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Stockholders' Equity
6 Months Ended
Jun. 30, 2015
Stockholders' Equity  
Stockholders' Equity

Note 8 — Stockholders’ Equity

 

Tencent Investment

 

  On April 29, 2015, the Company entered into a Purchase Agreement with Tencent Holdings Limited (“Tencent”) and Tencent’s controlled affiliate, Red River Investment Limited (“Red River”).  Pursuant to the Purchase Agreement, the Company issued to Red River in a private placement an aggregate of 21,000 shares of the Company’s common stock (the “Shares”) at a purchase price of $6.00 per share, for aggregate net proceeds of $125,158, after offering expenses. The Company issued 12,500 of the Shares to Red River on April 29, 2015 and issued the remaining 8,500 Shares at a second closing on June 3, 2015. 

 

Acquisitions

 

On August 20, 2014, as part of the consideration for its acquisition of Cie Games, the Company issued an aggregate of 9,983 shares of its common stock to Cie Games’ former shareholders, of which approximately 2,139 shares will be held back by Glu for 18 months to satisfy potential indemnification claims under the Cie Games merger agreement.

 

On May 14, 2014, as consideration for its acquisition of PlayFirst, the Company issued an aggregate of 2,849 shares of its common stock to PlayFirst’s former shareholders, which is net of shares withheld to cover a net working capital adjustment, stockholders’ agent expenses and tax obligations of former PlayFirst shareholders. Of the 2,849 shares issued in the acquisition, 1,500 are being held in escrow and will be retained by the Company for 24 months to satisfy potential indemnification claims under the PlayFirst merger agreement.  During the third quarter of 2014, approximately 24 shares that were being held back pursuant to the PlayFirst merger agreement were cancelled to satisfy a net working capital adjustment.  

 

Shares Issued in Connection with the Blammo Earnout

 

On August 1, 2011, the Company completed the acquisition of Blammo Games Inc. (“Blammo”), by entering into a Share Purchase Agreement (the “Share Purchase Agreement”) by and among the Company, Blammo and each of the owners of the outstanding share capital of Blammo (“the Sellers”). Pursuant to the terms of the Share Purchase Agreement, the Company agreed to issue to the Sellers, in the aggregate, 1,000 shares of the Company’s common stock plus up to an additional 3,313 shares of the Company’s common stock (the “Additional Shares”) if Blammo achieved specified Net Revenue (as such term is defined in the Share Purchase Agreement) targets during the fiscal years ending March 31, 2013, March 31, 2014 and March 31, 2015.

 

As of June 30, 2014, the vesting conditions for the last two tranches of earnout shares for the fiscal years ended March 31, 2014 and 2015 were attained, and the Company issued 435 and 750 shares in May 2014 and July 2014, respectively, to the former Blammo shareholders. Since the contingency related to the number of shares to be earned in connection with the target for the fiscal year ended March 31, 2015 was resolved as of June 30, 2014, and the number of shares became fixed, the fair value of these shares has been presented in additional paid-in capital on the Company’s unaudited condensed consolidated balance sheet since June 30, 2014.

 

Three of the five Sellers were also employees of Blammo. The fair value of the contingent consideration issued to the three Sellers who were also employees of Blammo was not considered part of the purchase price, since vesting was contingent upon these employees’ continued service during the earn-out periods. In accordance with ASC 805, Business Combinations, non-employee contingent consideration issued to the two Sellers who were not employees of Blammo was recorded as part of the purchase accounting and was fair valued at each subsequent reporting period. During the three and six months ended June 30, 2015, the Company recorded no fair value adjustments for the non-employee contingent consideration, as the contingency related to the number of shares earned was resolved during second quarter of 2014. During the three and six months ended June 30, 2014, the Company recorded fair value expense adjustments of $531 and $835, respectively. In accordance with ASC 805, changes in the fair value of non-employee contingent consideration were recognized in general and administrative expense in the Company’s unaudited condensed consolidated statements of operations.

