##### 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 June 30, 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
(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
 o o
  Large accelerated filer o
Accelerated filer þ
Non-accelerated filer o(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 June 30, 2009
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008
    
    
    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
    
    
    35ITEM 4. 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
    
    
    56ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    56ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    57ITEM 5. OTHER INFORMATION
    
    
    57ITEM 6. EXHIBITS
    
    
    57SIGNATURES
    
    
    58Exhibit 31.01Exhibit 31.02Exhibit 32.01Exhibit 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)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash and cash equivalents
    
    $
    12,811
    
    
    $
    19,166Accounts receivable, net
    
    
    16,910
    
    
    
    19,826Prepaid royalties
    
    
    13,013
    
    
    
    15,298Prepaid expenses and other
    
    
    2,557
    
    
    
    2,704Total current assets
    
    
    45,291
    
    
    
    56,994Property and equipment, net
    
    
    4,014
    
    
    
    4,861Prepaid royalties
    
    
    4,483
    
    
    
    4,349Other long-term assets
    
    
    1,074
    
    
    
    930Intangible assets, net
    
    
    16,014
    
    
    
    20,320Goodwill
    
    
    4,603
    
    
    
    4,622Total assets
    
    $
    75,479
    
    
    $
    92,076LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,806
    
    
    $
    6,569Accrued liabilities
    
    
    816
    
    
    
    686Accrued compensation
    
    
    2,732
    
    
    
    2,184Accrued royalties
    
    
    14,483
    
    
    
    18,193Accrued restructuring
    
    
    962
    
    
    
    1,000Deferred revenues
    
    
    562
    
    
    
    727Current portion of long-term debt
    
    
    14,975
    
    
    
    14,000Total current liabilities
    
    
    38,336
    
    
    
    43,359Other long-term liabilities
    
    
    10,498
    
    
    
    11,798Long-term debt, less current portion
    
    
    6,125
    
    
    
    10,125Total liabilities
    
    
    54,959
    
    
    
    65,282Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $0.0001 par value; 5,000 shares authorized at June 30, 2009 and December 31, 2008;
no shares issued and outstanding at June 30, 2009 and December 31, 2008
    
    
    
    
    
    
    Common stock, $0.0001 par value: 250,000 shares authorized at June 30, 2009 and December 31, 2008;
29,633 and 29,584 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    186,296
    
    
    
    184,757Deferred stock-based compensation
    
    
    
    
    
    
    (11
    )Accumulated other comprehensive income
    
    
    641
    
    
    
    1,170Accumulated deficit
    
    
    (166,420
    )
    
    
    (159,125
    )Total stockholders equity
    
    
    20,520
    
    
    
    26,794Total liabilities and stockholders equity
    
    $
    75,479
    
    
    $
    92,076
  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
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Revenues
    
    $
    19,872
    
    
    $
    23,704
    
    
    $
    40,647
    
    
    $
    44,296Cost of revenues:Royalties
    
    
    5,667
    
    
    
    5,633
    
    
    
    11,480
    
    
    
    11,123Impairment of prepaid royalties and guarantees
    
    
    589
    
    
    
    
    
    
    
    589
    
    
    
    Amortization of intangible assets
    
    
    1,412
    
    
    
    3,135
    
    
    
    4,260
    
    
    
    4,842Total cost of revenues
    
    
    7,668
    
    
    
    8,768
    
    
    
    16,329
    
    
    
    15,965Gross profit
    
    
    12,204
    
    
    
    14,936
    
    
    
    24,318
    
    
    
    28,331Operating expenses:Research and development
    
    
    6,648
    
    
    
    8,861
    
    
    
    13,045
    
    
    
    15,381Sales and marketing
    
    
    3,546
    
    
    
    6,042
    
    
    
    7,658
    
    
    
    11,824General and administrative
    
    
    3,905
    
    
    
    6,096
    
    
    
    8,390
    
    
    
    11,491Amortization of intangible assets
    
    
    51
    
    
    
    69
    
    
    
    102
    
    
    
    137Restructuring charge
    
    
    513
    
    
    
    86
    
    
    
    513
    
    
    
    161Acquired in-process research and development
    
    
    
    
    
    
    71
    
    
    
    
    
    
    
    1,110Total operating expenses
    
    
    14,663
    
    
    
    21,225
    
    
    
    29,708
    
    
    
    40,104Loss from operations
    
    
    (2,459
    )
    
    
    (6,289
    )
    
