##### 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 September 30, 2008
 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
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    91-2143667
(I.R.S. Employer
Identification No.)
 2207 Bridgepointe Parkway, Suite 250
San Mateo, California 94404
 (650) 532-2400
 þ o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)Smaller reporting company o o þ




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##### 



GLU MOBILE INC.
 FORM 10-Q
 Quarterly Period Ended September 30, 2008
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2008 and September 30, 2007
    
    
    4Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 2008 and September 30, 2007
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    23ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    34ITEM 4T. CONTROLS AND PROCEDURES
    
    
    36PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    37ITEM 1A. RISK FACTORS
    
    
    37ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    55ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    55ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    55ITEM 5. OTHER INFORMATION
    
    
    56ITEM 6. EXHIBITS
    
    
    57SIGNATURES
    
    
    58EX-10.01EX-10.02EX-31.01EX-31.02EX-32.01EX-32.02
  2




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##### 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)
 September 30, 2008
    
    
    December 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    19,895
    
    
    $
    57,816Short-term investments
    
    
    842
    
    
    
    1,994Accounts receivable, net of allowance of $486
and $368 at September 30, 2008 and December 31,
2007, respectively
    
    
    21,248
    
    
    
    18,369Prepaid royalties
    
    
    15,157
    
    
    
    10,643Prepaid expenses and other
    
    
    2,840
    
    
    
    2,589Total current assets
    
    
    59,982
    
    
    
    91,411Property and equipment, net
    
    
    5,882
    
    
    
    3,817Prepaid royalties
    
    
    6,649
    
    
    
    2,825Other long-term assets
    
    
    1,090
    
    
    
    1,593Intangible assets, net
    
    
    23,814
    
    
    
    14,597Goodwill
    
    
    12,459
    
    
    
    47,262Total assets
    
    $
    109,876
    
    
    $
    161,505LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    6,222
    
    
    $
    6,427Accrued liabilities
    
    
    766
    
    
    
    217Accrued compensation
    
    
    3,592
    
    
    
    2,322Accrued royalties
    
    
    16,995
    
    
    
    12,759Deferred revenues
    
    
    669
    
    
    
    640Accrued restructuring charges
    
    
    1,024
    
    
    
    Total current liabilities
    
    
    29,268
    
    
    
    22,365Other long-term liabilities
    
    
    14,871
    
    
    
    9,679Total liabilities
    
    
    44,139
    
    
    
    32,044Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $0.0001 par value; 5,000
shares authorized at September 30, 2008 and
December 31, 2007; no shares issued and
outstanding at September 30, 2008 and December
31, 2007
    
    
    
    
    
    
    Common
stock, $0.0001 par value: 250,000 shares
authorized at September 30, 2008 and December
31, 2007; 29,613 and 29,023 shares issued and
outstanding at September 30, 2008 and December
31, 2007
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    187,235
    
    
    
    179,924Deferred stock-based compensation
    
    
    (30
    )
    
    
    (113
    )Accumulated other comprehensive income
    
    
    431
    
    
    
    2,080Accumulated deficit
    
    
    (121,902
    )
    
    
    (52,433
    )Total stockholders equity
    
    
    65,737
    
    
    
    129,461Total liabilities and stockholders equity
    
    $
    109,876
    
    
    $
    161,505
  3




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##### Table of Contents



GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
(in thousands, except per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Revenues
    
    $
    23,894
    
    
    $
    16,651
    
    
    $
    68,190
    
    
    $
    48,727Cost of revenues:Royalties
    
    
    5,753
    
    
    
    4,587
    
    
    
    16,642
    
    
    
    13,267Impairment of prepaid royalties and guarantees
    
    
    1,921
    
    
    
    
    
    
    
    2,155
    
    
    
    Amortization of intangible assets
    
    
    3,247
    
    
    
    483
    
    
    
    8,089
    
    
    
    1,589Total cost of revenues
    
    
    10,921
    
    
    
    5,070
    
    
    
    26,886
    
    
    
    14,856Gross profit
    
    
    12,973
    
    
    
    11,581
    
    
    
    41,304
    
    
    
    33,871Operating expenses:Research and development
    
    
    9,223
    
    
    
    5,863
    
    
    
    24,604
    
    
    
    16,153Sales and marketing
    
    
    6,004
    
    
    
    3,326
    
    
    
    17,828
    
    
    
    9,532General and administrative
    
    
    5,085
    
    
    
    4,149
    
    
    
    16,576
    
    
    
    12,422Amortization of intangible assets
    
    
    67
    
    
    
    67
    
    
    
    204
    
    
    
    200Acquired in-process research and development
    
    
    
    
    
    
    
    
    
    
    1,110
    
    
    
    Impairment of goodwill
    
    
    46,618
    
    
    
    
    
    
    
    46,618
    
    
    
    Restructuring charge
    
    
    126
    
    
    
    
    
    
    
    287
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,040
    )Total operating expenses
    
    
    67,123
    
    
    
    13,405
    
    
    
    107,227
    
    
    
    37,267Loss from operations
    
    
    (54,150
    )
    
    
    (1,824
    )
    
    
    (65,923
    )
    
    
    (3,396
    )Interest and other income/(expense), net:Interest income
    
    
    127
    
    
    
    956
    
    
    
    844
    
    
    
    2,081Interest expense
    
    
    (30
    )
    
    
    (14
    )
    
    
    (50
    )
    
    
    (871
    )Other income/(expense), net
    
    
    (1,991
    )
    
    
    357
    
    
    
    (2,172
    )
    
    
    584Interest and other income/(expense), net
    
    
    (1,894
    )
    
    
    1,299
    
    
    
    (1,378
    )
    
    
    1,794Loss before income taxes and minority interest
    
    
    (56,044
    )
    
    
    (525
    )
    
    
    (67,301
    )
    
    
    (1,602
    )Income tax provision
    
    
    (822
    )
    
    
    (228
    )
    
    
    (2,165
    )
    
    
    (813
    )Minority interest in consolidated subsidiaries
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    Net loss
    
    
    (56,866
    )
    
    
    (753
    )
    
    
    (69,469
    )
    
    
    (2,415
    )Accretion to preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17
    )Deemed dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,130
    )Net loss attributable to common stockholders
    
    $
    (56,866
    )
    
    $
    (753
    )
    
    $
    (69,469
    )
    
    $
    (5,562
    )Net loss per share attributable to common stockholders 
basic and diluted:Net loss
    
    $
    (1.93
    )
    
    $
    (0.03
    )
    
    $
    (2.37
    )
    
    $
    (0.11
    )Accretion to preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deemed dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.15
    )Net loss per share attributable to common stockholders 
basic and diluted
    
    $
    (1.93
    )
    
    $
    (0.03
    )
    
    $
    (2.37
    )
    
    $
    (0.26
    )Weighted average common shares outstanding  basic and diluted
    
    
    29,470
    
    
    