 

The Company used a risk-neutral framework to estimate the probability of achieving the revenue targets set forth above for the above periods. The fair value of the contingent consideration was determined using a digital option, which captured the present value of the expected payment multiplied by the probability of reaching the revenue targets for each year.

 

Public Offering

 

In June 2014, the Company sold in an underwritten public offering an aggregate of 9,861 shares of its common stock at a public offering price of $3.50 per share for net cash proceeds of approximately $32,058 after underwriting discounts and other offering expenses.

 

Warrants to Purchase Common Stock

 

In September 2014, the Company and Kimsaprincess, Inc. (“KAP”), entered into a second amendment to their existing License Agreement (the “KAP License Agreement”). In connection with entry into the second amendment of the KAP License Agreement, the Company issued to KAP and two other entities associated with KAP’s president, Kim Kardashian West, a total of three warrants exercisable for up to an aggregate of 500 shares of the Company’s common stock (collectively, the “Kardashian Warrants”). Each of the Kardashian Warrants has an initial exercise price of $4.99 per share, subject to adjustments for dividends, reorganizations and other common stock events. Each of the Kardashian Warrants expires on September 2, 2020. Each of the Kardashian Warrants vests and becomes exercisable in equal monthly installments over the 60-month term of the KAP License Agreement, subject to full acceleration or cessation of vesting under specified circumstances, as stipulated in the amended KAP License Agreement. Each of the Kardashian Warrants may, at the election of the holder, be either exercised for cash or net exercised on a cashless basis. During the three and six months ended June 30, 2015, the Company recorded a warrant compensation charge, classified to cost of sales, of $135 and $228, respectively, related to the Kardashian Warrants. Key assumptions used in the Black Scholes valuation model for the three months ended June 30, 2015 included an expected term of 6.0 years volatility of 61.1%, risk-free interest rate of 1.99% and a dividend yield of 0%.

 

In July 2013, the Company and MGM Interactive Inc. (“MGM”) entered into a warrant agreement that gives MGM the right to purchase up to 3,333 shares of the Company’s common stock at an exercise price of $3.00 per share (the “MGM Warrant”), subject to adjustments for dividends, reorganizations and other common stock events. Of the 3,333 shares of the Company’s common stock underlying the MGM Warrant, 333 shares were immediately vested and exercisable on the warrant agreement effective date and the remaining shares will vest and become exercisable based on conditions related to the Company releasing mobile games based on mutually agreed upon intellectual property licensed by MGM to the Company. The MGM Warrant expires on July 15, 2018.

 

In April 2014, the Company entered into a license agreement with MGM, United Artists Corporation and Danjaq, LLC pursuant to which the Company will develop and publish a free-to-play mobile game based on the James Bond film franchise. The commercial release by the Company of this mobile game, which is expected to occur in second half of 2015, will trigger the vesting of an additional 1,000 shares subject to the MGM Warrant.

 

During the six months ended June 30, 2015 and 2014, respectively, investors exercised warrants to purchase 250 and 522 shares of the Company’s common stock, respectively, and the Company received gross proceeds of $375 and $783, respectively, in connection with these exercises. These exercised warrants related to warrants issued by the Company in August 2010 in connection with a private placement transaction.

 

Warrants outstanding as of June 30, 2015 were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Number

 

 

 

 

 

Exercise

 

of Shares

 

 

 

 

 

Price

 

Outstanding

 

 

 

Term

 

per

 

Under

 

Date of Issuance

   

(Years)

   

Share 

   

Warrant

   

August 2010 - Warrants issued in private offering

 

5

 

$

1.50

 

200

 

July 2013 - Warrant issued to MGM

 

5

 

 

3.00

 

2,667

 

September 2014 - Warrant issued to KAP

 

6

 

 

4.99

 

500

 

 

 

 

 

 

 

 

3,367