    
    (5,390
    )
    
    
    (11,773
    )Interest and other income/(expense), net:Interest income
    
    
    61
    
    
    
    189
    
    
    
    79
    
    
    
    717Interest expense
    
    
    (365
    )
    
    
    (11
    )
    
    
    (729
    )
    
    
    (21
    )Other income/(expense), net
    
    
    761
    
    
    
    (277
    )
    
    
    300
    
    
    
    (183
    )Interest and other income/(expense), net
    
    
    457
    
    
    
    (99
    )
    
    
    (350
    )
    
    
    513Loss before income taxes
    
    
    (2,002
    )
    
    
    (6,388
    )
    
    
    (5,740
    )
    
    
    (11,260
    )Income tax benefit/(provision)
    
    
    464
    
    
    
    (213
    )
    
    
    (1,555
    )
    
    
    (1,343
    )Net loss
    
    $
    (1,538
    )
    
    $
    (6,601
    )
    
    $
    (7,295
    )
    
    $
    (12,603
    )Net loss per share   basic and diluted:
    
    $
    (0.05
    )
    
    $
    (0.23
    )
    
    $
    (0.25
    )
    
    $
    (0.43
    )Weighted average common shares outstanding  basic and diluted
    
    
    29,621
    
    
    
    29,317
    
    
    
    29,608
    
    
    
    29,231Stock-based compensation expense included in:Research and development
    
    $
    200
    
    
    $
    174
    
    
    $
    380
    
    
    $
    250Sales and marketing
    
    
    159
    
    
    
    1,303
    
    
    
    310
    
    
    
    2,605General and administrative
    
    
    405
    
    
    
    554
    
    
    
    838
    
    
    
    1,148
  4




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##### Table of Contents



GLU MOBILE INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
 Six Months Ended June 30,2009
    
    
    2008Cash flows from operating activities:Net loss
    
    $
    (7,295
    )
    
    $
    (12,603
    )Adjustments to reconcile net loss to net cash provided by/(used in) operating
activities:Depreciation and accretion
    
    
    1,178
    
    
    
    1,361Amortization of intangible assets
    
    
    4,360
    
    
    
    5,050Stock-based compensation
    
    
    1,528
    
    
    
    4,003MIG earnout expense
    
    
    875
    
    
    
    Interest expense on debt
    
    
    606
    
    
    
    Amortization of loan agreement costs
    
    
    75
    
    
    
    20Non-cash foreign currency remeasurement gain
    
    
    (317
    )
    
    
    (384
    )Acquired in-process research and development
    
    
    
    
    
    
    1,110Impairment of prepaid royalties and guarantees
    
    
    
    
    
    
    234Write down of auction-rate securities
    
    
    
    
    
    
    470Changes in allowance for doubtful accounts
    
    
    17
    
    
    
    86Changes in operating assets and liabilities, net of effect of acquisitions:Accounts receivable
    
    
    2,904
    
    
    
    1,342Prepaid royalties
    
    
    2,390
    
    
    
    (1,926
    )Prepaid expenses and other assets
    
    
    84
    
    
    
    (463
    )Accounts payable
    
    
    (2,846
    )
    
    
    (543
    )Other accrued liabilities
    
    
    47
    
    
    
    834Accrued compensation
    
    
    492
    
    
    
    1,171Accrued royalties
    
    
    (3,886
    )
    
    
    57Deferred revenues
    
    
    (213
    )
    
    
    183Accrued restructuring charge
    
    
    (75
    )
    
    
    (1,568
    )Other long-term liabilities
    
    
    (1,358
    )
    
    
    1,665Net cash provided by/(used in) operating activities
    
    
    (1,434
    )
    
    
    99Cash flows from investing activities:Purchase of property and equipment
    
    
    (375
    )
    
    
    (3,357
    )Acquisition of Superscape, net of cash acquired
    
    
    
    
    
    
    (30,008
    )Acquisition of MIG, net of cash acquired
    
    
    
    
    
    
    (693
    )Net cash used in investing activities
    
    
    (375
    )
    
    
    (34,058
    )Cash flows from financing activities:Proceeds from line of credit
    
    
    31,025
    
    
    
    Payments on line of credit
    
    
    (26,514
    )
    
    
    MIG loan payments
    
    
    (9,000
    )
    
    
    Proceeds from exercise of stock options
    
    
    20
    
    
    
    158Proceeds from exercise of stock warrants
    
    
    
    
    