    28,788
    
    
    
    29,311
    
    
    
    21,398Stock-based compensation expense included in:Research and development
    
    $
    261
    
    
    $
    310
    
    
    $
    511
    
    
    $
    665Sales and marketing
    
    
    1,298
    
    
    
    224
    
    
    
    3,903
    
    
    
    498General and administrative
    
    
    569
    
    
    
    626
    
    
    
    1,716
    
    
    
    1,613
  4




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##### Table of Contents



GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
(in thousands)
 Nine MonthsEnded September 30,2008
    
    
    2007Cash flows from operating activities:Net loss
    
    $
    (69,469
    )
    
    $
    (2,415
    )Adjustments to reconcile net loss to net cash provided by/(used in) operating activities:Depreciation and accretion
    
    
    2,107
    
    
    
    1,518Amortization of intangible assets
    
    
    8,293
    
    
    
    1,787Stock-based compensation expense
    
    
    6,130
    
    
    
    2,776Change in carrying value of preferred stock warrant liability
    
    
    
    
    
    
    10Amortization of value of warrants issued in connection with loan
    
    
    
    
    
    
    477Amortization of loan agreement costs
    
    
    47
    
    
    
    91Non-cash foreign currency translation (gain)/loss
    
    
    917
    
    
    
    (574
    )Acquired in-process research and development
    
    
    1,110
    
    
    
    Impairment of goodwill
    
    
    46,618
    
    
    
    Impairment of prepaid royalties and guarantees
    
    
    2,155
    
    
    
    Impairment of auction-rate securities
    
    
    1,152
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (1,040
    )Changes in allowance for doubtful accounts
    
    
    118
    
    
    
    46Changes in operating assets and liabilities, net of effect of acquisitions:(Increase)/decrease in accounts receivable
    
    
    1,001
    
    
    
    (1,584
    )Increase in prepaid royalties
    
    
    (5,696
    )
    
    
    (776
    )(Increase)/decrease in prepaid expenses and other assets
    
    
    268
    
    
    
    (1,525
    )Increase/(decrease) in accounts payable
    
    
    (2,615
    )
    
    
    2,424Increase/(decrease) in other accrued liabilities
    
    
    1,434
    
    
    
    (800
    )Increase/(decrease) in accrued compensation
    
    
    1,011
    
    
    
    (215
    )Increase/(decrease) in accrued royalties
    
    
    2,496
    
    
    
    (245
    )Increase/(decrease) in deferred revenues
    
    
    73
    
    
    
    (9
    )Decrease in accrued restructuring charges
    
    
    (2,630
    )
    
    
    (36
    )Increase in other long-term liabilities
    
    
    2,263
    
    
    
    393Net cash provided by/(used in) operating activities
    
    
    (3,217
    )
    
    
    303Cash flows from investing activities:Purchase of short-term investments
    
    
    
    
    
    
    (73,600
    )Sale of short-term investments
    
    
    
    
    
    
    79,550Purchase of property and equipment
    
    
    (3,691
    )
    
    
    (2,142
    )Proceeds from sale of assets, net of selling costs
    
    
    
    
    
    
    1,040Acquisition of MIG, net of cash acquired
    
    
    (693
    )
    
    
    Acquisition of Superscape, net of cash acquired
    
    
    (30,008
    )
    
    
    Net cash provided by/(used in) investing activities
    
    
    (34,392
    )
    
    
    4,848Cash flows from financing activities:Proceeds from IPO shares, net of issuance costs
    
    
    
    
    
    
    74,758Proceeds from exercise of stock options
    
    
    231
    
    
    
    151Proceeds from exercise of stock warrants
    
    
    101
    
    
    
    Debt payments
    
    
    
    
    
    
    (12,060
    )Net cash provided by financing activities
    
    
    332
    
    
    
    62,849Effect of exchange rate changes on cash
    
    
    (644
    )
    
    
    165Net increase/(decrease) in cash and cash equivalents
    
    
    (37,921
    )
    
    
    68,165Cash and cash equivalents at beginning of period
    
    
    57,816
    
    
    
    3,823Cash and cash equivalents at end of period
    
    $
    19,895
    
    
    $
    71,988
  5




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##### 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
    Short-Term Investments
   6




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##### Table of Contents



Concentration of Credit Risk
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007Verizon Wireless
    
    
    21.0
    %
    
    
    23.6
    %
    
    
    21.1
    %
    
    
    23.3
    %
   Nine Months EndedSeptember 30,2008
    
    2007Monopoly Here & Now
    
    
    *
    
    
    
    10.1
    %
 
 *
    
    Revenues from the title were less than 10% during the period.  Prepaid or Guaranteed Licensor Royalties
  Application of FASB Interpretation No. 45 to Minimum Revenue
Guarantees Granted to a Business or Its Owners.
 7




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##### Table of Contents



Comprehensive Loss
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss, as reported
    
    $
    (56,866
    )
    
    $
    (753
    )
    
    $
    (69,469
    )
    
    $
    (2,415
    )Other comprehensive loss:Foreign currency translation adjustment, net of tax
    
    
    (2,507
    )
    
    
    504
    
    
    
    (1,649
    )
    
    
    1,025Unrealized loss on investments, net of tax
    
    
    
    
    
    
    (259
    )
    
    
    
    
    
    
    (259
    )Comprehensive loss
    
    $
    (59,373
    )
    
    $
    (508
    )
    
    $
    (71,118
    )
    
    $
    (1,649
    )
 Net Loss Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net loss attributable to common stockholders
    
    $
    (56,866
    )
    
    $
    (753
    )
    
    $
    (69,469
    )
    
    $
    (5,562
    )Basic and diluted shares:Weighted average common shares outstanding
    
    
    29,472
    
    
    
    28,863
    
    
    
    29,337
    
    
    
    21,487Weighted average unvested common shares subject to repurchase
    
    
    (2
    )
    
    
    (75
    )
    
    
    (26
    )
    
    
    (89
    )Weighted average shares used to compute basic and diluted net loss per
share
    
    
    29,470
    
    
    
    28,788
    
    
    
    29,311
    
    
    
    21,398Net loss per share attributable to common stockholders  basic and diluted
    
    $
    (1.93
    )
    
    $
    (0.03
    )
    
    $
    (2.37
    )
    
    $
    (0.26
    )
 8




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##### Table of Contents



Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,936Warrants to purchase common stock
    
    
    106
    
    
    
    204
    
    
    
    122
    
    
    
    221Unvested common shares subject to repurchase
    
    
    2
    
    
    
    75
    
    
    
    26
    
    
    
    89Options to purchase common stock
    
    
    4,618
    
    
    
    3,570
    
    
    
    4,465
    
    
    
    3,3704,726
    
    
    
    3,849
    
    
    
    4,613
    
    
    
