##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from to
 Commission File Number 001-33368
 Glu Mobile Inc.
  Delaware
    
    91-2143667(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)
 2207 Bridgepointe Parkway, Suite 250
San Mateo, California 94404
 (650) 532-2400
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



GLU MOBILE INC.
 FORM 10-Q
 Quarterly Period Ended March 31, 2009
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008
    
    3Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2009 and 2008
    
    4Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    22ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    30ITEM 4. CONTROLS AND PROCEDURES
    
    31PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    32ITEM 1A. RISK FACTORS
    
    32ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    47ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    47ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    47ITEM 5. OTHER INFORMATION
    
    48ITEM 6. EXHIBITS
    
    48SIGNATURES
    
    49EX-31.01EX-31.02EX-32.01EX-32.02
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (in thousands, except per share data)
 March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    14,674
    
    
    $
    19,166Accounts receivable, net of allowance of $487 and $468 at
March 31, 2009 and December 31, 2008, respectively
    
    
    19,681
    
    
    
    19,826Prepaid royalties
    
    
    16,212
    
    
    
    15,298Prepaid expenses and other
    
    
    1,885
    
    
    
    2,704Total current assets
    
    
    52,452
    
    
    
    56,994Property and equipment, net
    
    
    4,463
    
    
    
    4,861Prepaid royalties
    
    
    4,428
    
    
    
    4,349Other long-term assets
    
    
    1,024
    
    
    
    930Intangible assets, net
    
    
    17,367
    
    
    
    20,320Goodwill
    
    
    4,603
    
    
    
    4,622Total assets
    
    $
    84,337
    
    
    $
    92,076LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,065
    
    
    $
    6,569Accrued liabilities
    
    
    906
    
    
    
    686Accrued compensation
    
    
    2,252
    
    
    
    2,184Accrued royalties
    
    
    17,644
    
    
    
    18,193Accrued restructuring
    
    
    651
    
    
    
    1,000Deferred revenues
    
    
    710
    
    
    
    727Current portion of long-term debt
    
    
    15,175
    
    
    
    14,000Total current liabilities
    
    
    43,403
    
    
    
    43,359Other long-term liabilities
    
    
    10,744
    
    
    
    11,798Long-term debt, less current portion
    
    
    8,326
    
    
    
    10,125Total liabilities
    
    
    62,473
    
    
    
    65,282Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $0.0001 par value; 5,000 shares authorized at March 31, 2009 and December 31, 2008;
no shares issued and outstanding at March 31, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $0.0001 par value: 250,000 authorized at March 31, 2009 and December 31, 2008;
29,621 and 29,584 shares issued and outstanding at March 31, 2009 and December 31, 2008
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    185,521
    
    
    
    184,757Deferred stock-based compensation
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive income
    
    
    1,222
    
    
    
    1,170Accumulated deficit
    
    
    (164,882
    )
    
    
    (159,125
    )Total stockholders equity
    
    
    21,864
    
    
    
    26,794Total liabilities and stockholders equity
    
    $
    84,337
    
    
    $
    92,076
  3




---



##### Table of Contents



GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
 (in thousands, except per share data)
 Three Months EndedMarch 31,2009
    
    
    2008Revenues
    
    $
    20,775
    
    
    $
    20,592Cost of revenues:Royalties
    
    
    5,813
    
    
    
    5,488Amortization of intangible assets
    
    
    2,848
    
    
    
    1,708Total cost of revenues
    
    
    8,661
    
    
    
    7,196Gross profit
    
    
    12,114
    
    
    
    13,396Operating expenses:Research and development
    
    
    6,397
    
    
    
    6,520Sales and marketing
    
    
    4,112
    
    
    
    5,782General and administrative
    
    
    4,485
    
    
    
    5,395Amortization of intangible assets
    
    
    51
    
    
    
    68Restructuring charge
    
    
    
    
    
    
    75Acquired in-process research and development
    
    
    
    
    
    
    1,039Total operating expenses
    
    
    15,045
    
    
    
    18,879Loss from operations
    
    
    (2,931
    )
    
    
    (5,483
    )Interest and other income/(expense), net:Interest income
    
    
    18
    
    
    
    527Interest expense
    
    
    (364
    )
    
    
    (10
    )Other income/(expense), net
    
    
    (461
    )
    
    
    94Interest and other income/(expense), net
    
    
    (807
    )
    
    
    611Loss before income taxes
    
    
    (3,738
    )
    
    
    (4,872
    )Income tax provision
    
    
    (2,019
    )
    
    
    (1,130
    )Net loss
    
    $
    (5,757
    )
    
    $
    (6,002
    )Net loss per share  basic and diluted:
    
    $
    (0.19
    )
    
    $
    (0.21
    )Weighted average common shares outstanding  basic and diluted
    
    
    29,595
    
    
    
    29,146Stock-based compensation expense included in:Research and development
    
    $
    180
    
    
    $
    77Sales and marketing
    
    
    151
    
    
    
    1,301General and administrative
    
    
    433
    
    
    
    594
  4




---



##### Table of Contents



GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (in thousands)
 Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (5,757
    )
    
    $
    (6,002
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and accretion
    
    
    593
    
    
    
    630Amortization of intangible assets
    
    
    2,899
    
    
    
    1,776Stock-based compensation
    
    
    764
    
    
    
    1,972MIG earnout expense
    
    
    656
    
    
    