    
    101Net cash provided by/(used in) financing activities
    
    
    (4,469
    )
    
    
    259Effect of exchange rate changes on cash
    
    
    (77
    )
    
    
    17Net decrease in cash and cash equivalents
    
    
    (6,355
    )
    
    
    (33,683
    )Cash and cash equivalents at beginning of period
    
    
    19,166
    
    
    
    57,816Cash and cash equivalents at end of period
    
    $
    12,811
    
    
    $
    24,133Supplemental disclosure of non-cash activitiesAccrued acquisition costs
    
    $
    
    
    
    $
    340Accrued interest on MIG loan payments
    
    $
    552
    
    
    $
    
  5




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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




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Concentration of Credit Risk
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Verizon Wireless
    
    
    20.8
    %
    
    
    21.9
    %
    
    
    21.3
    %
    
    
    21.1
    %China Mobile
    
    
    *
    
    
    
    13.7
    
    
    
    10.2
    
    
    
    11.3
 
 *
    
    Revenues from the customer were less than 10% during the period.  Net Loss Per Share
  7




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net loss
    
    $
    (1,538
    )
    
    $
    (6,601
    )
    
    $
    (7,295
    )
    
    $
    (12,603
    )Basic and diluted shares:Weighted average common shares outstanding
    
    
    29,622
    
    
    
    29,350
    
    
    
    29,609
    
    
    
    29,269Weighted average unvested common shares subject to repurchase
    
    
    (1
    )
    
    
    (33
    )
    
    
    (1
    )
    
    
    (38
    )Weighted average shares used to compute basic and diluted net loss per share
    
    
    29,621
    
    
    
    29,317
    
    
    
    29,608
    
    
    
    29,231Net loss per share  basic and diluted
    
    $
    (0.05
    )
    
    $
    (0.23
    )
    
    $
    (0.25
    )
    
    $
    (0.43
    )  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Warrants to purchase common stock
    
    
    106
    
    
    
    106
    
    
    
    106
    
    
    
    131Unvested common shares subject to repurchase
    
    
    1
    
    
    
    33
    
    
    
    1
    
    
    
    38Options to purchase common stock
    
    
    5,063
    
    
    
    4,720
    
    
    
    5,036
    
    
    
    4,3905,170
    
    
    
    4,859
    
    
    
    5,143
    
    
    
    4,559
 Recent Accounting Pronouncements
 The FASB Accounting Standards Codification and the Hierarchy
of Generally Accepted Accounting Principles The Hierarchy of
Generally Accepted Accounting Principles
 Subsequent Events
 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
 8




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##### Table of Contents



Fair Value Measurements
 Business Combinations Business Combinations
 Note 2  Acquisitions
 Acquisition of Superscape Group plc
     9




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##### 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.
     10




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##### Table of Contents



SixMonthsEndedJune 30,2008Total pro forma revenues
    
    $
    47,009Gross profit
    
    
    24,064Pro forma net loss
    
    
    (12,962
    )Pro forma net loss per share  basic and diluted
    
    $
    (0.44
    )
 Note 3  Short-Term Investments and Fair Value Measurements
 Short-Term Investments
  Fair Value Measurements
  11




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Note 4  Balance Sheet Components
 Accounts Receivable
 June 30,
    
    
    December 31,2009
    
    
    2008Accounts receivable
    
    $
    17,395
    
    
    $
    20,294Less: Allowance for doubtful accounts
    
    
    (485
    )
    
    
    (468
    )$
    16,910
    
    
    $
    19,826
  Property and Equipment
 June 30,
    
    
    December 31,2009
    
    
    2008Computer equipment
    
    $
    4,946
    
    
    $
    4,644Furniture and fixtures
    
    
    422
    
    
    
    386Software
    
    
    2,663
    
    
    
    2,628Leasehold improvements
    
    
    3,181
    
    
    
    3,05511,212
    
    
    
    10,713Less: Accumulated depreciation and amortization
    
    
    (7,198
    )
    
    
    (5,852
    )$
    4,014
    
    
    $
    4,861
  Other Long-Term Liabilities
 June 30,
    
    
    December 31,2009
    
    
    2008Accrued royalties
    
    $
    2,000
    
    
    $
    3,409FIN 48 obligations
    
    
    4,471
    
    
    
    4,399Deferred income tax liability
    
    
    2,450
    
    
    
    2,461Other
    
    
    1,577
    
    
    
    1,529$
    10,498
    
    
    