    8,616
 Recent Accounting Pronouncements
 Fair Value Measurements
 Level 1
 Level 2
 Level 3
  The Fair Value Option for
Financial Assets and Financial Liabilities
 Business Combinations Business Combinations
 Non-controlling Interests in Consolidated
Financial Statements Consolidated
Financial Statements
 9




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##### Table of Contents



Note 2  Acquisitions
 Acquisition of Superscape Group plc
      Assets acquired:Cash
    
    $
    8,593Accounts receivable
    
    
    4,346Prepaid and other current assets
    
    
    1,507Property and equipment
    
    
    182Intangible assets (see Note 5):Titles, content and technology
    
    
    7,190Carrier contracts and relationships
    
    
    7,400Patents and core technology
    
    
    2,000Trade name
    
    
    330In-process research and development
    
    
    1,110Goodwill (see Note 5)
    
    
    12,785Total assets acquired
    
    
    45,443Liabilities assumed:Accounts payable
    
    
    (2,570
    )Accrued liabilities
    
    
    (367
    )Restructuring liabilities
    
    
    (3,564
    )Total liabilities acquired
    
    
    (6,501
    )Net acquired assets
    
    $
    38,942
 Recognition of Liabilities in Connection with a Purchase Business Combination.
  10




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##### Table of Contents



Goodwill and Other Intangible Assets
 Acquisition of Beijing Zhangzhong MIG Information Technology Co. Ltd.
   
    
    $14,000 of additional consideration due in cash, with approximately $12,100 due in the first
half of 2009 and $1,900 due at the end of the fourth quarter of 2009;
    
    $6,000 of additional consideration, which the Company may elect to pay in cash or stock, at
its discretion, $5,200 of which is due in the first half of 2009 and $800 of which is due December
31, 2009; provided that the Company may not issue more than an
aggregate of approximately 5,795
shares without stockholder approval (which, for example, based on the
average closing price of the
Companys common stock for the ten trading days ending
November 13, 2008, would represent
approximately $3,178), with any remaining balance for which the Company does not seek stockholder
approval to be paid in cash; and
    
    $5,000 of bonuses to the two officers of MIG due in stock to be issued from the 2007 Equity
Incentive Plan, half of which is to be issued in the first half of 2009 and half to be issued on
December 31, 2009; provided that, based on the closing price of the Companys common stock on
November 13, 2008, the Company will be required to seek stockholder approval to increase the number
of shares reserved for issuance under its 2007 Equity Incentive Plan to issue these shares under
that plan.
  11




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##### Table of Contents



Accounting for
Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business
Combination
  Assets acquired:Cash
    
    $
    1,899Accounts receivable
    
    
    848Prepaid and other current assets
    
    
    20Property and equipment
    
    
    71Intangible assets:Content and technology
    
    
    490Existing titles
    
    
    2,200Carrier contracts and relationships
    
    
    8,510Service providers license
    
    
    400Trade names
    
    
    110In-process research and development
    
    
    59Goodwill
    
    
    7,880Total assets acquired
    
    
    22,487Liabilities assumed:Accounts payable
    
    
    (21
    )Accrued liabilities
    
    
    (650
    )Accrued compensation
    
    
    (106
    )Total current liabilities
    
    
    (777
    )Long-term deferred tax liabilities
    
    
    (2,652
    )Other long-term liabilities
    
    
    (3,830
    )Total liabilities
    
    
    (7,259
    )Net acquired assets
    
    $
    15,228
     12




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##### Table of Contents



Nine Months EndedThree Months Ended



    September 30,September 30, 2007


    2008
    
    2007Total pro forma revenues
    $
    21,931



    $
    70,903
    
    
    $
    62,635Gross profit
    
    15,002




    
    37,037
    
    
    
    42,433Pro forma net loss

    
    (2,566


)


    
    (69,828
    )
    
    
    (7,502
    )Pro forma net loss per share  basic and diluted
    

    (0.09
)




    
    (2.37
    )
    
    
    (0.35
    )
  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 September 30, 2008:Auction-rate securities
    
    $
    2,800
    
    
    $
    (1,958
    )
    
    $
    842
    
    
    $
    
    
    
    $
    842Money market funds
    
    
    209
    
    
    
    
    
    
    
    209
    
    
    
    209
    
    
    
    $
    3,009
    
    
    $
    (1,958
    )
    
    $
    1,051
    
    
    $
    209
    
    
    $
    842As of December 31, 2007:Auction-rate securities
    
    $
    2,800
    
    
    $
    (806
    )
    
    $
    1,994
    
    
    $
    
    
    
    $
    1,994Money market funds
    
    
    50,968
    
    
    
    
    
    
    
    50,968
    
    
    
    50,968
    
    
    
    $
    53,768
    
    
    $
    (806
    )
    
    $
    52,962
    
    
    $
    50,968
    
    
    $
    1,994
     13




---



##### Table of Contents



Fair Value Measurements
   AggregateFair Value
    
    
    Level 1
    
    
    Level 2Auction-rate securities
    
    $
    842
    
    
    $
    
    
    
    $
    842Money market funds
    
    
    209
    
    
    
    209
    
    
    
    Total cash equivalents and marketable securities
    
    
    1,051
    
    
    $
    209
    
    
    $
    842Cash
    
    
    19,686Total cash, cash equivalents and marketable securities
    
    $
    20,737
 Note 4  Balance Sheet Components
 Property and Equipment
 September 30,
    
    
    December 31,2008
    
    
    2007Computer equipment
    
    $
    4,696
    
    
    $
    3,200Furniture and fixtures
    
    
    439
    
    
    
    1,368Software
    
    
    2,482
    
    
    
    2,196Leasehold improvements
    
    
    3,837
    
    
    
    1,69411,454
    
    
    
    8,458Less: Accumulated depreciation and amortization
    
    
    (5,572
    )
    
    
    (4,641
    )$
    5,882
    
    
    $
    3,817
  Accounts Receivable
 September 30,
    
    
    December 31,2008
    
    
    2007Accounts receivable
    
    $
    21,734
    
    
    $
    18,737Less: Allowance for doubtful accounts
    
    
    (486
    )
    
    
    (368
    )$
    21,248
    
    
    $
    18,369
  14




---



##### Table of Contents



Note 5  Goodwill and Intangible Assets
  September 30, 2008
    
    
    December 31, 2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedAmortization
    
    
    
    
    
    
    
    
    
    
    AmortizationGross
    
    
    Expense
    
    
    
    
    
    
    Gross
    
    
    ExpenseCarrying
    
    
    (Including
    
    
    
    
    
    
    Carrying
    
    
    (IncludingEstimated
    
    
    Value (Including
    
    
    Impact of
    
    
    Net
    
    
    Value (Including
    
    
    Impact of
    
    
    NetUseful
    
    
    Impact of Foreign
    
    
    Foreign
    
    
    Carrying
    
    
    Impact of Foreign
    
    
    Foreign
    
    
    CarryingLife
    
    
    Exchange
    
    
    Exchange)
    
