Vonage 2008 Annual Report Download - page 72

V
O
NA
G
EH
O
LDIN
GS CO
RP
.
N
O
TE
S
T
OCO
N
SO
LIDATED FINAN
C
IAL
S
TATEMENT
S
—
(C
ontinued
)
(
In thousands, except per share amounts
)
T
he following shares were excluded from the calculation of diluted earnings per common share because of their anti-
d
il
u
tiv
ee
ff
ec
t
s
:
For the Years Ended December 31,
2008 2007 200
6
C
ommon stock warrants 514 3
,
085 3
,
08
5
C
onvertible notes
(
1
)
—17
,
824 17
,
83
5
C
onvertible notes
(
2
)
62
,
069 — —
R
es
tri
c
t
ed s
t
oc
k
u
nit
s
3,
100 3
,
104 1
,
912
Emplo
y
ee stock option
s
2
9
,
227 18
,
257 17
,
00
4
9
4
,
910 42
,
270 39
,
836
(1) In December 2005 and January 2006, we issued $249,919 a
gg
re
g
ate principal amount of our Previous Convertibl
e
N
otes due December 1, 2010. The first interest payment on the Previous Convertible Notes of
$
3,645 was paid in-
kind. In November 2008, we completed a financin
g
transaction consistin
g
of (i) a $130,300 first lien senior facility, (ii) a
$72,000 second lien senior facility and (iii) the sale of $18,000 of convertible notes. The proceeds from the financin
g
p
lus cash on hand were used to re
p
urchase the Previous Convertible Notes. The share amounts in 2007 and 2006 are
related to the Previous
C
onvertible Notes.
(2) The share amount in 2008 is related to our convertible notes issued in November 2008.
Share-Based Com
p
ensation
We account for share-based com
p
ensation in accord
-
ance with Statement of Financial Accountin
g
Standards
N
o. 123
(
R
)
,Share-Based Payment (
“
S
FAS 123
(
R
)
”
)
. Under
t
he fair value reco
g
nition provisions of this statement
,
share-based compensation cost is measured at the
g
rant
date based on the
f
air value o
f
the award and is recog
-
nized as expense over the applicable vestin
g
period of th
e
stock award usin
g
the accelerated method
.
Recent Accountin
g
Pronouncement
s
In June 2008, the Financial Accountin
gS
tandards
B
oard (“FASB”) ratified Emer
g
in
g
Issues Task Forc
e
(“EITF”) Issue No. 07-5, “Determining Whether an Instru-
ment
(
or an Embedded Feature
)
Is Indexed to an Entity’s
O
wn Stock” (“EITF 07-5”). EITF 07-5 provides that an
entity should use a two step approach to evaluate
whether an equity-linked financial instrument
(
or
embedded feature) is indexed to its own stock, includin
g
evaluating the instrument’s contingent exercise and
settlement
p
rovisions. It also clarifies on the im
p
act of
f
orei
g
n currency denominated strike prices and market-
based emplo
y
ee stock option valuation instruments on
t
he evaluation. EITF 07-5 is effective for fiscal year
s
be
g
innin
g
a
f
ter December 15, 2008. The adoption o
f
EITF
0
7-5 will not have an impact on our consolidated
f
inancia
l
p
osition and results of o
p
erations.
In May 2008, the FA
S
B issued
S
tatement of Financial
Accountin
g
Standards No. 162 (“SFAS No. 162”), “The
H
ierarchy of Generally Accepted Accounting Principles.”
S
FA
S
No. 162 identifies the sources of accountin
g
princi-
ples and the
f
ramework
f
or selectin
g
the principles used in
t
he
p
re
p
aration o
ff
inancial statements that are
p
resente
d
in conformity with
g
enerally accepted accountin
g
princi-
ples. SFAS No. 162 becomes effective 60 days followin
g
t
he Securities and Exchange Commission’s approval of
t
he Public
C
ompany Accountin
gO
versi
g
ht Board
amendments to AU Section 411
,
“The Meanin
g
o
f
Present
Fairly in
C
onformity With
G
enerally Accepted Accounting
Princi
p
les.
”
W
e do not ex
p
ect that the ado
p
tion of SFA
S
No. 162 will have a material impact on our consolidate
d
f
in
a
n
c
i
a
l
s
t
a
t
e
m
e
nt
s.
I
n April 2008, the FA
S
B issued F
S
P No. 142-3
(
“F
S
P
1
42-3”), “Determination of the Useful Life of Intangible
A
ssets.” F
S
P 142-3 amends the factors an entity shoul
d
cons
id
er
i
n
d
eve
l
op
i
n
g
renewa
l
or extens
i
on assumpt
i
on
s
u
sed in determining the use
f
ul li
f
eo
f
recognized intangibl
e
assets under FA
S
B
S
tatement No. 142
,
“
G
oodwill an
d
O
ther Intan
g
ible Assets.” This new
g
uidance applies
p
rospectively to intangible assets that are acquire
d
i
ndividually or with a group of other assets in busines
s
combinations and asset acquisitions. F
S
P 142-3 is effec
-
t
ive
f
or
f
inancial statements issued
f
or
f
iscal
y
ears an
d
i
nterim periods beginning after December 15, 2008. Earl
y
adoption is prohibited.
S
ince this
g
uidance will be applie
d
p
rospectivel
y
, on adoption, there will be no impact to our
current consolidated financial statements
.
I
n March 2008
,
the FASB
,
affirmed the consensus of
FA
S
B
S
taff Position
(
F
S
P
)
Accounting Principles Boar
d
O
pinion No. 14-1
(
APB 14-1
),
Accountin
g
for
C
onvertibl
e
Debt Instruments That May Be Settled in Cash upon Con-
version
(
Including Partial
C
ash
S
ettlement
)
,w
hi
c
h
a
ppli
es
to all co
nv
e
rt
ible deb
t
i
n
s
tr
u
m
e
nt
s
t
ha
t
ha
v
ea
n
e
t
se
tt
le
-
m
ent
f
eature
;
which means that such convertible deb
t
i
nstruments,
b
yt
h
e
i
r terms, may
b
e sett
l
e
d
e
i
t
h
er w
h
o
ll
yo
r
p
artiall
y
in cash upon conversion. F
S
P APB 14-1 requires
i
ssuers o
f
convertible debt instruments that ma
y
be settled
w
h
o
ll
y or part
i
a
ll
y
i
n cas
h
upon convers
i
on to separate
l
y
account for the liabilit
y
and equit
y
components in a man-
n
er re
f
lective o
f
the issuer’s nonconvertible debt borrowin
g
rate. Previous guidance provided for accounting for this
ty
pe of convertible debt instrument entirel
y
as debt. F
SP
A
PB 14-1 is e
ff
ective
f
or
f
inancial statements issued
f
or
f
iscal years beginning after December 15, 2008 and interim
p
eriods within those fiscal
y
ears. The adoption of F
S
PAP
B
1
4-1 will not have an impact on our
f
inancial statements
.
F
-
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V
O
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