    Interest expense on debt
    
    
    276
    
    
    
    Amortization of loan agreement costs
    
    
    38
    
    
    
    10Non-cash foreign currency remeasurement (gain)/loss
    
    
    442
    
    
    
    (318
    )Acquired in-process research and development
    
    
    
    
    
    
    1,039(Gain)/write down of auction-rate securities
    
    
    
    
    
    
    235Changes in allowance for doubtful accounts
    
    
    20
    
    
    
    62Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    (130
    )
    
    
    (81
    )Prepaid royalties
    
    
    (1,034
    )
    
    
    (1,885
    )Prepaid expenses and other assets
    
    
    678
    
    
    
    30Accounts payable
    
    
    (393
    )
    
    
    1,114Other accrued liabilities
    
    
    221
    
    
    
    880Accrued compensation
    
    
    67
    
    
    
    600Accrued royalties
    
    
    (482
    )
    
    
    (213
    )Deferred revenues
    
    
    (8
    )
    
    
    (146
    )Accrued restructuring charge
    
    
    (349
    )
    
    
    78Other long-term liabilities
    
    
    (1,045
    )
    
    
    1,250Net cash provided by/(used in) operating activities
    
    
    (2,544
    )
    
    
    1,031Cash flows from investing activities:Purchase of property and equipment
    
    
    (305
    )
    
    
    (2,265
    )Acquisition of Superscape, net of cash acquired
    
    
    
    
    
    
    (26,651
    )Acquisition of MIG, net of cash acquired
    
    
    
    
    
    
    (693
    )Net cash used in investing activities
    
    
    (305
    )
    
    
    (29,609
    )Cash flows from financing activities:Proceeds from line of credit
    
    
    18,312
    
    
    
    Payments on line of credit
    
    
    (13,851
    )
    
    
    MIG loan payments
    
    
    (6,000
    )
    
    
    Proceeds from exercise of stock options
    
    
    11
    
    
    
    93Proceeds from exercise of stock warrants
    
    
    
    
    
    
    101Net cash provided by/(used in) financing activities
    
    
    (1,528
    )
    
    
    194Effect of exchange rate changes on cash
    
    
    (115
    )
    
    
    91Net decrease in cash and cash equivalents
    
    
    (4,492
    )
    
    
    (28,293
    )Cash and cash equivalents at beginning of period
    
    
    19,166
    
    
    
    57,816Cash and cash equivalents at end of period
    
    $
    14,674
    
    
    $
    29,523Supplemental disclosure of non-cash activitiesAccrued acquisition costs
    
    $
    
    
    
    $
    1,012Accrued
interest on MIG loan payments
    
    $
    276
    
    
    $
    
  5




---



##### Table of Contents



GLU MOBILE INC.
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (in thousands, except per share data)
 Note 1  The Company, Basis of Presentation and Summary of Significant Accounting Policies
  Basis of Presentation
   6




---



##### Table of Contents



Concentration of Credit Risk
    Three Months EndedMarch 31,2009
    
    2008Verizon Wireless
    
    
    21.8
    %
    
    
    22.0
    %China Mobile
    
    
    12.2
    
    
    
    
    *Vodafone
    
    
    
    *
    
    
    10.3
 
 *
    
    Revenues from the customer were less than 10% during the period.  Net Loss Per Share
  Three Months EndedMarch 31,2009
    
    
    2008Net loss attributable to common stockholders
    
    $
    (5,757
    )
    
    $
    (6,002
    )Basic and diluted shares:Weighted average common shares outstanding
    
    
    29,596
    
    
    
    29,189Weighted average unvested common shares subject to repurchase
    
    
    (1
    )
    
    
    (43
    )Weighted average shares used to compute basic and diluted net loss per share
    
    
    29,595
    
    
    
    29,146Net loss per share attributable to common stockholders  basic and diluted
    
    $
    (0.19
    )
    
    $
    (0.21
    )
  Three Months EndedMarch 31,2009
    
    
    2008Warrants to purchase common stock
    
    
    106
    
    
    
    155Unvested common shares subject to repurchase
    
    
    1
    
    
    
    43Options to purchase common stock
    
    
    5,010
    
    
    
    4,0605,117
    
    
    
    4,258
 Recent Accounting Pronouncements
 Fair Value Measurements
 7




---



##### Table of Contents



Business Combinations Business Combinations
 Accounting for Assets and
Liabilities Assumed in a Business Combination That Arise From Contingencies
 Non-controlling Interests in
Consolidated Financial Statements Consolidated Financial Statements Earnings per Share
 Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly Recognition and Presentation of
Other-Than-Temporary Impairments Interim Disclosures About Fair Value of Financial Instruments Disclosures about Fair Value of Financial Instruments Interim Financial Reporting
 Note 2  Acquisitions
 Acquisition of Superscape Group plc
  8




---



##### Table of Contents



Assets acquired:Cash
    
    $
    8,593Accounts receivable
    
    
    4,353Prepaid and other current assets
    
    
    1,507Property and equipment
    
    
    182Titles, content and technology
    
    
    9,190Carrier contracts and relationships
    
    
    7,400Trade name
    
    
    330In-process research and development
    
    
    1,110Goodwill
    
    
    13,432Total assets acquired
    
    
    46,097Liabilities assumed:Accounts payable
    
    
    (2,567
    )Accrued liabilities
    
    
    (585
    )Accrued compensation
    
    
    (367
    )Accrued restructuring
    
    
    (3,768
    )Total current liabilities
    
    
    (7,287
    )Total liabilities
    
    
    (7,287
    )Net acquired assets
    
    $
    38,810
 Recognition of Liabilities in Connection with a Purchase Business Combination.
   9