    
    Value
    
    
    Exchange
    
    
    Exchange)
    
    
    ValueIntangible assets amortized to cost of revenues:Titles, content and technology
    
    2.5 yrs
    
    $
    13,956
    
    
    $
    (8,951
    )
    
    $
    5,005
    
    
    $
    5,018
    
    
    $
    (4,172
    )
    
    $
    846Catalogs
    
    1 yr
    
    
    1,413
    
    
    
    (1,413
    )
    
    
    
    
    
    
    1,553
    
    
    
    (1,553
    )
    
    
    ProvisionX Technology
    
    6 yrs
    
    
    233
    
    
    
    (139
    )
    
    
    94
    
    
    
    256
    
    
    
    (118
    )
    
    
    138Carrier contract and related relationships
    
    5 yrs
    
    
    18,748
    
    
    
    (3,238
    )
    
    
    15,510
    
    
    
    10,922
    
    
    
    (1,117
    )
    
    
    9,805Licensed content
    
    5 yrs
    
    
    2,780
    
    
    
    (832
    )
    
    
    1,948
    
    
    
    2,651
    
    
    
    (183
    )
    
    
    2,468Service provider license
    
    9 yrs
    
    
    431
    
    
    
    (38
    )
    
    
    393
    
    
    
    404
    
    
    
    (2
    )
    
    
    402Trademarks
    
    3 yrs
    
    
    550
    
    
    
    (240
    )
    
    
    310
    
    
    
    218
    
    
    
    (96
    )
    
    
    12238,111
    
    
    
    (14,851
    )
    
    
    23,260
    
    
    
    21,022
    
    
    
    (7,241
    )
    
    
    13,781Other intangible assets amortized to operating
expenses:Emux Technology
    
    6 yrs
    
    
    1,507
    
    
    
    (953
    )
    
    
    554
    
    
    
    1,656
    
    
    
    (840
    )
    
    
    816Noncompete agreement
    
    2 yrs
    
    
    659
    
    
    
    (659
    )
    
    
    
    
    
    
    725
    
    
    
    (725
    )
    
    
    2,166
    
    
    
    (1,612
    )
    
    
    554
    
    
    
    2,381
    
    
    
    (1,565
    )
    
    
    816Total intangibles assets
    
    
    
    
    
    $
    40,277
    
    
    $
    (16,463
    )
    
    $
    23,814
    
    
    $
    23,403
    
    
    $
    (8,806
    )
    
    $
    14,597
    Amortization
    
    
    AmortizationIncluded in
    
    
    Included in
    
    
    TotalCost of
    
    
    Operating
    
    
    AmortizationFiscal Years:
    
    Revenues
    
    
    Expenses
    
    
    Expense2008 (remaining three months)
    
    $
    3,228
    
    
    $
    63
    
    
    $
    3,2912009
    
    
    7,136
    
    
    
    251
    
    
    
    7,3872010
    
    
    4,258
    
    
    
    240
    
    
    
    4,4982011
    
    
    2,864
    
    
    
    
    
    
    
    2,8642012
    
    
    2,738
    
    
    
    
    
    
    
    2,7382013 and thereafter
    
    
    3,036
    
    
    
    
    
    
    
    3,036$
    23,260
    
    
    $
    554
    
    
    $
    23,814
 Goodwill
  15




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##### Table of Contents



Effects of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Effects ofForeign
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    ImpairmentJanuary 1,
    
    
    Goodwill
    
    
    
    
    
    
    Currency
    
    
    December 31,
    
    
    Goodwill
    
    
    
    
    
    
    Currency
    
    
    of
    
    
    September 30,2007
    
    
    Acquired
    
    
    Adjustments
    
    
    Exchange
    
    
    2007
    
    
    Acquired
    
    
    Adjustments
    
    
    Exchange
    
    
    Goodwill
    
    
    2008Americas
    
    $
    11,414
    
    
    $
    
    
    
    $
    12
    
    
    $
    
    
    
    $
    11,426
    
    
    $
    12,938
    
    
    $
    
    
    
    $
    
    
    
    $
    (21,239
    )
    
    $
    3,125EMEA
    
    
    27,313
    
    
    
    
    
    
    
    13
    
    
    
    534
    
    
    
    27,860
    
    
    
    
    
    
    
    
    
    
    
    (2,481
    )
    
    
    (25,379
    )
    
    
    APAC
    
    
    
    
    
    
    7,880
    
    
    
    
    
    
    
    96
    
    
    
    7,976
    
    
    
    
    
    
    
    1,306
    
    
    
    52
    
    
    
    
    
    
    
    9,334Total
    
    $
    38,727
    
    
    $
    7,880
    
    
    $
    25
    
    
    $
    630
    
    
    $
    47,262
    
    
    $
    12,938
    
    
    $
    1,306
    
    
    $
    (2,429
    )
    
    $
    (46,618
    )
    
    $
    12,459
      Note 6  Commitments and Contingencies
 Leases
  16




---



##### Table of Contents



MinimumOperating
    
    
    
    
    
    
    NetLease
    
    
    Sub-lease
    
    
    LeaseFiscal Years:
    
    Payments
    
    
    Income
    
    
    Payments2008 (remaining three months)
    
    $
    1,049
    
    
    $
    121
    
    
    $
    9282009
    
    
    3,783
    
    
    
    363
    
    
    
    3,4202010
    
    
    2,519
    
    
    
    
    
    
    
    2,5192011
    
    
    1,968
    
    
    
    
    
    
    
    1,9682012
    
    
    1,054
    
    
    
    
    
    
    
    1,0542013 and thereafter
    
    
    180
    
    
    
    
    
    
    
    180$
    10,553
    
    
    $
    484
    
    
    $
    10,069
 Capital Lease
  Minimum Guaranteed Royalties
  MinimumGuaranteedFiscal Year:
    
    Royalties2008 (remaining three months)
    
    $
    5,2642009
    
    
    8,1382010
    
    
    2,9372011
    
    
    4942012
    
    
    4142013 and thereafter
    
    
    $
    17,247
  Acquisition Related Commitments
  17




---



##### Table of Contents



Contingencies
  Note 7  Debt
 Line of Credit Facility
  Note 8  Stockholders Equity
 Common Stock
   Early Exercise of Options
  18




---



##### Table of Contents



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
 2008 Equity Inducement Plan
   Stock Option Activity
  Shares
    
    
    
    
    
    
    Weighted
    
    
    WeightedAvailable
    
    
    Number of
    
    
    Average
    
    
    Average
    
    
    Aggregatefor
    
    
    Options
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicGrant
    
    
    Outstanding
    
    
    Price
    
    
    Term (Years)
    
    
    ValueBalances, December 31, 2007
    
    
    817
    
    
    
