1272830--3/17/2008--VONAGE_HOLDINGS

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Our cash flow and capital resources may not be sufficient for the future repurchase of our convertible notes. We may require significant additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on favorable terms or at all. We have incurred quarterly losses since our inception, and we may continue to incur losses in the future. A higher rate of customer terminations would negatively affect our business by reducing our revenue or requiring us to spend more money to grow our customer base. We may not be able to maintain adequate customer care during periods of growth or in connection with our addition of new and complex Vonage-enabled devices, which could adversely affect our ability to grow and cause our financial results to be negatively affected. Our ability to provide our service is dependent upon third-party facilities and equipment, the failure of which could cause delays or interruptions of our service, damage our reputation, cause us to lose customers and limit our growth. We rely on third parties to provide a portion of our customer service representatives, initiate local number portability for our customers and provide aspects of our E-911 service. If these third parties do not provide our customers with reliable, high-quality service, our reputation will be harmed and we may lose customers. If we are unable to compete successfully, we could lose market share and revenue. Decreasing telecommunications prices may cause us to lower our prices to remain competitive, which could delay or prevent our future profitability. If VoIP technology fails to gain acceptance among mainstream consumers, our ability to grow our business will be limited. Certain aspects of our service are not the same as traditional telephone service, which may limit the acceptance of our services by mainstream consumers and our potential for growth. We have identified a material weakness in our internal control over financial reporting which was remediated as of December 31, 2007 and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. Our emergency and new E-911 calling services are different from those offered by traditional wireline telephone companies and may expose us to significant liability. If we fail to comply with FCC regulations requiring us to provide E-911 emergency calling services, we may be subject to fines or penalties, which could include disconnection of our service for certain customers or prohibitions on marketing of our services and accepting new customers in certain areas. Taxes and 911-related fees will increase our customers cost of using our services and could result in penalties being imposed on us. Flaws in our technology and systems could cause delays or interruptions of service, damage our reputation, cause us to lose customers and limit our growth. Future disruptive new technologies could have a negative effect on our businesses. The success of our business relies on customers continued and unimpeded access to broadband service. Providers of broadband services may be able to block our services or charge their customers more for also using our services, which could adversely affect our revenue and growth. Our service requires an operative broadband connection, and if the adoption of broadband does not progress as expected, the market for our services will not grow and we may not be able to grow our business and increase our revenue. We are and in the future may be subject to damaging and disruptive intellectual property litigation that could materially and adversely affect our business, results of operations and financial condition, as well as the continued viability of our company. Because much of our potential success and value lies in our use of internally developed systems and software, if we fail to protect them, it could negatively affect us. We are currently subject to securities class action litigations, the unfavorable outcome of which might have a material adverse effect on our financial condition, results of operations and cash flows. We may incur significant costs and harm to our reputation from lawsuits and regulatory inquiries related to our business practices, which may also divert the attention of our management from other aspects of our business. Our credit card processors have the ability to take significant holdbacks or increase existing reserves in certain circumstances. The initiation of such holdbacks or increased reserves likely would have a material adverse effect on our liquidity. We are dependent on a small number of individuals, and if we lose key personnel upon whom we are dependent, our business will be adversely affected. Demand for information technology and engineering personnel is high, and the media impact from our patent infringement litigation combined with our prior reduction in force and need to refinance our convertible notes have negatively affected our ability to attract and retain such personnel. If we fail to hire and train these additional information technology and engineering personnel, our business, operating results and financial position could be materially adversely affected. Regulation of VoIP services is developing and therefore uncertain, and future legislative, regulatory or judicial actions could adversely affect our business and expose us to liability. The past background of our founder, Chairman, Chief Strategist and interim Chief Executive Officer, Jeffrey A. Citron, may adversely affect our ability to enter into business relationships and may have other adverse effects on our business. As a result of being a public company, we incur increased costs that may place a strain on our resources or divert our management s attention from other business concerns. Jeffrey A. Citron, our founder, Chairman, Chief Strategist, interim Chief Executive Office and principal stockholder, exerts significant influence over us. We may be unable to fully realize the benefits of our net operating loss ( NOL ) carryforwards if an ownership change occurs. The market price of our common stock has been and may continue to be volatile, and purchasers of our common stock could incur substantial losses. Our stock price may decline due to sales of shares by our other stockholders. Our common stock is listed on the New York Stock Exchange and we may not be able to maintain that listing, which may make it more difficult for you to sell your shares. Our certificate of incorporation, bylaws and convertible notes and the terms of certain settlement agreements to which we are a party contain provisions that could delay or discourage a takeover attempt, which could prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.

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1272830--3/17/2008--VONAGE_HOLDINGS_CORP