gifts in a commercial setting is to create goodwill and sound working relationships, not to gain unfair advantage with customers. No gift or entertainment should ever be offered, given, provided or accepted by any director, officer or employee of the Company, or by any family member of a director, officer, employee or agent, unless it (1) is not a cash gift, (2) is consistent with customary business practices, (3) is not excessive in value, (4) cannot be construed as a bribe or payoff and (5) does not violate any laws or regulations. Please discuss with your supervisor or manager any gifts or proposed gifts if you are uncertain whether they are appropriate and/or refer to IDT’s Gift Policy.

VI. DISCRIMINATION AND HARASSMENT

The diversity of our employees is a tremendous asset. We are firmly committed to providing equal opportunity in all aspects of employment and will not tolerate any illegal discrimination or harassment of any kind. Examples include derogatory comments based on racial or ethnic characteristics and unwelcome sexual advances. If you have any questions, please consult the Vice President, Legal or the Senior Vice President of Human Resources.

VII. HEALTH AND SAFETY

The Company strives to provide each employee with a safe and healthy work environment. Each employee is responsible for maintaining a safe and healthy workplace for all employees by following safety and health rules and practices and reporting accidents, injuries and unsafe equipment, practices or conditions.

Violence and threatening behavior are not permitted. Employees should report to work in condition to perform their duties, free from the influence of alcohol or illegal drugs. The use of alcohol or illegal drugs in the workplace will not be tolerated.

VIII.  RECORDKEEPING

The Company requires honest and accurate recording and reporting of information in order to make responsible business decisions. For example, only the true and actual number of hours worked by an employee should be reported.

Many employees regularly use business expense accounts. These accounts must be documented and recorded accurately. If you are not sure whether a certain expense is legitimate, ask your supervisor or manager. Rules and guidelines are available from the Chief Accounting Officer and Controller.

All Company books, records, accounts and financial statements must be maintained in reasonable detail, must appropriately reflect Company transactions and must conform to both applicable legal requirements and the system of internal controls of the Company. Unrecorded or “off the books” funds or assets should not be maintained unless permitted by applicable law or regulation.

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Business records and communications often become public, and we should avoid exaggeration, derogatory remarks, guesswork or inappropriate characterizations of people and companies that may be misunderstood. This principle applies equally to e-mail, internal memoranda and formal reports.

Records should be retained or destroyed in accordance with the Company’s Records Retention Policy, as in effect from time to time. If you have any questions, please consult the Vice President, Legal.

IX. CONFIDENTIALITY

Each employee must maintain the confidentiality of confidential information entrusted to him or her by the Company or its customers, except when disclosure is authorized by the General Counsel or Vice President, Legal, or required by law or regulations. Confidential information includes all nonpublic information that, if disclosed, might be useful to competitors or harmful to the Company or its customers. It also includes information that suppliers and customers have entrusted to us.

Employees are required to execute a standard form confidentiality agreement upon employment and from time to time during the course of employment. The obligation to preserve confidential information continues even after employment ends.

X. PROTECTION AND PROPER USE OF COMPANY ASSETS

All employees should endeavor to protect Company assets and to ensure their efficient use. Theft, carelessness and waste have a direct impact on profitability. Any suspected incident of fraud or theft should be immediately reported for investigation. Except for incidental personal use, Company equipment should not be used for purposes that do not relate to Company business.

The obligation of employees to protect Company assets includes its proprietary information. Proprietary information includes intellectual property, such as trade secrets, patents, trademarks and copyrights, as well as business, marketing and service plans, engineering and manufacturing ideas, designs, databases, records, salary information and any unpublished financial data and reports. Unauthorized use or distribution of this information is a violation of Company policy. It may also be illegal, may result in civil and criminal penalties and may subject a director, officer or employee to discipline, up to and including termination for cause.

XI. PAYMENTS TO GOVERNMENTAL PERSONNEL

The Foreign Corrupt Practices Act prohibits giving anything of value, directly or indirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business. The Company strictly prohibits the making of illegal payments to government officials of any country. The Company has adopted a Foreign Corrupt Practices Act Policy. If you have any questions, please consult the Vice President, Legal.

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The United States government has a number of laws and regulations regarding business gratuities that may be accepted by US government personnel. The promise, offer or delivery to an official or employee of the US government of a gift, favor or other gratuity in violation of these rules violates Company policy and may be a criminal offense. State and local governments may have similar rules. If you have any questions, please consult the Vice President, Legal.

XII.   WAIVERS OF THIS CODE OF BUSINESS CONDUCT AND ETHICS

Any waiver of this Code with respect to a director or executive officer of the Company may be made only by the Board of Directors or a committee of the Board of Directors. Any such waiver will be promptly disclosed to the extent required by law or stock exchange regulation.