    4,036
    
    
    $
    6.75Additional Authorized
    
    
    1,471
    
    
    
    
    
    
    
    Granted
    
    
    (1,573
    )
    
    
    1,573
    
    
    
    4.50Exercised
    
    
    
    
    
    
    (287
    )
    
    
    0.81Forfeited, cancelled or expired
    
    
    887
    
    
    
    (859
    )
    
    
    6.98Balances, September 30, 2008
    
    
    1,602
    
    
    
    4,463
    
    
    $
    6.30
    
    
    
    6.10
    
    
    $
    369Options vested and expected to vest at September 30, 2008
    
    
    
    
    
    
    4,012
    
    
    $
    6.30
    
    
    
    6.10
    
    
    $
    369Options exercisable at September 30, 2008
    
    
    
    
    
    
    1,617
    
    
    $
    6.01
    
    
    
    5.85
    
    
    $
    360
  19




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##### Table of Contents



Three Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2008
    
    2007
    
    2008
    
    2007Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    2.87
    %
    
    
    4.56
    %
    
    
    2.67
    %
    
    
    4.70
    %Expected term (years)
    
    
    4.08
    
    
    
    6.08
    
    
    
    4.08
    
    
    
    6.08Expected volatility
    
    
    41.9
    %
    
    
    52.9
    %
    
    
    43.9
    %
    
    
    57.84
    %
     Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Research and development
    
    $
    261
    
    
    $
    310
    
    
    $
    511
    
    
    $
    665Sales and marketing
    
    
    1,298
    
    
    
    224
    
    
    
    3,903
    
    
    
    498General and administrative
    
    
    569
    
    
    
    626
    
    
    
    1,716
    
    
    
    1,613Total stock-based compensation expense
    
    $
    2,128
    
    
    $
    1,160
    
    
    $
    6,130
    
    
    $
    2,776
   Restricted Stock
  20




---



##### Table of Contents



Note 10  Income Taxes
  Accounting for Uncertainty in Income Tax
   Note 11  Segment Reporting
 Disclosures about Segments of an
Enterprise and Related Information
   Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007United States of America (USA)
    
    $
    11,070
    
    
    $
    9,161
    
    
    $
    31,743
    
    
    $
    26,350United Kingdom
    
    
    1,126
    
    
    
    1,682
    
    
    
    4,103
    
    
    
    5,130China
    
    
    2,326
    
    
    
    91
    
    
    
    7,369
    
    
    
    117Americas, excluding USA
    
    
    2,891
    
    
    
    1,464
    
    
    
    6,977
    
    
    
    3,545EMEA, excluding the United Kingdom
    
    
    5,662
    
    
    
    3,464
    
    
    
    15,618
    
    
    
    10,989Other
    
    
    819
    
    
    
    789
    
    
    
    2,380
    
    
    
    2,596$
    23,894
    
    
    $
    16,651
    
    
    $
    68,190
    
    
    $
    48,727
  September 30,
    
    
    December 31,2008
    
    
    2007Americas
    
    $
    3,955
    
    
    $
    1,806EMEA
    
    
    978
    
    
    
    1,146APAC
    
    
    949
    
    
    
    865$
    5,882
    
    
    $
    3,817
 21




---



##### Table of Contents



Note 12  Subsequent Events
   22




---



##### Table of Contents






ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Forward-Looking Statements and Factors That May Affect Future Results


Our Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
should be read in conjunction with the unaudited condensed consolidated financial statements and
the related notes thereto included elsewhere in this report and the audited consolidated financial
statements and notes thereto and managements discussion and analysis of financial condition and
results of operations for the year ended December 31, 2007 included in the Annual Report on Form
10-K filed with the Securities and Exchange Commission, or SEC, on March 31, 2008. This report
contains forward-looking statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended. These statements are often identified by the use of words such as may,
will, expect, believe, anticipate, intend, could, estimate, or continue, and
similar expressions or variations. In this report, forward-looking statements include, without
limitation, the following:



    
    our expectations and beliefs regarding future conduct and growth of the business;
    
    our beliefs regarding trends for our businesses;
    
    the assumptions underlying our Critical Accounting Policies and Estimates, including stock
volatility and other assumptions used to estimate the fair value of share-based compensation;
    
    our expectations regarding the costs and other effects of our acquisitions;
    
    our assessments and estimates that determine our effective tax rate and valuation allowance;
    
    our expected cash, cash equivalents and short-term investments balance at December 31, 2008;
    
    our belief that the international financial institutions that hold our investments are
financially sound; and
    
    our belief that our cash, cash equivalents and investments, including cash flows from
operations, will be sufficient to meet our working capital needs, capital expenditure
requirements and similar commitments for at least the next 12 months.


Such forward-looking statements are subject to risks, uncertainties and other factors that could
cause actual results and the timing of certain events to differ materially from future results
expressed or implied by such forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those identified below, and those discussed in
the section titled Risk Factors, set forth in Part II, Item 1A of this Form 10-Q. We disclaim any
obligation to update any forward-looking statements to reflect events or circumstances after the
date of this report or to conform these forward-looking statements to actual results.





    
    overview that discusses at a high level our operating results and some of the trends that
affect our business;
    
    significant changes since our most recent Annual Report on Form 10-K in the Critical
Accounting Policies and Estimates that we believe are important to understanding the
assumptions and judgments underlying our financial statements;
    
    the Recent Accounting Pronouncements that apply to us;
    
    our Results of Operations, including a more detailed discussion of our revenue and expenses;
and
    
    Liquidity and Capital Resources, which discusses key aspects of our statements of cash flows,
changes in our balance sheets and our financial commitments.


23



---



##### Table of Contents



Overview
 About Glu Mobile
 Call of Duty 4 Deer Hunter 2, Diner Dash 2, Sonic the Hedgehog, Transformers, World Series
of Poker Zuma. Brain Genius Space
Monkey, Stranded Super K.O. Boxing
    Financial Results and Trends
  Monopoly Here &
Now
 24




---



##### Table of Contents



Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  25




---



##### Table of Contents



Results of Operations
 Comparison of the Three Months Ended September 30, 2008 and 2007
 Revenues
 Three Months EndedSeptember 30,2008
    
    2007(in thousands)Revenues
    
    $
    23,894
    
    
    $
    16,651
  Cost of Revenues
 Three Months EndedSeptember 30,2008
    
    
    2007(In thousands)Cost of revenues:
    
    
    Royalties
    
    $
    5,753
    
    
    $
    4,587Impairment of prepaid royalties and guarantees
    
    
    1,921
    
    
    
    Amortization of intangible assets
    
    
    3,247
    
    
    
    483Total cost of revenues
    
    $
    10,921
    
    
    $
    5,070Revenues
    
    $
    23,894
    
    
    $
    16,651Gross margin
    
    
    54.3
    %
    
    
    69.6
    %
  Gross Margin
  Research Development Expenses
 Three Months EndedSeptember 30,2008
    