---



##### Table of Contents



ThreeMonthsEndedMarch 31,2008Total pro forma revenues
    
    $
    23,305Gross profit
    
    
    15,296Pro forma net loss
    
    
    (6,361
    )Pro forma net loss per share  basic and diluted
    
    $
    (0.22
    )
 Note 3  Short-Term Investments and Fair Value Measurements
 Short-Term Investments
  Classified on Balance SheetPurchased
    
    
    Realized
    
    
    Aggregate
    
    
    Cash and Cash
    
    
    Short-termCost
    
    
    Loss
    
    
    Fair Value
    
    
    Equivalents
    
    
    InvestmentsAs of March 31, 2009:Money market funds
    
    $
    118
    
    
    $
    
    
    
    $
    118
    
    
    $
    118
    
    
    $
    $
    118
    
    
    $
    
    
    
    $
    118
    
    
    $
    118
    
    
    $
    As of December 31, 2008:Money market funds
    
    $
    124
    
    
    $
    
    
    
    $
    124
    
    
    $
    124
    
    
    $
    $
    124
    
    
    $
    
    
    
    $
    124
    
    
    $
    124
    
    
    $
    
 Fair Value Measurements
   10




---



##### Table of Contents



AggregateFair Value
    
    
    Level 1Money market funds
    
    $
    118
    
    
    $
    118Total cash equivalents and marketable securities
    
    
    118Cash
    
    
    14,556Total cash, cash equivalents and marketable securities
    
    $
    14,674
 Note 4  Balance Sheet Components
 Accounts Receivable
 March 31,
    
    
    December 31,2009
    
    
    2008Accounts receivable
    
    $
    20,168
    
    
    $
    20,294Less: Allowance for doubtful accounts
    
    
    (487
    )
    
    
    (468
    )$
    19,681
    
    
    $
    19,826
  Property and Equipment
 March 31,
    
    
    December 31,2009
    
    
    2008Computer equipment
    
    $
    4,806
    
    
    $
    4,644Furniture and fixtures
    
    
    384
    
    
    
    386Software
    
    
    2,637
    
    
    
    2,628Leasehold improvements
    
    
    3,061
    
    
    
    3,05510,888
    
    
    
    10,713Less: Accumulated depreciation and amortization
    
    
    (6,425
    )
    
    
    (5,852
    )$
    4,463
    
    
    $
    4,861
  Other Long-Term Liabilities
 March 31,
    
    
    December 31,2009
    
    
    2008Accrued royalties
    
    $
    2,433
    
    
    $
    3,409FIN 48 obligations
    
    
    4,403
    
    
    
    4,399Deferred income tax liability
    
    
    2,450
    
    
    
    2,461Other
    
    
    1,458
    
    
    
    1,529$
    10,744
    
    
    
    11,798
 Note 5  Goodwill and Intangible Assets
  11




---



##### Table of Contents



March 31, 2009
    
    
    December 31, 2008Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    AmortizationExpense
    
    
    
    
    
    
    
    
    
    
    Expense(Including
    
    
    
    
    
    
    
    
    
    
    (IncludingEstimated
    
    
    Gross
    
    
    Impact of
    
    
    Net
    
    
    Gross
    
    
    Impact of
    
    
    NetUseful
    
    
    Carrying
    
    
    Foreign
    
    
    Carrying
    
    
    Carrying
    
    
    Foreign
    
    
    CarryingLife
    
    
    Value
    
    
    Exchange)
    
    
    Value
    
    
    Value
    
    
    Exchange)
    
    
    ValueIntangible assets amortized
to cost of revenues:Titles, content and technology
    
    2.5 yrs
    
    $
    13,326
    
    
    $
    (12,190
    )
    
    $
    1,136
    
    
    $
    13,370
    
    
    $
    (10,478
    )
    
    $
    2,892Catalogs
    
    1 yr
    
    
    1,105
    
    
    
    (1,105
    )
    
    
    
    
    
    
    1,126
    
    
    
    (1,126
    )
    
    
    ProvisionX Technology
    
    6 yrs
    
    
    182
    
    
    
    (125
    )
    
    
    57
    
    
    
    185
    
    
    
    (119
    )
    
    
    66Carrier contract and related relationships
    
    5 yrs
    
    
    18,403
    
    
    
    (4,623
    )
    
    
    13,780
    
    
    
    18,463
    
    
    
    (3,845
    )
    
    
    14,618Licensed content
    
    5 yrs
    
    
    2,731
    
    
    
    (1,239
    )
    
    
    1,492
    
    
    
    2,744
    
    
    
    (1,029
    )
    
    
    1,715Service provider license
    
    9 yrs
    
    
    431
    
    
    
    (62
    )
    
    
    369
    
    
    
    432
    
    
    
    (50
    )
    
    
    382Trademarks
    
    3 yrs
    
    
    539
    
    
    
    (341
    )
    
    
    198
    
    
    
    540
    
    
    
    (285
    )
    
    
    25536,717
    
    
    
    (19,685
    )
    