    11,798
 12




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##### Table of Contents



Note 5  Goodwill and Intangible Assets
  June 30, 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
    
    $
    13,693
    
    
    $
    (12,873
    )
    
    $
    820
    
    
    $
    13,370
    
    
    $
    (10,478
    )
    
    $
    2,892Catalogs
    
    1 yr
    
    
    1,285
    
    
    
    (1,285
    )
    
    
    
    
    
    
    1,126
    
    
    
    (1,126
    )
    
    
    ProvisionX Technology
    
    6 yrs
    
    
    212
    
    
    
    (155
    )
    
    
    57
    
    
    
    185
    
    
    
    (119
    )
    
    
    66Carrier contract and related relationships
    
    5 yrs
    
    
    18,597
    
    
    
    (5,577
    )
    
    
    13,020
    
    
    
    18,463
    
    
    
    (3,845
    )
    
    
    14,618Licensed content
    
    5 yrs
    
    
    2,758
    
    
    
    (1,472
    )
    
    
    1,286
    
    
    
    2,744
    
    
    
    (1,029
    )
    
    
    1,715Service provider license
    
    9 yrs
    
    
    431
    
    
    
    (74
    )
    
    
    357
    
    
    
    432
    
    
    
    (50
    )
    
    
    382Trademarks
    
    3 yrs
    
    
    546
    
    
    
    (404
    )
    
    
    142
    
    
    
    540
    
    
    
    (285
    )
    
    
    25537,522
    
    
    
    (21,840
    )
    
    
    15,682
    
    
    
    36,860
    
    
    
    (16,932
    )
    
    
    19,928Other intangible assets amortized
to operating expenses:Emux Technology
    
    6 yrs
    
    
    1,370
    
    
    
    (1,038
    )
    
    
    332
    
    
    
    1,201
    
    
    
    (809
    )
    
    
    392Noncompete agreement
    
    2 yrs
    
    
    600
    
    
    
    (600
    )
    
    
    
    
    
    
    525
    
    
    
    (525
    )
    
    
    1,970
    
    
    
    (1,638
    )
    
    
    332
    
    
    
    1,726
    
    
    
    (1,334
    )
    
    
    392Total intangibles assets
    
    
    
    
    
    $
    39,492
    
    
    $
    (23,478
    )
    
    $
    16,014
    
    
    $
    38,586
    
    
    $
    (18,266
    )
    
    $
    20,320
    Amortization
    
    
    AmortizationIncluded in
    
    
    Included in
    
    
    TotalCost of
    
    
    Operating
    
    
    AmortizationYear Ending December 31,
    
    Revenues
    
    
    Expenses
    
    
    Expense2009 (remaining six months)
    
    $
    2,819
    
    
    $
    114
    
    
    $
    2,9332010
    
    
    4,235
    
    
    
    218
    
    
    
    4,4532011
    
    
    2,858
    
    
    
    
    
    
    
    2,8582012
    
    
    2,737
    
    
    
    
    
    
    
    2,7372013
    
    
    2,669
    
    
    
    
    
    
    
    2,6692014 and thereafter
    
    
    364
    
    
    
    
    
    
    
    364$
    15,682
    
    
    $
    332
    
    
    $
    16,014
 Goodwill
  13




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Effects of
    
    
    
    
    
    
    
    
    
    
    Effects ofForeign
    
    
    Impairment
    
    
    
    
    
    
    ForeignJanuary 1,
    
    
    Goodwill
    
    
    
    
    
    
    Currency
    
    
    of
    
    
    December 31,
    
    
    Currency
    
    
    June 30,2008
    
    
    Acquired
    
    
    Adjustments
    
    
    Exchange
    
    
    Goodwill
    
    
    2008
    
    
    Exchange
    
    
    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
    
    
    LeaseYear Ending December 31,
    
    Payments
    
    
    Income
    
    
    Payments2009 (remaining six months)
    
    $
    1,972
    
    
    $
    102
    
    
    $
    1,8702010
    
    
    2,502
    
    
    
    
    
    
    
    2,5022011
    
    
    1,920
    
    
    
    
    
    
    
    1,9202012
    
    
    1,046
    
    
    
    
    
    
    
    1,0462013
    
    
    176
    
    
    
    
    
    
    
    176$
    7,616
    
    
    $
    102
    
    
    $
    7,514
 14




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##### Table of Contents



Minimum Guaranteed Royalties
  MinimumGuaranteedYear Ending December 31,
    
    Royalties2009 (remaining six months)
    