    2007(In thousands)Research and development expenses
    
    $
    9,223
    
    
    $
    5,863Percentage of revenues
    
    
    38.6
    %
    
    
    35.2
    %
 26




---



##### Table of Contents



Sales and Marketing Expenses
 Three Months EndedSeptember 30,2008
    
    2007(In thousands)Sales and marketing expenses
    
    $
    6,004
    
    
    $
    3,326Percentage of revenues
    
    
    25.1
    %
    
    
    20.0
    %
  General and Administrative Expenses
 Three Months EndedSeptember 30,2008
    
    2007(In thousands)General and administrative expenses
    
    $
    5,085
    
    
    $
    4,149Percentage of revenues
    
    
    21.3
    %
    
    
    24.9
    %
  27




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##### Table of Contents



Other Operating Expenses
    Other Expenses
  Income Tax Provision
  Comparison of the Nine Months Ended September 30, 2008 and 2007
 Revenues
 Nine Months EndedSeptember 30,2008
    
    2007(in thousands)Revenues
    
    $
    68,190
    
    
    $
    48,727
  28




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##### Table of Contents



Cost Revenues
 Nine Months EndedSeptember 30,2008
    
    
    2007(In thousands)Cost of revenues:Royalties
    
    $
    16,642
    
    
    $
    13,267Impairment of prepaid royalties and guarantees
    
    
    2,155
    
    
    
    Amortization of intangible assets
    
    
    8,089
    
    
    
    1,589Total cost of revenues
    
    $
    26,886
    
    
    $
    14,856Revenues
    
    $
    68,190
    
    
    $
    48,727Gross margin
    
    
    60.6
    %
    
    
    69.5
    %
  Gross Margin
  Research and Development Expenses
 Nine Months EndedSeptember 30,2008
    
    2007(In thousands)Research and development expenses
    
    $
    24,604
    
    
    $
    16,153Percentage of revenues
    
    
    36.1
    %
    
    
    33.1
    %
   Sales and Marketing Expenses
 Nine Months EndedSeptember 30,2008
    
    2007(In thousands)Sales and marketing expenses
    
    $
    17,828
    
    
    $
    9,532Percentage of revenues
    
    
    26.1
    %
    
    
    19.6
    %
 29




---



##### Table of Contents



General and Administrative Expenses
 Nine Months EndedSeptember 30,2008
    
    2007(In thousands)General and administrative expenses
    
    $
    16,576
    
    
    $
    12,422Percentage of revenues
    
    
    24.3
    %
    
    
    25.5
    %
  Other Operating Expenses
    30




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##### Table of Contents



Other Expenses
  Income Tax Provision
  Liquidity and Capital Resources
 Nine Months EndedSeptember 30,2008
    
    2007(in thousands)Consolidated Statement of Cash Flows Data:Capital expenditures
    
    $
    3,691
    
    
    $
    2,142Depreciation and amortization
    
    
    10,472
    
    
    
    3,305Cash flows provided by/(used in) operating activities
    
    
    (3,217
    )
    
    
    303Cash flows provided by/(used in) investing activities
    
    
    (34,392
    )
    
    
    4,848Cash flows provided by financing activities
    
    
    332
    
    
    
    62,849
  Operating Activities
  31




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Investing Activities
   Financing Activities
   Sufficiency of Current Cash, Cash Equivalents and Short-Term Investments
   
    
    $14.0 million of additional consideration is due in cash, with approximately $12.1 million due in the first
half of 2009 and $1.9 million due at December 31, 2009;
    
    $6.0 million of additional consideration, which we may elect to pay in cash or stock, at our discretion, $5.2
million of which is due in the first half of 2009 and $800,000 of which is due December 31, 2009; provided that
we may not issue more than an aggregate of approximately 5.8 million shares without stockholder approval
(which, for example, based on the average closing price of our common stock for the ten trading days ending
November 13, 2008, would represent approximately $3.2 million), with any remaining balance for which we do
not seek stockholder approval to issue the shares to be paid in cash; and
    
    $5.0 million of bonuses to officers of MIG is due in stock to be issued from our 2007
Equity Incentive Plan, half of which is to be issued in the first half of 2009 and half to be
issued on December 31, 2009; provided that, based on the closing price of our common stock on
November 13, 2008, we will be required to seek stockholder approval to increase the
number of shares reserved for issuance under our 2007 Equity Incentive Plan to issue these
shares under that plan.
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Contractual Obligations
  Payments Due by PeriodLess thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    Thereafter(In thousands)Operating lease obligations, net of sublease income
    
    $
    10,069
    
    
    $
    928
    
    
    $
    5,939
    
    
    $
    3,202
    
    
    $
    Guaranteed royalties(1)
    
    
    17,247
    
    
    
    5,263
    
    
    
    11,075
    
    
    
    909
    
    
    
    FIN 48 obligations, including interest and penalties(2)
    
    
    4,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,352Total
    
    $
    31,668
    
    
    $
    6,191
    
    
    $
    17,014
    
    
    $
    4,111
    
    
    $
    4,352
 
 (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 $13.7 million have been recorded as liabilities on our consolidated balance sheet
because payment is not contingent upon performance by the licensor.(2)
    
    As of September 30, 2008, unrecognized tax benefits and potential interest and penalties are
classified within Other long-term liabilities on our consolidated balance sheet. As of
September 30, 2008, the settlement of our income tax liabilities cannot be determined,
however, the liabilities are not expected to become due within the next twelve months. 33




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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate and Credit Risk
    34




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Foreign Currency Exchange Risk
     Inflation
  
 35




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ITEM 4T. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  Risks Related to Our Business
 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.
  
    
    maintain our current, and develop new, wireless carrier relationships, particularly in
international markets;
    
    maintain and expand our current, and develop new, relationships with third-party branded
content owners;
    
    retain or improve our current revenue-sharing arrangements with carriers and third-party
branded content owners;
    
    maintain and enhance our own brands;
    
    continue to develop new high-quality mobile games that achieve significant market
acceptance, including for new high-end handsets;
    
    continue to port existing mobile games to new mobile handsets;
    
    continue to develop and upgrade our technology;
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
    
    continue to enhance our information processing systems;
    
    increase the number of end users of our games;
    
    maintain and grow our non-carrier, or off-deck, distribution, including through our
website and third-party direct-to-consumer distributors;
    
    expand our development capacity in countries with lower costs;
    
    execute our business and marketing strategies successfully;
    
    respond to competitive developments including new platforms and pricing and distribution
models; and
    
    attract, integrate, retain and motivate qualified personnel.
  Our financial results could vary significantly from quarter to quarter and are difficult to
predict.
    