    
    17,032
    
    
    
    36,860
    
    
    
    (16,932
    )
    
    
    19,928Other intangible assets amortized
to operating expenses:Emux Technology
    
    6 yrs
    
    
    1,179
    
    
    
    (844
    )
    
    
    335
    
    
    
    1,201
    
    
    
    (809
    )
    
    
    392Noncompete agreement
    
    2 yrs
    
    
    516
    
    
    
    (516
    )
    
    
    
    
    
    
    525
    
    
    
    (525
    )
    
    
    1,695
    
    
    
    (1,360
    )
    
    
    335
    
    
    
    1,726
    
    
    
    (1,334
    )
    
    
    392Total intangibles assets
    
    
    
    
    
    $
    38,412
    
    
    $
    (21,045
    )
    
    $
    17,367
    
    
    $
    38,586
    
    
    $
    (18,266
    )
    
    $
    20,320
    Amortization
    
    
    AmortizationIncluded in
    
    
    Included in
    
    
    TotalCost of
    
    
    Operating
    
    
    AmortizationPeriod Ending December 31,
    
    Revenues
    
    
    Expenses
    
    
    Expense2009 (remaining nine months)
    
    $
    4,203
    
    
    $
    147
    
    
    $
    4,3502010
    
    
    4,208
    
    
    
    188
    
    
    
    4,3962011
    
    
    2,852
    
    
    
    
    
    
    
    2,8522012
    
    
    2,736
    
    
    
    
    
    
    
    2,7362013
    
    
    2,669
    
    
    
    
    
    
    
    2,6692014 and thereafter
    
    
    364
    
    
    
    
    
    
    
    364$
    17,032
    
    
    $
    335
    
    
    $
    17,367
 Goodwill
   12




---



##### Table of Contents



Effects of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effects ofForeign
    
    
    Impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    ImpairmentJanuary 1,
    
    
    Goodwill
    
    
    
    
    
    
    Currency
    
    
    of
    
    
    December 31,
    
    
    Goodwill
    
    
    
    
    
    
    Currency
    
    
    of
    
    
    March 31,2008
    
    
    Acquired
    
    
    Adjustments
    
    
    Exchange
    
    
    Goodwill
    
    
    2008
    
    
    Acquired
    
    
    Adjustments
    
    
    Exchange
    
    
    Goodwill
    
    
    2009Americas
    
    $
    11,426
    
    
    $
    13,445
    
    
    $
    
    
    
    $
    
    
    
    $
    (24,871
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    EMEA
    
    
    27,860
    
    
    
    
    
    
    
    
    
    
    
    (2,506
    )
    
    
    (25,354
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    APAC
    
    
    7,976
    
    
    
    
    
    
    
    15,510
    
    
    
    409
    
    
    
    (19,273
    )
    
    
    4,622
    
    
    
    
    
    
    
    
    
    
    
    (19
    )
    
    
    
    
    
    
    4,603Total
    
    $
    47,262
    
    
    $
    13,445
    
    
    $
    15,510
    
    
    $
    (2,097
    )
    
    $
    (69,498
    )
    
    $
    4,622
    
    
    $
    
    
    
    $
    
    
    
    $
    (19
    )
    
    $
    
    
    
    $
    4,603
  Note 6  Commitments and Contingencies
 Leases
   MinimumOperating
    
    
    
    
    
    
    NetLease
    
    
    Sub-lease
    
    
    LeasePeriod Ending December 31,
    
    Payments
    
    
    Income
    
    
    Payments2009 (remaining nine months)
    
    $
    2,786
    
    
    $
    162
    
    
    $
    2,6242010
    
    
    2,288
    
    
    
    
    
    
    
    2,2882011
    
    
    1,807
    
    
    
    
    
    
    
    1,8072012
    
    
    989
    
    
    
    
    
    
    
    9892013
    
    
    147
    
    
    
    
    
    
    
    147$
    8,017
    
    
    $
    162
    
    
    $
    7,855
 Minimum Guaranteed Royalties
  MinimumGuaranteedPeriod Ending December 31,
    
    Royalties2009 (remaining nine months)
    
    $
    7,8892010
    
    
    3,7802011
    
    
    3442012
    
    
    3642013
    
    
    2014 and thereafter
    
    
    50$
    12,427
 13




---



##### Table of Contents



Income Taxes
  Indemnification Agreements
   Contingencies
  Note 7  Debt
 MIG Notes
  14




---



##### Table of Contents



January 15, 2009
    
    $
    6,000April 1, 2009
    
    $
    3,000July 1, 2009
    
    $
    5,000March 31, 2010
    
    $
    1,500June 30, 2010
    
    $
    1,500September 30, 2010
    
    $
    1,500December 31, 2010
    
    $
    1,50020,000
    March 31, 2010
    
    $
    937June 30, 2010
    
    $
    937September 30, 2010
    
    $
    1,563December 31, 2010
    
    $
    1,5635,000
    Credit Facility
   15




---



##### Table of Contents



(a)
    
    Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). The Company
must maintain, measured on consolidated basis as of the end of each of the following
periods, EBITDA of at least the following:
 October 1, 2008 through December 31, 2008
    
