After an exciting IPO in 2006 -- which was deemed the most successful in years -- low-cost phone service provider Vonage (NYSE:VG) dominated the financial news, as the company quickly succumbed to excessive spending and a myriad of lawsuits. Now, after a relatively quiet period of restructuring, Vonage is poised again to be tested as it faces challenges to stay liquid.

The drama of addressing looming debt has largely overshadowed the company's second-quarter financial report. In the report, Vonage disclosed revenue that grew 11% to $228 million even though subscriber growth was essentially stagnant, with only 2,000 net additions this quarter. The red ink on the bottom line was $7 million for the quarter on a GAAP basis, better than the $23 million lost last year. While it’s still a long way from "good," the lower net loss is certainly better than it has been.

Some key operating metrics were better as well: Churn has come down from a crushing level of 3.3% last quarter to only 3% now. And average revenue per line ticked up slightly to $29.04. Again, better, but not anywhere near what is needed to compete with top telcos like Verizon (NYSE:VZ), Qwest (NYSE:Q), or even the struggling Sprint Nextel (NYSE:S).

A new CEO has also been brought in to lead the company through this phase. Marc Lefar stepped up to the challenge after his experience as chief marketing officer at Cingular before it became AT&T (NYSE:T). The board of directors and senior management at Vonage believe Marc is the right guy to lead the company back from the edge, just as competing cable companies like Comcast (NASDAQ:CMCSA) or Time Warner Cable (NYSE:TWC) are proving particularly adept at luring phone service subscribers.

The big story with Vonage right now, though, is the plan to address a potentially lethal $253 million call on its convertible notes. Vonage has a commitment in place with Silver Point Finance, and on Aug. 20, it will put a complex deal consisting of a senior facility and new convertible notes to a shareholder vote. If the refinancing goes through as planned, Vonage will also commit a significant portion of its own cash, and interest expenses will more than double from this quarter’s $5.5 million.

Though the new financing may keep the company afloat, it will also burn through a lot of cash and shareholder value, so be warned.

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Fool contributor Dave Mock considers a glass of cool lemonade by the pool to be living large. He owns no shares of companies mentioned here and is the author of The Qualcomm Equation. The Fool's disclosure policy always gives treats, never tricks.