XIII.  REPORTING ILLEGAL OR UNETHICAL BEHAVIOR

Employees are encouraged to talk to supervisors, managers or other appropriate personnel about observed illegal or unethical behavior and about the best course of action in a particular situation. The Company will not retaliate or condone retaliation against employees who report possible misconduct by others in good faith. Employees are expected to cooperate in internal investigations of misconduct.

XIV.  COMPLIANCE PROCEDURES

We must all work to ensure prompt and consistent action against violations of this Code.

A. IDT Employees

In some situations it is difficult to determine the proper course of action. Since we cannot anticipate every situation that may arise, it is important for the Company to set forth a general way to approach a new question or problem. These are the steps to keep in mind:

• Make sure you have all of the facts. In order to reach the right solutions, you must be as fully informed as possible.

• Ask yourself what you are specifically being asked to do. This analysis will enable you to focus on the specific issues that are raised and the available alternatives. Use your judgment and common sense. If something seems unethical or improper, it may well be.

• Clarify your responsibility and role. In most situations, there is shared responsibility. Are your colleagues informed? It may help to get others involved and to discuss the problem.

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• Discuss the problem with your supervisor or manager. This approach is best in most if not all situations. Your supervisor or manager may be more knowledgeable about the issue and will appreciate being brought into the process. It is a supervisor’s or manager’s responsibility to help you to solve problems.

• Seek help from Company resources. In the rare instance in which it may not be appropriate to discuss an issue with your supervisor or manager, or in which you feel uncomfortable approaching your supervisor or manager, discuss the problem with the Vice President, Legal or General Counsel. If you prefer to write, address your concerns to the Vice President, Legal or General Counsel.

• You may report ethical violations in confidence and without fear of retaliation. If your situation requires that your identity be kept secret, the Company will protect your anonymity. The Company does not permit retaliation of any kind against employees for good faith reports of ethical violations. Please refer to IDT’s Whistleblower Procedure for anonymous reporting procedures.

• Ask first. If you are unsure of the proper course of action, seek guidance before you act.

B. IDT Supervisors and Managers

• Compliance certification. All IDT supervisors and managers, which includes any IDT employee, agent or representative (including consultants) who oversees at least one employee, agent or representative (including consultants), shall be responsible for the enforcement of and compliance with this Code, including necessary distribution (if requested) to ensure employee, agent and representative knowledge and compliance. Appropriate management will periodically be required to certify compliance with this Code. Any false certification, without exception, will be dealt with severely.

• Advise employees. Supervisors and managers should advise employees of their reporting obligation and encourage employees to report any prohibited or unlawful activities of which they are aware. Supervisors and managers should advise employees that the Company does not permit retaliation of any kind against employees for good faith reports of ethical violations.

• You may report ethical violations in confidence and without fear of retaliation. If your situation requires that your identity be kept secret, the Company will protect your anonymity. The Company does not permit retaliation of any kind against supervisors and managers for good faith reports of ethical violations. Please refer to IDT’s Whistleblower Procedure for anonymous reporting procedures.

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• Management reporting requirements. Any supervisor or manager having knowledge of any prohibited or unlawful acts or any allegations of fraud or improper behavior must promptly report such matters to the Vice President, Legal or General Counsel. Supervisors and managers should never assume that someone else has reported a prohibited or unlawful act or any allegation of fraud or improper behavior.

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EX-21.01

Exhibit 21.01

DOMESTIC SUBSIDIARIES

CORPORATIONS

IDT America of Virginia, LLC (DE) American Shale Oil Corporation (DE) American Shale Oil, LLC (DE), Assumed Name in TX: AMSO, LLC AMSO Holdings I, Inc. (DE) AMSO Holdings, LLC (DE) Broad-Atlantic Associates, LLC (DE) Broad-Atlantic Realty, LLC (DE) Dipchip Corp. (NY) Entrix Telecom, Inc. (DE) Genie Energy Corporation (DE) IDT 225 Old NB Road Holdings, Inc. (DE) IDT 225 Old NB Road, LLC (DE) IDT 226 Old NB Road Holdings, Inc. (DE) IDT 226 Old NB Road, LLC (DE) IDT Advanced Communication Services, LLC (NJ) IDT America, Corp. (NJ) IDT Capital, Inc. (DE) IDT Domestic Telecom, Inc. (DE), NJ dba Mobiltalker IDT Domestic-Union, LLC (DE) IDT Energy, Inc. (DE) IDT Financial Services, LLC (DE) IDT International Telecom, Inc. (DE) IDT Investments Inc. (NV) IDT Spectrum, Inc. (DE) IDT Spectrum, LLC (DE) IDT Stored Value Services, Inc. (DE) IDT Telecom, Inc. (DE) IDT Telecom, LLC (DE) IDT Wireless, Inc. (DE) King Telecom, LLC (DE) Net2Phone Cable Telephony, LLC (DE) Net2Phone Global Services, LLC Net2Phone, Inc. (DE) North American Energy, Inc. (DE) NTOP Holdings, LLC (DE) PICUP, LLC (DE) Telecard Network, L.L.C. (NJ) Touch-N-Buy, LLC (DE) TúYo Mobile, LLC (DE) Union CT Telecom, L.L.C. (NJ) Union Romerias Georgia, LLC (DE) Union Telecard Alliance, LLC (DE) Union Telecard Arizona, LLC (NV) Union Telecard Connecticut, LLC (DE) Union Telecom Texas LLC (TX) UTA Web Sales LLC (DE) Winstar Holdings, LLC (DE) Winstar Spectrum, LLC (DE) Zedge Holdings, Inc. (DE)