    $
    4,7852010
    
    
    4,0582011
    
    
    3482012
    
    
    2172013
    
    
    2014 and thereafter
    
    
    50$
    9,458
  Income Taxes
  Indemnification Agreements
   Contingencies
   15




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##### Table of Contents



Note 7  Debt
 MIG Notes
  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
    16




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##### Table of Contents



Credit Facility
    (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:
 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.
   17




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Note 8  Stockholders Equity
 Common Stock
   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
 2007 Employee Stock Purchase Plan
   18




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2009 Stock Option Exchange Program
  Exchange Ratio(New Options-for-Exercise Price
    
    Eligible 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
  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
    
    
    (1,211
    )
    
    
    1,211
    
    
    
    0.74Options canceled
    
    
    1,316
    
    
    
    (1,316
    )
    
    
    6.87Options exercised
    
    
    
    
    
    
    (49
    )
    
    
    0.42Balances at June 30, 2009
    
    
    1,927
    
    
    
    4,976
    
    
    $
    3.70
    
    
    
    5.36
    
    
    $
    1,069Options vested and expected to vest at June 30, 2009
    
    
    
    
    
    
    4,301
    
    
    $
    3.95
    
    
    
    5.34
    
    
    $
    844Options exercisable at June 30, 2009
    
    
    
    
    
    
    1,822
    
    
    $
    5.67
    
    
    
    5.08
    
    
    $
    124
  Share-Based Payment
 19




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Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Dividend yield
    
    
    
    %
    
    
    
    %
    
    
    
    %
    
    
    
    %Risk-free interest rate
    
    
    1.41
    %
    
    
    2.91
    %
    
    
    1.42
    %
    
    
    2.63
    %Expected volatility
    
    
    58.0
    %
    
    
    44.1
    %
    
    
    57.7
    %
    
    
    44.2
    %Expected term (years)
    
    
    3.13
    
    
    
    4.08
    
    
    
    3.16
    
    
    
    4.08
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Research and development
    
    $
    200
    
    
    $
    174
    
    
    $
    380
    
    
    $
    250Sales and marketing
    
    
    159
    
    
    
    1,303
    
    
    
    310
    
    
    
    2,605General and administrative
    
    
    405
    
    
    
    554
    
    
    
    838
    
    
    
    1,148Total stock-based compensation expense
    
    $
    764
    
    
    $
    2,031
    
    
    $
    1,528
    
    
    $
    4,003
  Note 10  Income Taxes
  Accounting for Uncertainty in Income Tax
   20




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Note 11  Segment Reporting
 Disclosures about Segments of an Enterprise and Related Information
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008United States of America
    
    $
    9,702
    
    
    $
    11,166
    
    
    $
    19,725
    
    
    $
    20,674United Kingdom
    
    
    659
    
    
    
    1,364
    
    
    
    1,457
    
    
    
    2,977China
    
    
    1,589
    
    
    
    3,254
    
    
    
    4,133
    
    
    
    5,043Americas, excluding the USA
    
    
    2,805
    
    
    
    2,232
    
    
    
    4,959
    
    
    
    4,086EMEA, excluding the United Kingdom
    
    
    4,468
    
    
    
    4,877
    
    
    
    9,237
    
    
    
    9,956Other
    
    
    649
    
    
    
    811
    
    
    
    1,136
    
    
    
    1,560$
    19,872
    
    
    $
    23,704
    
    
    $
    40,647
    
    
    $
    44,296
  June 30,
    
    
    December 31,2009
    
    
    2008Americas
    
    $
    2,690
    
    
    $
    3,208EMEA
    
    
    685
    
    
    
    790Other
    
    
    639
    
    
    
    863$
    4,014
    
    
    $
    4,861
 Note 12  Restructuring
   21




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Note 13  Subsequent Events
   22




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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 the future conduct and growth of our
business;
    
    our expectations regarding competition and our ability to compete effectively;
    
    our expectations regarding the development of future products, including those for
next-generation platforms and social networking websites;
    
    our expectations regarding our revenues and expenses for the second half of 2009;
    
    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 and cash flows from operations 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 second half of 2009;
    
    our expectation regarding the costs that will be associated with the transition of our
Chief Executive Officer and our ability to effect a smooth transition;
    
    our expectation regarding our ability to maintain
compliance with or amend 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.
  