    
    the number of new mobile games released by us and our competitors;
    
    the timing of release of new games by us and our competitors, particularly those that may
represent a significant portion of revenues in a period;
    
    the popularity of new games and games released in prior periods;
    
    changes in prominence of deck placement for our leading games and those of our
competitors;
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
    
    the strength in demand for new mobile devices;
    
    the expiration of existing content licenses for particular games;
    
    the timing of charges related to impairments of goodwill, intangible assets, prepaid
royalties and guarantees;
    
    changes in pricing policies by us, our competitors or our carriers and other
distributors;
    
    changes in pricing policies by our carriers related to downloading content, such as our
games and other content;
    
    changes in the mix of original and licensed games, which have varying gross margins;
    
    the timing of successful mobile handset launches;
    
    the timeliness of reporting from carriers;
    
    the seasonality of our industry;
    
    fluctuations in the size and rate of growth of overall consumer demand for mobile
handsets, mobile games and related content;
    
    strategic decisions by us or our competitors, such as acquisitions, divestitures,
spin-offs, joint ventures, strategic investments or changes in business strategy;
    
    our success in entering new geographic markets;
    
    foreign currency exchange fluctuations;
    
    accounting rules governing recognition of revenue;
    
    the timing of compensation expense associated with equity compensation grants; and
    
    decisions by us to incur additional expenses, such as increases in marketing or research
and development.
  The markets in which we operate are highly competitive, and many of our competitors have
significantly greater resources than we do.
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
    
    significantly greater revenues and financial resources;
    
    stronger brand and consumer recognition regionally or worldwide;
    
    the capacity to leverage their marketing expenditures across a broader portfolio of
mobile and non-mobile products;
    
    more substantial intellectual property of their own from which they can develop games
without having to pay royalties;
    
    pre-existing relationships with brand owners or carriers that afford them access to
intellectual property while blocking the access of competitors to that same intellectual
property;
    
    greater resources to make acquisitions;
    
    lower labor and development costs; and
    
    broader global distribution and presence.
  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.
 Battleship, Clue, Game of Life Monopoly
 World
Series of Poker Deer Hunter 2 Kasparov Chess.
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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 23.0% of our
revenues in 2007. The loss of or a change in any significant carrier relationships could cause us
to lose access to their subscribers and thus materially reduce our revenues.
    
    
    the carriers preference for our competitors mobile games rather than ours;
    
    the carriers decision not to include or highlight our games on the deck of its mobile
handsets;
    
    the carriers decision to discontinue the sale of our mobile games or all mobile games
like ours;
    
    the carriers decision to offer games to its subscribers without charge or at reduced
prices;
    
    the carriers decision to require market development funds from publishers like us;
    
    the carriers decision to restrict or alter subscription or other terms for downloading
our games;
    
    the carriers decision to facilitate the sale of games to consumers who have purchased
new high-end smartphones, such as the RIM Blackberry and Microsoft Danger devices, directly
to consumers or to do so through third-parties;
    
    a failure of the carriers merchandising, provisioning or billing systems;
    
    the carriers decision to offer its own competing mobile games;
    
    the carriers decision to transition to different platforms and revenue models; and
    
    consolidation among carriers.
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Acquisitions could result in operating difficulties, dilution and other harmful consequences.
  
    
    diversion of management time and a shift of focus from operating the businesses to issues
related to integration and administration, particularly given the frequency, size and
varying scope of our recent acquisitions of Superscape and MIG;
    
    declining employee morale and retention issues resulting from changes in compensation,
management, reporting relationships, future prospects or the direction of the business;
    
    the need to integrate each acquired companys accounting, management, information, human
resource and other administrative systems to permit effective management, and the lack of
control if such integration is delayed or not implemented;
    
    the need to implement controls, procedures and policies appropriate for a larger public
company that the acquired companies lacked prior to acquisition;
    
    in the case of foreign acquisitions, the need to integrate operations across different
cultures and languages and to address the particular economic, currency, political and
regulatory risks associated with specific countries;
    
    liability for activities of the acquired companies before the acquisition, including
violations of laws, rules and regulations, commercial disputes, tax liabilities and other
known and unknown liabilities.
    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.
  Inferior deck placement would likely adversely impact our revenues and thus our operating results
and financial condition.
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We have depended on no more than ten mobile games for a majority of our revenues in recent fiscal
periods.
   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.
  Our business and growth may suffer if we are unable to hire and retain key personnel, who are in
high demand.
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Growth may place significant demands on our management and our infrastructure.
  
    
    develop and improve our operational, financial and management controls;
    
    enhance our reporting systems and procedures;
    
    recruit, train and retain highly skilled personnel;
    
    maintain our quality standards; and
    
    maintain branded content owner, wireless carrier and end-user satisfaction.
  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.
  
    
    challenges caused by distance, language and cultural differences;
    
    multiple and conflicting laws and regulations, including complications due to unexpected
changes in these laws and regulations;
    
    the burdens of complying with a wide variety of foreign laws and regulations;
    
    higher costs associated with doing business internationally;
    
    difficulties in staffing and managing international operations;
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
    
    greater fluctuations in sales to end users and through carriers in developing countries,
including longer payment cycles and greater difficulty collecting accounts receivable;
    
    protectionist laws and business practices that favor local businesses in some countries;
    
    potential adverse foreign tax consequences;
    
    foreign exchange controls that might prevent us from repatriating income earned in
countries outside the United States;
    
    price controls;
    
    the servicing of regions by many different carriers;
    
    imposition of public sector controls;
    
    political, economic and social instability;
    
    restrictions on the export or import of technology;
    
    trade and tariff restrictions;
    
    variations in tariffs, quotas, taxes and other market barriers; and
    
    difficulties in enforcing intellectual property rights in countries other than the United
States.
   If we fail to deliver our games at the same time as new mobile handset models are commercially
introduced, our sales may suffer.
  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.
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We may be unable to develop and introduce in a timely way new mobile games, and our games may have
defects, which could harm our brand.
  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 could suffer.
   If our independent, third-party developers cease development of new games for us and we are unable
to find comparable replacements, we may have to reduce the number of games that we intend to
introduce, delay the introduction of some games or increase our internal development staff, which
would be a time-consuming and potentially costly process, and, as a result, our competitive
position may be adversely impacted.
  
    
    key developers who worked for us in the past may choose to work for or be acquired by our
competitors;
    
    developers currently under contract may try to renegotiate our agreements with them on
terms less favorable to us; and
    
    our developers may be unable or unwilling to allocate sufficient resources to complete
our games in a timely or satisfactory manner or at all.
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If one or more of our games were found to contain hidden, objectionable content, our reputation and
operating results could suffer.


Super K.O. Boxing


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.