FOREIGN SUBSIDIARIES

Name	Country of Formation
DirectTel Dutch Holdings B.V.	Netherlands
DYP C.V.	Netherlands
Expercom S.A.	Belgium
Homer Dutch Holdings B.V.	Netherlands
IDT Brasil Telecomunicações Ltda	Brazil
IDT Brazil Limitada	Brazil
IDT Card Services Ireland Limited	Ireland
IDT Chile S.A.	Chile
IDT Corporation de Argentina S.A.	Argentina
IDT Denmark ApS	Denmark
IDT Dutch Holdings B.V.	Netherlands
IDT Europe B.V.B.A.	Belgium
IDT Financial Services Holding Limited	Gibraltar
IDT Financial Services Limited	Gibraltar
IDT France SARL	France
IDT Germany GmbH	Germany
IDT Global Limited	United Kingdom
IDT Inter Direct Tel Sweden AB	Sweden
IDT Italia S.R.L.	Italy
IDT Netherlands B.V.	Netherlands
IDT Peru S.R.L.	Peru
IDT Puerto Rico & Co.	Puerto Rico
IDT Switzerland GmbH	Switzerland
IDT Telecom Asia Pacific (Australia) PTY. LTD.	Australia
IDT Telecom Asia Pacific Limited	Hong Kong
IDT Telecom South Africa (PTY) LTD	South Africa
Interdirect Tel Limited	Ireland
MJP C.V.	Netherlands
MST Dutch Holdings B.V.	Netherlands
NewPhone Dutch Holdings B.V.	Netherlands
Prepaid Cards B.V.B.A.	Belgium
Pryd Dutch Holdings B.V.	Netherlands
SPD Dutch Holdings B.V.	Netherlands
SPD Puerto Rico Corp	Puerto Rico
STA Dutch Holdings B.V.	Netherlands
Strategic Dutch Holdings B.V.	Netherlands
TimeTel Dutch Holdings B.V.	Netherlands
TLT Dutch Holdings B.V.	Netherlands
WorldTalk Dutch Holdings B.V.	Netherlands
Zedge Dutch Holdings B.V.	Netherlands
Zedge Limited	United Kingdom
Zedge Nordic NUF Limited	Norway

EX-23.01

Exhibit 23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated October 29, 2009, with respect to the consolidated financial statements included in the Annual Report of IDT Corporation (a Delaware Corporation) and subsidiaries on Form 10-K for the year ended July 31, 2009. We hereby consent to the incorporation by reference of said report in the Registration Statements of IDT Corporation and subsidiaries on Forms S-3 (File Nos. 333-53719, 333-61565, 333-71991, 333-77395, 333-80133, 333-86261, 333-104286, 333-115403 and 333-119190), and on Forms S-8 (File Nos. 333-73167, 333-100424, 333-105865, 333-116266, 333-130287, 333-130288, 333-130562, 333-146718 and 333-154257).

/s/ GRANT THORNTON LLP

New York, New York

October 29, 2009

EX-31.01

Exhibit 31.01

Certification of Chief Executive Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Howard S. Jonas, certify that:

1. I have reviewed this Annual Report on Form 10-K of IDT Corporation;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 29, 2009

/s/ Howard S. Jonas        

Howard S. Jonas

Chief Executive Officer

EX-31.02

Exhibit 31.02

Certification of Chief Financial Officer

pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Bill Pereira, certify that:

1. I have reviewed this Annual Report on Form 10-K of IDT Corporation;

2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 29, 2009

/s/ Bill Pereira        

Bill Pereira

Chief Financial Officer

EX-32.01

Exhibit 32.01

IDT CORPORATION

Certification Pursuant to

18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act Of 2002)

In connection with the Annual Report of IDT Corporation (the “Company”) on Form 10-K for fiscal 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Howard S. Jonas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 29, 2009

/s/ Howard S. Jonas

Howard S. Jonas

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to IDT Corporation and will be retained by IDT Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

Exhibit 32.02

IDT CORPORATION

Certification Pursuant to

18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 of

the Sarbanes-Oxley Act Of 2002)

In connection with the Annual Report of IDT Corporation (the “Company”) on Form 10-K for fiscal 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Bill Pereira, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 29, 2009

/s/ Bill Pereira

Bill Pereira

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to IDT Corporation and will be retained by IDT Corporation and furnished to the Securities and Exchange Commission or its staff upon request.