1272830--3/3/2009--VONAGE_HOLDINGS

related topics

{system, service, information}

{stock, price, share}

{product, market, service}

{financial, litigation, operation}

{control, financial, internal}

{debt, indebtedness, cash}

{property, intellectual, protect}

{operation, natural, condition}

{provision, law, control}

{tax, income, asset}

{stock, price, operating}

{condition, economic, financial}

{acquisition, growth, future}

{product, liability, claim}

{customer, product, revenue}

The debt agreements governing our recent financing contain restrictions that may limit our flexibility in operating our business. If we do not meet the New York Stock Exchange continued listing requirements, our common stock may be delisted. If we are unable to compete successfully, we could lose market share and revenue. Current economic conditions may adversely affect our industry, business and results of operations. 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 have incurred quarterly losses since our inception, and we may continue to incur losses in the future. If we require additional capital, we may not be able to obtain additional financing on favorable terms or at all. 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. 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. 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. Our emergency and E-911 calling services may expose us to significant liability. 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. 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. Our business may be harmed if we are unable to maintain data security and meet Payment Card Industry data security standards. 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. 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. 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. 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. We 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 common stockholders may suffer dilution in the future upon exercise of our Convertible Notes. Jeffrey A. Citron, our founder, Chairman and a significant 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 certificate of incorporation and bylaws, the agreements governing our indebtedness 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--3/3/2009--VONAGE_HOLDINGS_CORP