    
    An 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
    
    Liquidity and Capital Resources, which discusses key aspects of our statements of cash
flows, changes in our balance sheets and our financial commitments.
 23




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Overview
  Financial Results and Trends
    24




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Significant Transactions
    Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
  25




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Results of Operations
 Comparison of the Three Months Ended June 30, 2009 and 2008
 Revenues
 Three Months EndedJune 30,2009
    
    2008(in thousands)Revenues
    
    $
    19,872
    
    
    $
    23,704
  Cost of Revenues
 Three Months EndedJune 30,2009
    
    
    2008(in thousands)Cost of revenues:Royalties
    
    $
    5,667
    
    
    $
    5,633Impairment of prepaid royalties and guarantees
    
    
    589
    
    
    
    Amortization of intangible assets
    
    
    1,412
    
    
    
    3,135Total cost of revenues
    
    $
    7,668
    
    
    $
    8,768Revenues
    
    $
    19,872
    
    
    $
    23,704Gross margin
    
    
    61.4
    %
    
    
    63.0
    %
  26




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Research and Development Expenses
 Three Months EndedJune 30,2009
    
    2008(in thousands)Research and development expenses
    
    $
    6,648
    
    
    $
    8,861Percentage of revenues
    
    
    33.5
    %
    
    
    37.4
    %
   Sales and Marketing Expenses
 Three Months EndedJune 30,2009
    
    2008(in thousands)Sales and marketing expenses
    
    $
    3,546
    
    
    $
    6,042Percentage of revenues
    
    
    17.8
    %
    
    
    25.5
    %
  General and Administrative Expenses
 Three Months EndedJune 30,2009
    
    2008(in thousands)General and administrative expenses
    
    $
    3,905
    
    
    $
    6,096Percentage of revenues
    
    
    19.7
    %
    
    
    25.7
    %
  27




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##### Table of Contents



Other Operating Expenses
   Other Expenses
  Income Tax Provision
  Comparison of the Six Months Ended June 30, 2009 and 2008
 Revenues
 Six Months EndedJune 30,2009
    
    2008(in thousands)Revenues
    
    $
    40,647
    
    
    $
    44,296
  28




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##### Table of Contents



Cost of Revenues
 Six Months EndedJune 30,2009
    
    
    2008(in thousands)Cost of revenues:Royalties
    
    $
    11,480
    
    
    $
    11,123Impairment of prepaid royalties and guarantees
    
    
    589
    
    
    
    Amortization of intangible assets
    
    
    4,260
    
    
    
    4,842Total cost of revenues
    
    $
    16,329
    
    
    $
    15,965Revenues
    
    $
    40,647
    
    
    $
    44,296Gross margin
    
    
    59.8
    %
    
    
    64.0
    %
  Research and Development Expenses
 Six Months EndedJune 30,2009
    
    2008(in thousands)Research and development expenses
    
    $
    13,045
    
    
    $
    15,381Percentage of revenues
    
    
    32.1
    %
    
    
    34.7
    %
   29




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##### Table of Contents



Sales and Marketing Expenses
 Six Months EndedJune 30,2009
    
    2008(in thousands)Sales and marketing expenses
    
    $
    7,658
    
    
    $
    11,824Percentage of revenues
    
    
    18.8
    %
    
    
    26.7
    %
  General and Administrative Expenses
 Six Months EndedJune 30,2009
    
    2008(in thousands)General and administrative expenses
    
    $
    8,390
    
    
    $
    11,491Percentage of revenues
    
    
    20.6
    %
    
    
    25.9
    %
  Other Operating Expenses
   Other Expenses
  Income Tax Provision
  30




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##### Table of Contents



Liquidity and Capital Resources
 Six Months Ended June 30,2009
    
    2008(in thousands)Consolidated Statement of Cash Flows Data:Capital expenditures
    
    $
    375
    
    
    $
    3,357Depreciation and amortization
    
    
    5,538
    
    
    
    6,411Cash flows provided by/(used in) operating activities
    
    
    (1,434
    )
    
    
    99Cash flows used in investing activities
    
    
    (375
    )
    
    
    (34,058
    )Cash flows provided by/(used in) financing activities
    
    
    (4,469
    )
    
    
    259
  Operating Activities
   Investing Activities
   Financing Activities
   31




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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:
 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
  32




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##### 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.
        33