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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 competitive position may be
adversely affected.
   Third parties may sue us for intellectual property infringement, which, if successful, may disrupt
our business and could require us to pay significant damage awards.
  Indemnity provisions in various agreements potentially expose us to substantial liability for
intellectual property infringement, damages caused by malicious software and other losses.
  As a result of a substantial portion of our revenues currently being derived from Verizon Wireless
and three other wireless carriers, if Verizon Wireless or any other significant carrier were unable
to fulfill its payment obligations, our financial condition and results of operations would suffer.
  We invest in securities that are subject to market risk and fluctuations in interest rates and the
recent issues in the financial markets could adversely affect the value of our assets.
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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.
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Our stock price has been highly volatile and has experienced a significant decline, and may
continue to be volatile and decline further.
  
    
    variations in our actual and anticipated operating results;
    
    changes in our earnings estimates by analysts;
    
    the volatility in the stock market generally and inherent in stocks within the emerging
sector within which we conduct business;
    
    and the volume of trading in our common stock, including sales of substantial amounts of
common stock issued upon the exercise of outstanding options and warrants.
   Changes in foreign exchange rates and limitations on the convertibility of foreign currencies could
adversely affect our business and operating results.
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Our business in countries with a history of corruption and transactions with foreign governments,
including with government owned or controlled wireless carriers, increase the risks associated with
our international activities.
  Changes to financial accounting standards and new exchange rules could make it more expensive to
issue stock options to employees, which would increase compensation costs and might cause us to
change our business practices.
 Share-Based Payment
 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.
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Risks Relating to Our Industry
 Wireless communications technologies are changing rapidly, and we may not be successful in working
with these new technologies.
   The complexity of and incompatibilities among mobile handsets may require us to use additional
resources for the development of our games.
  If wireless subscribers do not continue to use their mobile handsets to access games and other
applications, our business growth and future revenues may be adversely affected.
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Our industry is subject to risks generally associated with the entertainment industry, any of which
could significantly harm our operating results.
  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.
  System or network failures could reduce our sales, increase costs or result in a loss of end users
of our games.
 World Series of Poker FOX
Sports Mobile
 The market for mobile games is seasonal, and our results may vary significantly from period to
period.
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Our business depends on the growth and maintenance of wireless communications infrastructure.
  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.
  Actual or perceived security vulnerabilities in mobile handsets or wireless networks could
adversely affect our revenues.
  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, our sales could suffer.
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Changes in government regulation of the media and wireless communications industries may adversely
affect our business.
   
 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
    Repurchase of Common Stock
 Period
    
    (a) Total Number of Shares Purchased
    
    (b) Average Price Paid per ShareJuly 1, 2008 to July 31, 2008
    
    
    28,548
    
    
    $
    0.75August 1, 2008 to August 31, 2008
    
    
    
    
    
    
    September 1, 2008 to September
30, 2008
    
    
    
    
    
    
    Total
    
    
    28,548
    
    
    $
    0.75
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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ITEM 5. OTHER INFORMATION
   
    
    Require that any stockholder of the Company who submits a nomination for election to the
Board of Directors or a stockholder proposal for consideration at a meeting of stockholders
to deliver a notice to the Company (a Stockholder Notice) , which shall include, among
other things (i) in the case of a stockholder nomination for election as a director,
specified information regarding ownership of Company stock and related derivative
securities, including ownership information of an Associated Person (as defined below) of
such nominee or stockholder; and (ii) in all instances (including where the stockholder is
submitting a nominee for election), specified name and address information and specified
information regarding ownership of Company stock and related derivative securities for such
stockholder or beneficial owner and any Associated Person (collectively, the
Securityholdings);
    
    Require that any such notice specify (a) whether the stockholder or beneficial owner
intends to solicit proxies from holders of, in the case of a proposal, at least the
percentage of the Companys voting shares required under applicable law to carry the
proposal or, in the case of a nomination or nominations, a sufficient number of holders of
the Companys voting shares to elect such nominee or nominees (an affirmative statement of
such intent being a Solicitation Notice), and (b) to the extent known by such stockholder
or beneficial owner or any Associated Person, (i) information regarding any other
stockholder or holder of derivative interests supporting the proposed nominee(s) for
election or the proposal of other business (such stockholder other holder, an Aligned
Person), and (ii) whether such stockholder, beneficial owner, Aligned Person or any
associated person intends to acquire, directly or indirectly, capital stock representing a
majority the voting power of the capital stock of the Company or the power to elect or
nominate a majority of the Board of Directors;
    
    Require that the stockholder or any beneficial owner giving the Stockholder Notice must
give notice to the Companys secretary within two business days of any change in the
Securityholdings of such stockholder or beneficial owner and any Associated Person occurring
between the date of delivery of the Stockholder Notice and the closing of the polls at the
meeting (each a Securityholdings Update) including specified information regarding the
change; and
    
    Provide that any failure by such a stockholder or beneficial owner to provide any
Securityholdings Update shall preclude the stockholder or beneficial owner and any
Associated Person from voting those Securityholdings at the meeting (and authorize the
chairman, secretary or inspector of elections of the meeting to disallow and disregard any
such vote purported to be cast).
    
    
    reinforce that changes in the Delaware General Corporation Law and changes in bylaws can
only broaden, and not reduce, existing indemnification rights;
    
    reduce exceptions to the Bylaw provision regarding advancement of funds;
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
    
    provide specified default indemnification terms where the Company does not have an
indemnification agreement with a covered person; and
    
    specify that the Bylaws provide a contract right to indemnification that continues
following the time that the covered person ceased to be a director or officer.
   
 Appointment of Section 16 Officers and Summary of Compensation Terms
   ITEM 6. EXHIBITS
  57




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SIGNATURES
  GLU MOBILE INC.Date: November 14, 2008
    By:
    /s/ L. Gregory BallardL. Gregory BallardPresident and Chief Executive Officer
(Principal Executive Officer)Date: November 14, 2008
    By:
    /s/ Eric R. LudwigEric R. LudwigSenior Vice President and Chief Financial Officer
(Principal Financial Officer) 58




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EXHIBIT INDEX
 Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    Filing
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Date
    
    Herewith3.01
    
    Amended and Restated
Bylaws of Glu Mobile
Inc., dated October 22,
2008.
    
    8-K
    
    001-33368
    
    
    99.01
    
    
    10/28/0810.01#
    
    Offer Letter, between
Glu Mobile Inc. and
Thomas M. Perrault,
dated as of July 17,
2008.
    
    
    
    
    
    
    
    
    
    
    
    X10.02#
    
    Summary of Compensation Terms for
Kevin S. Chou, 
dated as of October 31, 2008.
    
    
    
    
    
    
    
    
    
    
    
    X31.01
    
    Certification of
Principal Executive
Officer Pursuant to
Securities Exchange Act
Rule 13a-14(a).
    
    
    
    
    
    
    
    
    
    
    
    X31.02
    
    Certification of
Principal Financial
Officer Pursuant to
Securities Exchange Act
Rule 13a-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 specifically
incorporates it by reference.