    $
    (1,672
    )October 1, 2008 through March 31, 2009
    
    $
    (2,832
    )January 1, 2009 through June 30, 2009
    
    $
    (812
    )April 1, 2009 through September 30, 2009
    
    $
    1,572July 1, 2009 through December 31, 2009
    
    $
    4,263October 1, 2009 through March 31, 2010
    
    $
    5,092January 1, 2010 through June 30, 2010
    
    $
    5,257April 1, 2010 through September 30, 2010
    
    $
    5,298July 1, 2010 through December 31, 2010
    
    $
    6,073
  (b)
    
    Minimum Domestic Liquidity: The Company must maintain at the lender an amount of cash,
cash equivalents and short-term investments of not less than the greater of: (a) 20% of the
Companys total consolidated unrestricted cash, cash equivalents and short-term
investments, or (b) 15% of outstanding obligations under the Credit Facility.
    Note 8  Stockholders Equity
 Common Stock
  16




---



##### Table of Contents



Early Exercise of Options
  Warrants to Purchase Common Stock
   NumberExercise
    
    of SharesPrice
    
    OutstandingTerm
    
    per
    
    UnderIssue Date
    
    (Years)
    
    Share
    
    WarrantMay 2006
    
    
    7
    
    
    $
    9.03
    
    
    
    106
 Note 9  Stock Option and Other Benefit Plans
 2001 Stock Plan
   2007 Equity Incentive Plan
  17




---



##### Table of Contents



2007 Employee Stock Purchase Plan
    2008 Equity Inducement Plan
   18




---



##### Table of Contents



Stock Option Activity
  Options OutstandingWeighted
    
    WeightedNumber
    
    Average
    
    Average
    
    AggregateShares
    
    of
    
    Exercise
    
    Contractual
    
    IntrinsicAvailable
    
    Shares
    
    Price
    
    Term (Years)
    
    ValueBalances at December 31, 2008
    
    
    935
    
    
    
    5,130
    
    
    
    5.18Increase in authorized shares
    
    
    887Options granted
    
    
    (57
    )
    
    
    57
    
    
    
    0.64Options canceled
    
    
    323
    
    
    
    (323
    )
    
    
    6.52Options exercised
    
    
    
    
    
    
    (37
    )
    
    
    0.30Balances at March 31, 2009
    
    
    2,088
    
    
    
    4,827
    
    
    $
    5.07
    
    
    
    5.45
    
    
    $
    2Options vested and expected to vest at March 31, 2009
    
    
    
    
    
    
    4,256
    
    
    $
    5.26
    
    
    
    5.45
    
    
    $
    1Options exercisable at March 31, 2009
    
    
    
    
    
    
    2,076
    
    
    $
    6.05
    
    
    
    5.26
    
    
    $
    1
  Share-Based Payment
 Three Months EndedMarch 31,2009
    
    2008Dividend yield
    
    
    
    %
    
    
    
    %Risk-free interest rate
    
    
    1.52
    %
    
    
    2.46
    %Expected volatility
    
    
    50.4
    %
    
    
    44.2
    %Expected term (years)
    
    
    3.88
    
    
    
    4.08
    Three Months EndedMarch 31,2009
    
    
    2008Research and development
    
    $
    180
    
    
    $
    77Sales and marketing
    
    
    151
    
    
    
    1,301General and administrative
    
    
    433
    
    
    
    594Total stock-based compensation expense
    
    $
    764
    
    
    $
    1,972
 19




---



##### Table of Contents



Restricted Stock
  Note 10  Income Taxes
  Accounting for Uncertainty in Income Tax
   Note 11  Segment Reporting
 Disclosures about Segments of an
Enterprise and Related Information
   20




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008United States of America
    
    $
    10,023
    
    
    $
    9,508United Kingdom
    
    
    798
    
    
    
    1,613China
    
    
    2,544
    
    
    
    1,789Americas, excluding the USA
    
    
    2,154
    
    
    
    1,853EMEA, excluding the United Kingdom
    
    
    4,769
    
    
    
    5,079Other
    
    
    487
    
    
    
    750$
    20,775
    
    
    $
    20,592
  March 31,
    
    
    December 31,2009
    
    
    2008Americas
    
    $
    2,999
    
    
    $
    3,208EMEA
    
    
    709
    
    
    
    790Other
    
    
    755
    
    
    
    863$
    4,463
    
    
    $
    4,861
 Note 11  Restructuring
   Note 11  Subsequent Events
  Exchange Ratio(New Options-for-EligibleExercise Price
    
    
    
    Options)$1.25 - $1.99
    
    
    
    1-for-12.00 - 3.99
    
    
    
    1-for-24.00 - 5.94
    
    
    
    1-for-35.95 or greater
    
    
    