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##### Table of Contents



Contractual Obligations
  Payments Due by PeriodTotal
    
    1 Year*
    
    1-3 Years
    
    3-5 Years
    
    Thereafter(in thousands)Operating lease obligations, net of sublease income
    
    $
    7,514
    
    
    $
    1,870
    
    
    $
    5,468
    
    
    $
    176
    
    
    $
    Guaranteed royalties(1)
    
    
    9,458
    
    
    
    4,785
    
    
    
    4,623
    
    
    
    50
    
    
    
    MIG earnout and bonus notes(2)
    
    
    16,552
    
    
    
    5,192
    
    
    
    11,360
    
    
    
    
    
    
    
    FIN 48 obligations, including interest and penalties(3)
    
    
    4,470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,470Line of credit
    
    
    4,547
    
    
    
    4,547
    
    
    
    
    
    
    
    
    
    
    
    
 
 *      Represents the remaining six 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 $9.2 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 had paid an aggregate principal amount of $14.0
million as of July 31, 2009. The amounts in the table above include
interest accrued through June 30, 2009. See Note 7 of Notes to
Unaudited Consolidated Financial Statements included in Part I, Item 1
of this report for further details.(3)
    
    As of June 30, 2009, unrecognized tax benefits and potential interest
and penalties were classified within Other long-term liabilities on
our consolidated balance sheets. As of June 30, 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
  34




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##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate and Credit Risk
       Foreign Currency Exchange Risk
     35




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##### Table of Contents



ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  36




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##### 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.
  
    
    respond to market developments, including next-generation platforms, technologies and
pricing and distribution models;
 37




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##### Table of Contents




    
    maintain and grow our non-carrier, or off-deck, distribution, including through our
website and third-party direct-to-consumer distributors;
    
    maintain our current, and develop new, wireless carrier and other distributor
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, other
distributors and third-party branded content owners;
    
    maintain and develop greater consumer awareness of our games based on our own intellectual
property and the Glu brand;
    
    continue to develop new high-quality mobile games that achieve significant market
acceptance, particularly for new next-generation handsets and social networking websites;
    
    continue to port existing mobile games to new mobile handsets;
    
    continue to develop and upgrade our technology;
    
    continue to enhance our information processing systems;
    
    expand our development capacity in countries with lower costs;
    
    execute our business and marketing strategies successfully; and
    
    attract, integrate, retain and motivate qualified personnel.
  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.
   38




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##### Table of Contents




    
    the number of new mobile games released by us and our competitors, including those for
next-generation platforms;
    
    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 the prominence of deck placement for our leading games and those of our
competitors;
    
    the strength or weakness in consumer 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, which pricing policies could be influenced by the lower average prices for content on
next-generation platforms;
    
    changes in the mix of original and licensed games, which have varying gross margins;
    
    the timing of successful mobile handset launches;
    
    the timeliness and accuracy 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, including the rate of growth of next-generation
platforms;
    
    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;
    
    changes in accounting rules, such as those 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.
  39




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##### Table of Contents




    
    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;
    
    the ability or willingness to offer competing products at no charge or supported by
in-game advertising;
    
    lower labor and development costs; and
    
    broader global distribution and presence.
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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.
  Our stock price has fluctuated and declined significantly since our initial public offering 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
  
    
    price and volume fluctuations in the overall stock market, including as a result of trends
in the economy as a whole, such as the recent and continuing unprecedented volatility in the
financial markets;
    
    changes in the operating performance and stock market valuations of other technology
companies generally, or those in our industry in particular;
    
    actual or anticipated fluctuations in our operating results;
    
    the financial projections we may provide to the public, any changes in these projections
or our failure to meet these projections;
    
    failure of securities analysts to initiate or maintain coverage of us, changes in
financial estimates by any securities analysts who follow our company or our industry, our failure
to meet these estimates or failure of those analysts to initiate or maintain coverage of our stock;
    
    ratings or other changes by any securities analysts who follow our company or our
industry;
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
    
    announcements by us or our competitors of significant technical innovations, acquisitions,
strategic partnerships, joint ventures, capital raising activities or capital commitments;
    
    the publics response to our press releases or other public announcements, including our
filings with the SEC;
    
    lawsuits threatened or filed against us; and
    
    market conditions or trends in our industry or the economy as a whole.
   We have outstanding debt obligations and may incur additional debt in the future, which could
adversely affect our financial condition and results of operations.
  
