Vonage 2010 Annual Report Download - page 41

C
hange in fair value of embedded features within notes
pa
y
able and stock warran
t
.
The increase in the chan
g
e in fair
v
alue of embedded features within notes pa
y
able and stock
warrant is primarily due to the recordin
g
of the chan
g
e in the fair
va
l
ue o
fth
eco
nv
e
r
s
i
o
nf
ea
t
u
r
eco
nt
a
in
ed
within
ou
r
co
nv
e
rti
b
l
e
notes of
$
49,380 for the year ended December 31, 2009. We also
r
ecorded
$
553 for the fair value of our common stock warrant.
G
ain (loss) on extin
g
uishment of notes. The chan
g
ein
g
ai
n
(loss) of early extin
g
uishment of $34,611, or 113%, was primarily
r
elated to the loss of $30,570 in 2008 resultin
g
from the early
extin
g
uishment of debt offset by $4,041
g
ain associated with
co
nv
e
r
s
i
o
n
of ou
r
co
nv
e
rti
b
l
e
n
o
t
es
.
O
ther
.
W
e reco
g
nized $792 in other income for the year
e
nded December 31, 2009
f
or the net
p
roceeds we receive
d
f
rom a key-man term li
f
e insurance policy related to the passin
g
of a fo
rm
e
r
e
x
ecu
tiv
e
.
Income Tax Expens
e
F
or the Years Ended December 31
,
D
o
ll
a
r
C
han
ge
2
0
1
0
v
s
.
2
009
Do
ll
a
r
C
han
ge
2009
v
s
.
2008
Pe
r
ce
nt
C
han
g
e
2
0
1
0
v
s.
2
009
P
e
r
ce
nt
C
han
ge
2
009
v
s
.
2
008
(
in thousands, except percentages
)
2
0
1
0
2
009
2
008
Income tax expense
$
(318)
$
(836)
$
(678)
$
518
$
(158) 62% (23%
)
PROVISION FOR INCOME TAXES
T
he provision
f
or each
y
ear represents state and local
i
ncome taxes current
ly
pa
y
a
bl
e.
Recognition of deferred tax assets will require generation o
f
future taxable income. There can be no assurance that we wil
l
generate sufficient taxable income in future years. Therefore, w
e
established a valuation allowance on net deferred tax assets o
f
$
415
,
903 as of December 31
,
2010.
We participated in the
S
tate of New Jerse
y
’s corporatio
n
b
usiness tax benefit certificate transfer program, which allows
certa
i
n
hi
g
h
tec
h
no
l
ogy an
dbi
otec
h
no
l
ogy compan
i
es to trans
-
fer unused New Jersey net operating loss carryovers to other
N
ew
J
ersey corporat
i
on
b
us
i
ness taxpayers.
D
ur
i
ng 2003 an
d
2004, we submitted an application to the New Jerse
y
Economi
c
Development Authority, or EDA, to participate in the pro
g
ram
and the a
pp
lication was a
pp
roved. The EDA then issued
a
certi
f
icate certi
f
yin
g
our eli
g
ibility to participate in the pro
g
ram
.
T
he pro
g
ram requires that a purchaser pay at least 75
%
o
f
the
amount o
f
the surrendered tax bene
f
it. In tax years 2008, 2009,
and 2010, we sold approximately, $10,051, $0, and $2,194
,
r
espectively, of our New Jersey State net operatin
g
loss carr
y
forwards for a reco
g
nized benefit of approximately $605 in 2008,
$
0 in 2009, and $168 in 2010. Collectively, all transactions
r
epresent approximatel
y
85
%
o
f
the surrendered tax bene
f
i
t
eac
h
year an
dh
ave
b
een recogn
i
ze
di
nt
h
e year rece
i
ve
d.
As o
f
December 31, 2010, we had net operating loss carry
forwards for United
S
tates federal and state tax purposes of
$
885,431 and
$
849,567, respectively, expiring at various time
s
from years ending 2012 through 2030. In addition, we had ne
t
operating loss carry forwards for
C
anadian tax purposes o
f
$
42,457 expiring through 2027. We also had net operating loss
carry forwards for United Kingdom tax purposes of
$
40,335 wit
h
no exp
i
rat
i
on
d
ate
.
N
et
L
os
s
F
or t
h
e
Y
ears
E
n
d
e
dD
ecem
b
er
3
1
,
D
o
ll
a
r
C
hange
20
1
0
vs
.
2009
D
o
ll
a
r
Chang
e
2009
vs.
2008
P
ercen
t
C
hange
20
1
0
vs
.
2009
P
ercent
Chang
e
2009
vs
2008
(in thousands, except percentages
)
20
1
0 2009 2008
Net loss $(83,665) $(42,598) $(64,576) $(41,067) $21,978 (96%) 34
%
2010 com
p
ared to 2009
Ne
tL
oss
.
B
ased on the activity described above, our ne
t
l
oss of $83,665 for the year ended December 31, 2010
i
ncreased by $41,067, or 96%, from $42,598 for the year ended
December 31, 2009
.
2009 com
p
ared to 2008
Ne
tL
oss
.
B
ased on the activity described above, our net
l
oss of $42,598 for the year ended December 31, 200
9
decreased by $21,978, or 34%, from $64,576 for the year ende
d
December 31, 2008
.
3
4
VO
NA
G
E ANN
U
AL REP
O
RT 2010