    1-for-4
  21




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 The information in this discussion and elsewhere in this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current
expectations that involve risks and uncertainties. Any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. For example, the
words may, will, believe, anticipate, plan, expect, intend, could, estimate,
continue and similar expressions or variations are intended to identify forward-looking
statements. In this report, forward-looking statements include, without limitation, the following:
  our expectations and beliefs regarding future conduct and growth of the business;
  our expectations regarding competition and our ability to compete effectively;
  our expectations regarding development of future products;
  our expectations regarding our expenses for 2009;
  our assumptions underlying our Critical Accounting Policies and Estimates, including
forecasts, comparable companies and other assumptions used to estimate the fair value of our
goodwill;
  our assumptions regarding the impact of Recent Accounting Pronouncements applicable to
us;
  our assessments and estimates that determine our effective tax rate and valuation
allowance;
  our belief that our cash and cash equivalents, borrowings under our revolving credit
facility, cash flows from operations and our ability to repatriate cash from foreign locations
will be sufficient to meet our working capital needs, contractual obligations, debt service
obligations, capital expenditure requirements and similar commitments;
  our expectation that we will generate cash from operations in the latter half of 2009;
  our expectation that we will be able to maintain compliance with the financial and other
covenants in our credit facility; and
  our assessments and beliefs regarding the future outcome of pending legal proceedings
and the liability, if any, that we may incur as a result of those proceedings.
 Our actual results and the timing of certain events may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such a discrepancy include,
but are not limited to, those discussed in Risk Factors elsewhere in this report. All
forward-looking statements in this document are based on information available to us as of the date
hereof, and we assume no obligation to update any such forward-looking statements to reflect future
events or circumstances.
  
    
    Overview that discusses at a high level our operating results and some of the trends that
affect our business;
    
    Critical Accounting Policies and Estimates that we believe are important to understanding
the assumptions and judgments underlying our financial statements;
 
    
    Recent Accounting Pronouncements;
 
    
    Results of Operations, including a more detailed discussion of our revenues and expenses;
and
 22




---



##### Table of Contents




    
    Liquidity and Capital Resources, which discusses key aspects of our statements of cash
flows, changes in our balance sheets and our financial commitments.
 Overview
  Financial Results and Trends
     23




---



##### Table of Contents



Significant Transactions
    Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  Results of Operations
 Comparison of the Three Months Ended March 31, 2009 and 2008
 Revenues
 Three Months EndedMarch 31,2009
    
    2008(in thousands)Revenues
    
    $
    20,775
    
    
    $
    20,592
  Cost of Revenues
 24




---



##### Table of Contents



Three Months EndedMarch 31,2009
    
    
    2008(in thousands)Cost of revenues:Royalties
    
    $
    5,813
    
    
    $
    5,488Amortization of intangible assets
    
    
    2,848
    
    
    
    1,708Total cost of revenues
    
    $
    8,661
    
    
    $
    7,196Revenues
    
    $
    20,775
    
    
    $
    20,592Gross margin
    
    
    58.3
    %
    
    
    65.1
    %
  Research Development Expenses
 Three Months EndedMarch 31,2009
    
    2008(in thousands)Research and development expenses
    
    $
    6,397
    
    
    $
    6,520Percentage of revenues
    
    
    30.8
    %
    
    
    31.7
    %
   Sales and Marketing Expenses
 Three Months EndedMarch 31,2009
    
    2008(in thousands)Sales and marketing expenses
    
    $
    4,112
    
    
    $
    5,782Percentage of revenues
    
    
    19.8
    %
    
    
    28.1
    %
 25




---



##### Table of Contents



General and Administrative Expenses
 Three Months EndedMarch 31,2009
    
    2008(in thousands)General and administrative expenses
    
    $
    4,485
    
    
    $
    5,395Percentage of revenues
    
    
    21.6
    %
    
    
    26.2
    %
  Other Operating Expenses
   Other Expenses
  Income Tax Provision
  26




---



##### Table of Contents



Liquidity and Capital Resources
 Three Months Ended March 31,2009
    
    2008(in thousands)Consolidated Statement of Cash Flows Data:Capital expenditures
    
    $
    305
    
    
    $
    2,265Depreciation and amortization
    
    
    3,492
    
    
    
    2,406Cash flows provided by/(used in) operating activities
    
    
    (2,544
    )
    
    
    1,031Cash flows provided by/(used in) investing activities
    
    
    (305
    )
    
    
    (29,609
    )Cash flows provided by financing activities
    
    
    (1,528
    )
    
    
    194
  Operating Activities
    Investing Activities
   Financing Activities
   27




---



##### Table of Contents



Sufficiency of Current Cash and Cash Equivalents
 
   
    
    Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA). We must
maintain, measured on a consolidated basis at the end of each of the following periods, EBITDA
of at least the following:
 October 1, 2008 through December 31, 2008
    
    $
    (1,672,000
    )October 1, 2008 through March 31, 2009
    
    $
    (2,832,000
    )January 1, 2009 through June 30, 2009
    
    $
    (812,000
    )April 1, 2009 through September 30, 2009
    
    $
    1,572,000July 1, 2009 through December 31, 2009
    
    $
    4,263,000October 1, 2009 through March 31, 2010
    
    $
    5,092,000January 1, 2010 through June 30, 2010
    
    $
    5,257,000April 1, 2010 through September 30, 2010
    
    $
    5,298,000July 1, 2010 through December 31, 2010
    
    $
    6,073,000
  28




---



##### Table of Contents




    
    Minimum Domestic Liquidity:We must maintain at the lender an amount of cash, cash
equivalents and short-term investments of not less than the greater of: (a) 20% of our total
consolidated unrestricted cash, cash equivalents and short-term investments, or (b) 15% of
outstanding obligations under the credit facility.
        Contractual Obligations
 29




---



##### Table of Contents



Payments Due by PeriodTotal
    
    1 Year*
    
    1-3 Years
    
    3-5 Years
    
    Thereafter(in thousands)Operating lease obligations, net of sublease income
    
    $
    7,855
    
    
    $
    2,624
    
    
    $
    5,084
    
    
    $
    147
    
    
    $
    Guaranteed royalties(1)
    
