Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Stockholders' Equity

Stockholders' Equity

NOTE 9 — STOCKHOLDERS’ EQUITY

Common Stock

At December 31, 2016, the Company was authorized to issue 250,000 shares of common stock. As of December 31, 2016, the Company had reserved 33,347 shares for future issuance under its stock plans and outstanding warrants.

Preferred Stock

At December 31, 2016, the Company was authorized to issue 5,000 shares of preferred stock.

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 $125,156, 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 was held back by Glu for 18 months from the closing date of the acquisition to satisfy potential indemnification claims under the Cie Games merger agreement. All of these shares were released to former shareholders during the year ended December 31, 2016.

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 certain former PlayFirst shareholders. Of the 2,849 shares issued in the acquisition, 1,500 shares that were held in escrow until the date that is 60 days following the 24 month anniversary of the closing date to satisfy potential indemnification claims under the PlayFirst merger agreement were released to former shareholders in July 2016. 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.

See Note 3 – Business Combinations – for more information about these acquisitions.

Warrants to Purchase Common Stock

Celebrity Warrants 

During 2015, the Company issued warrants to celebrity licensors, and entities affiliated with one of the celebrity licensors, to purchase up to an aggregate of 1,100 shares of the Company’s common stock, subject to adjustments for dividends, reorganizations and other common stock events (collectively, the “Celebrity Warrants”). With respect to Celebrity Warrants covering 1,000 shares, such warrants vest with respect to 50% of the underlying shares upon public announcement of the related license agreement, with the remaining shares vesting in equal monthly installments over 24 months, subject to full acceleration in the event of (i) the Company’s full recoupment of the minimum guarantee payments under the related license agreement, (ii) the termination of the license agreement due to the Company’s material breach of the agreement or (iii) a change of control of the Company. With respect to the remaining Celebrity Warrants covering 100 shares issued in 2015, such warrants vest in equal monthly installments over 60 months, with up to 25% of the shares subject to accelerated vesting in the event the celebrity licensor approves game design documentation by a certain date and the related game commercially launches by a certain date. During the years ended December 31, 2016, and 2015, none of these vesting conditions were met.

Each of the Celebrity Warrants may, at the election of the holder, be either exercised for cash or net exercised on a cashless basis. As of December 31, 2016, Celebrity Warrants covering 1,600 shares of the Company’s common stock were outstanding.

The fair value of the outstanding Celebrity Warrants is estimated using the Black-Scholes valuation model. The Black-Scholes valuation model requires inputs such as the expected term of the Celebrity Warrants, expected volatility and risk-free interest rate. Certain of these inputs are subjective and require significant analysis and judgment to develop. The Company will estimate and record the fair value of these Celebrity Warrants using a Black-Scholes valuation model when the above vesting conditions have been met. 

The amount recognized as expense with respect to these Celebrity Warrants was immaterial for each of  years ended December 31, 2016, 2015 and 2014.

MGM Warrants

In July 2013, the Company and MGM Interactive Inc. (“MGM”) entered into a warrant agreement that provided MGM the right to purchase up to 3,333 shares of the Company’s common stock subject to adjustments for dividends, reorganizations and other common stock events (the “MGM Warrant”). As of December 31, 2016, MGM Warrants covering 2,667 shares of the Company’s common stock were outstanding. These remaining shares 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. During the year ended December 31, 2016, none of these vesting conditions were met.  During the year ended December 31, 2015, 1,000 shares underlying the MGM Warrants vested in conjunction with the commercial release of the Company’s game, James Bond: World of Espionage, which occurred on September 29, 2015. During the year ended December 31, 2015, the Company recorded $1,928 of non-cash warrant related expense in cost of revenue as the James Bond: World of Espionage game was not expected to generate meaningful revenue over its lifetime.

The Company estimated the fair value of the warrants using the Black-Scholes valuation model and the weighted average assumptions noted in the following table:

	Year Ended December 31,
	2016		2015		2014
Dividend yield	—	%	—	%	—	%
Risk-free interest rate	1.76	%	1.18	%	1.90	%
Expected volatility	57.54	%	53.40	%	58.20	%
Expected term (in years)	4.78		5.00		5.00

Warrants outstanding at December 31, 2016 were as follows:

	Number	Weighted
	ofShares	Average
	Outstanding	Exercise		Average
	Under	Price per		Contractual
	Warrant	Share		Term
Warrants outstanding, December 31, 2014	3,617	$	3.09
Granted	1,100		4.44
Exercised	(450)		1.50
Warrants outstanding, December 31, 2015	4,267	$	3.61	5.50
Granted	-		-
Exercised	-		-
Warrants outstanding, December 31, 2016	4,267	$	3.61	4.78

During the years ended December 31, 2016, 2015, and 2014, warrant holders exercised warrants to purchase 0,  450, and 1,191 shares of the Company’s common stock, respectively, and the Company received gross proceeds of $0,  $675, and $2,786, respectively, in connection with these exercises.