    
    requiring us to dedicate a portion of our expected cash from operations to service our
debt, thereby reducing the amount of expected cash flow available for other purposes, including
funding our operations;
    
    increasing our vulnerability to downturns in our business, to competitive pressures and to
adverse economic and industry conditions;
    
    limiting our ability to pursue acquisitions that may be accretive to our business; and
    
    limiting our flexibility in planning for, or reacting to, changes in our business and our
industry.
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A continued slowdown in sales of mobile devices, particularly the devices for our carrier-based
business which represents the vast majority of our revenues, or a decline in the average selling
prices of our games sold through wireless carriers, 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 gross margins from the next-generation
platforms, our revenues, financial position and operating results may suffer.
  
    
    the open nature of the development and marketing for certain of these next-generation
platforms increases substantially the number of our competitors and competitive products
and makes it more difficult for us to achieve prominence and deck placement for our games;
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
    
    the pricing and revenue models for products on these platforms are rapidly evolving,
and may result in average selling prices for our games developed for these platforms that
are substantially lower than from our traditional carrier channels and a lower than
expected return on investment for these games;
    
    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 net income or loss;
    
    many OEMs and carriers are developing next-generation platforms and it may be difficult
for us to predict which ones will be successful, and we may expend time and resources
developing games for next-generation platforms that ultimately do not succeed; and
    
    competitors may have substantially greater resources available to invest in development
and publishing of products for next-generation platforms.
  If we do not achieve a sufficient return on our investment with respect to our efforts to develop
games for social networking websites, it could negatively affect our operating results.
  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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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, in particular Verizon Wireless, to market and
distribute our games and thus to generate our revenues. 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.
  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.
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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.
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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;
    
    foreign currency exchange rate fluctuations;
    
    difficulties in staffing and managing international operations;
    
    potential violations of the Foreign Corrupt Practices Act, particularly in certain
emerging countries in East Asia, Eastern Europe and Latin America;
    
    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, particularly China;
    
    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;
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
    
    trade and tariff restrictions and variations in tariffs, quotas, taxes and other market
barriers; and
    
    difficulties in enforcing intellectual property rights in certain countries.
   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.
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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.
  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.
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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.
  If one or more of our games were found to contain hidden, objectionable content, our reputation and
operating results could suffer.
  If we do not effect a smooth transition to a new Chief Executive Officer, our business and
operating results may suffer and our stock price may decline. In addition, the costs associated
with this transition will make it more difficult for us to comply with the financial covenants
contained in our credit facility.
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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.
  
    
    diversion of management time and a shift of focus from operating the businesses to issues
related to integration and administration;
    
    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; and
    
    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.
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Our reported financial results could be adversely affected by changes in financial accounting
standards or by the application of existing or future accounting standards to our business as it
evolves.
  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.
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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.
  Changes in our tax rates or exposure to additional tax liabilities could adversely affect our
earnings and financial condition.
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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.
     System or network failures could reduce our sales, increase costs or result in a loss of revenues
or end users of our games.
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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.
  
    
    our board of directors is classified into three classes of directors with staggered
three-year terms;
    
    only our chairman of the board, our lead independent director, our chief executive
officer, our president or a majority of our board of directors is authorized to call a special
meeting of stockholders;
    
    our stockholders are able to take action only at a meeting of stockholders and not by
written consent;
    
    only our board of directors and not our stockholders is able to fill vacancies on our
board of directors;
    
    our certificate of incorporation authorizes undesignated preferred stock, the terms of
which may be established and shares of which may be issued without stockholder approval; and
    
    advance notice procedures apply for stockholders to nominate candidates for election as
directors or to bring matters before a meeting of stockholders.
  
 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
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Proposal No. 1
 Nominee
    
    For
    
    WithheldAnn Mather
    
    
    22,124,811
    
    
    
    515,278Daniel L. Skaff
    
    
    22,169,081
    
    
    
    471,008
  Proposal No. 2
 For
    
    Against
    
    Abstain
    
    Broker Non-Votes22,567,959
    
    
    57,973
    
    
    
    14,157
    
    
    
    0
 
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
  57




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SIGNATURES
  GLU MOBILE INC.Date: August 10, 2009
    By:
    /s/ L. Gregory BallardL. Gregory BallardPresident and Chief Executive Officer
(Principal Executive Officer) Date: August 10, 2009
    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
    
    Herewith10.01
    
    Form of Indemnity Agreement entered into between Glu
Mobile Inc. and each of its directors and executive
officers, effective as of June 15, 2009
    
    8-K
    
    001-33368
    
    10.01
    
    06/15/0931.01
    
    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
 
 *
    
    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. 59