    
    12,427
    
    
    
    7,889
    
    
    
    4,488
    
    
    
    50
    
    
    
    MIG Earnout and Bonus Notes(2)
    
    
    19,949
    
    
    
    8,192
    
    
    
    11,757
    
    
    
    
    
    
    
    FIN 48 obligations, including interest and
penalties(3)
    
    
    4,403
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,403Line of credit
    
    
    4,461
    
    
    
    4,461
    
    
    
    
    
    
    
    
    
    
    
    
 
 *
    
    Represents the remaining nine months of 2009(1)
    
    We have entered into license and development arrangements with various
owners of brands and other intellectual property so that we can create
and publish games for mobile handsets based on that intellectual
property. Some of these agreements require us to pay guaranteed
royalties over the term of the contracts regardless of actual game
sales. Some of these minimum payments totaling $11.7 million have been
recorded as liabilities on our unaudited consolidated balance sheet
because payment is not contingent upon performance by the licensor.(2)
    
    We have issued $25.0 million of notes payable to former shareholders
of MIG of which we have paid an aggregate principal amount of $9.0
million as of April 30, 2009. One of the former officers of MIG must
continue to provide services through June 30, 2009 to be fully vested
in the special bonus, and as a result, we did not record $218,750 of
the special bonus that is subject to vesting.(3)
    
    As of March 31, 2009, unrecognized tax benefits and potential interest
and penalties are classified within Other long-term liabilities on
our consolidated balance sheets. As of March 31, 2009, the settlement
of our income tax liabilities cannot be determined, however, the
liabilities are not expected to become due within the next twelve
months. Off-Balance Sheet Arrangements
  Inflation
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate and Credit Risk
   30




---



##### Table of Contents



Foreign Currency Exchange Risk
     
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  31




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  We have a history of net losses, may incur substantial net losses in the future and may not achieve
profitability.
  We have a limited operating history in an emerging market, which may make it difficult to evaluate
our business.
  
 
 
 
 32




---



##### Table of Contents




 
 
 
 
 
 
 
 
  Our financial results could vary significantly from quarter to quarter and are difficult to
predict, particularly in light of the current economic environment, which in turn could cause
volatility in our stock price.
    33




---



##### Table of Contents




 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 The markets in which we operate are highly competitive, and many of our competitors have
significantly greater resources than we do.
   34




---



##### Table of Contents




 
 
 
 
 
 
 
 
   We may need to raise additional capital or borrow funds to grow our business, and we may not be
able to raise capital or borrow funds on terms acceptable to us or at all.
  35




---



##### Table of Contents



Our stock price has fluctuated and declined significantly since our IPO in March 2007, and may
continue to fluctuate, may not rise and may decline further, which could cause our stock to be
delisted from trading on the NASDAQ Global Market
  
 
 
 
 
 
 
 
 
 
   36




---



##### Table of Contents



We have outstanding debt obligations and may incur additional debt in the future, which could
adversely affect our financial condition and results of operations.
  
 
 
 
  A continued slowdown in sales of mobile devices, particularly the devices for our carrier-based
business which represents the vast majority of our revenues, could have a material adverse impact
on our revenues, financial position and results of operations.
  Our strategy to grow our business includes developing titles for next-generation platforms beyond
our wireless carrier channel, which currently comprises the vast majority of our revenues. If we do
not succeed in generating considerable revenues and profitability from the next-generation
handsets, our revenues, financial position and operating results may suffer.
  
    
    the open nature of the development and marketing platforms for certain of these
next-generation platforms increases substantially the number of our competitors, and
competitive products, and
    
    the pricing and revenue models for products on these platforms are rapidly evolving,
and may result in average selling prices substantially lower than the traditional carrier
channel;
    
    the competitive advantage of our porting capabilities may be reduced as these
next-generation platforms become ubiquitous;
    
    many of our key licenses do not grant us the rights to develop games for the iPhone;
    
    we have relatively little experience with direct-to-consumer distribution channels;
    
    these next-generation platforms are effectively new markets, for which we are less
able to forecast with accuracy revenue levels, required marketing and developments
expenses, and profitability; and
    
    competitors may have substantially greater resources available to invest in
development and publishing of products for next-generation platforms.
  37




---



##### Table of Contents



Changes in foreign exchange rates and limitations on the convertibility of foreign currencies could
adversely affect our business and operating results.
   Some provisions in our certificate of incorporation, bylaws and the terms of some of our licensing
and distribution agreements and our credit facility may deter third parties from seeking to acquire
us.
  
 
 
 
 
 
  38




---



##### Table of Contents



Failure to renew our existing brand and content licenses on favorable terms or at all and to obtain
additional licenses would impair our ability to introduce new mobile games or to continue to offer
our current games based on third-party content.
    We currently rely primarily on wireless carriers to market and distribute our games and thus to
generate our revenues. In particular, subscribers of Verizon Wireless represented 21.4% of our
revenues in 2008. The loss of or a change in any significant carrier relationship, including their
credit worthiness, could materially reduce our revenues and adversely impact our cash position.
  39




---



##### Table of Contents



End user tastes are continually changing and are often unpredictable; if we fail to develop and
publish new mobile games that achieve market acceptance, our sales would suffer.
  A shift of technology platform by wireless carriers and mobile handset manufacturers could lengthen
the development period for our games, increase our costs and cause our games to be of lower quality
or to be published later than anticipated.
  Inferior deck placement would likely adversely impact our revenues and thus our operating results
and financial condition.
   We have depended on no more than ten mobile games for a majority of our revenues in recent fiscal
periods. If these games do not continue to succeed or we do not release highly successful new
games, our revenues would decline.
  If we are unsuccessful in establishing and increasing awareness of our brand and recognition of our
mobile games or if we incur excessive expenses promoting and maintaining our brand or our games,
our potential revenues could be limited, our costs could increase and our operating results and
financial condition could be harmed.
  40




---



##### Table of Contents



We face added business, political, regulatory, operational, financial and economic risks as a
result of our international operations and distribution, any of which could increase our costs and
hinder our growth.
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 41




---



##### Table of Contents



Wireless carriers generally control the price charged for our mobile games and the billing and
collection for sales of our mobile games and could make decisions detrimental to us.
    If we fail to deliver our games at the same time as new mobile handset models are commercially
introduced, our sales may suffer.
  Future mobile handsets may significantly reduce or eliminate wireless carriers control over
delivery of our games and force us to rely further on alternative sales channels, which, if not
successful, could require us to increase our sales and marketing expenses significantly.
 42




---



##### Table of Contents



If a substantial number of the end users that purchase our games by subscription change mobile
handsets or if wireless carriers switch to subscription plans that require active monthly renewal
by subscribers or change or cease offering subscription plans, our sales could suffer.
  If we fail to maintain and enhance our capabilities for porting games to a broad array of mobile
handsets, our attractiveness to wireless carriers and branded content owners will be impaired, and
our sales and financial results could suffer.
   Our industry is subject to risks generally associated with the entertainment industry, any of which
could significantly harm our operating results.
  43




---



##### Table of Contents



If one or more of our games were found to contain hidden, objectionable content, our reputation and
operating results could suffer.
  Our business and growth may suffer if we are unable to hire and retain key personnel.
  Acquisitions could result in operating difficulties, dilution and other harmful consequences.
  
 
 
 
 
 44




---



##### Table of Contents




    If we fail to maintain an effective system of internal controls, we might not be able to report our
financial results accurately or prevent fraud; in that case, our stockholders could lose confidence
in our financial reporting, which could negatively impact the price of our stock.
  If we do not adequately protect our intellectual property rights, it may be possible for third
parties to obtain and improperly use our intellectual property and our business and operating
results may be harmed.
   45




---



##### Table of Contents



Our business is subject to increasing regulation of content, consumer privacy, distribution and
online hosting and delivery in the key territories in which we conduct business. If we do not
successfully respond to these regulations, our business may suffer.
  Third parties may sue us, including for intellectual property infringement, which, if successful,
may disrupt our business and could require us to pay significant damage awards.
  Maintaining and improving our financial controls and the requirements of being a public company may
strain our resources, divert managements attention and affect our ability to attract and retain
qualified members for our board of directors.
    46




---



##### Table of Contents



System or network failures could reduce our sales, increase costs or result in a loss of revenues
or end users of our games.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 Unregistered Sales of Equity Securities
  Use of Proceeds from Public Offering of Common Stock
    Repurchases of Common Stock
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 47




---



##### Table of Contents



ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  48




---



##### Table of Contents



SIGNATURES
  GLU MOBILE INC.Date: May 11, 2009
    By:
    /s/ L. Gregory BallardL. Gregory BallardPresident and Chief Executive  Officer
(Principal Executive Officer)Date: May 11, 2009
    By:
    /s/ Eric R. LudwigEric R. LudwigSenior Vice President and Chief Financial Officer
(Principal Financial Officer) 49




---



##### Table of Contents



EXHIBIT INDEX
 Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    Filing
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Date
    
    Herewith10.01#
    
    
    Glu Mobile Inc. 2009 Executive Bonus Plan, dated as of February 25, 2009
    
    8-K
    
    001-33368
    
    
    10.01
    
    
    03/03/0910.02#
    
    
    Description of 2009 Executive Officer Target Bonuses under the Glu Mobile Inc. 2009 Executive Bonus Plan (contained in Item
5.02).
    
    8-K
    
    001-33368
    
    
    
    
    
    03/03/0910.03#
    
    
    Non-Employee Director Compensation Program, dated as of January 28, 2009.
    
    10-K
    
    001-33368
    
    
    10.17
    
    
    03/13/0910.04#
    
    
    2007 Employee Stock Purchase Plan, as amended on January 22, 2009
    
    10-K
    
    001-33368
    
    
    10.05
    
    
    03/13/0931.01
    
    
    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a).
    
    
    
    
    
    
    
    
    
    
    
    X31.02
    
    
    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a) /15d-14(a).
    
    
    
    
    
    
    
    
    
    
    
    X32.01
    
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
    
    
    
    
    
    
    
    
    
    
    
    X32.02
    
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 and Securities Exchange Act Rule 13a-14(b).*
    
    
    
    
    
    
    
    
    
    
    
    X
 
 #
    
    Indicates a management contract or compensatory plan or arrangement.*
    
    This certification is not deemed filed for purposes of Section 18 of the Securities
Exchange Act, or otherwise subject to the liability of that section. Such certification will
not be deemed to be incorporated by reference into any filing under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that Glu Mobile Inc. specifically
incorporates it by reference. 50